Project Grants Still Need Not Be the Enemy: An Equity-Oriented Update One Year Later | June 2022 | The Center for Effective Philanthropy

"A little more than a year ago, I made a controversial statement on this blog: that institutional funders do not have to defend or explain why multiyear general operating support (MYGOS) is not their primary form of funding. In that CEP blog post last year, I argued that project grants need not be the enemy. If funders adequately and fairly account for overhead costs within project grants, they can be an important tool to combatting the nonprofit starvation cycle, especially when they are multi-year. I also shared that BDO FMA, where I work, was involved with an exciting undertaking to improve project grants alongside peer consultants and several major funders. As promised, here is an update on that work. Funders for Real Costs, Real Change (FRC), a community of practice among 12 funders[1] that my colleagues and I have been privileged to facilitate and develop content for over the past three years, sought to tackle a question that has long plagued our sector: Can project grants be structured in ways that do a better job of supporting the financial and organizational health of grantees? Through research and exploration FRC affirmed that it is possible for project grants to do a better job of minimizing financial harm to their recipients. It will require senior leadership and boards of institutional funders to acknowledge there is a problem, to choose to change policies and practices, and to support staff and grantees in implementing those changes. Funder options range from conducting analysis to ensure each project grant covers a fair share of indirect costs to adding modest general operating support to many project grants. BDO FMA’s favorite, which is not yet common, is to structure project grants so that they allow for surpluses and do not require budgets delineating direct and indirect costs, thus focusing funders and grantees on scope and impact rather than on details of spending plans...."