All of us involved in philanthropy today – foundations, individual donors, corporations, government, nonprofits, and community leaders – recognize that the social sector is in the midst of a radical transformation.

Accordingly, grantmakers across California are examining their practices and looking to develop new approaches in order to increase impact in the communities they serve. Recently, many grantmakers have begun exploring an approach based on real cost funding – that is all of the necessary investments for a nonprofit organization to deliver on mission and to be sustainable over the long term.

The Real Cost Project

In response to these efforts, Northern California Grantmakers, San Diego Grantmakers and Southern California Grantmakers are proud to announce the launch of a joint statewide initiative – the Real Cost Project – to increase the impact of philanthropy across California. Created by funders for funders, the Real Cost Project will explore what it takes for funders to develop new grantmaking practices based on what it really costs to deliver outcomes.

We invite you to get engaged in this growing national conversation. Whether you provide general operating support, programmatic support, funding for capital projects or investments for social impact, understanding what is the real cost for delivering outcomes is critical to achieving your goals.

Report Highlights Consequences of Underfunding Nonprofits
“The bankruptcy of FEGS, a large and previously well-regarded nonprofit social service agency in New York City, underscores the importance of providing full cost funding to nonprofit organizations administering government grants and contracts. In a new report, “New York Nonprofits in the Aftermath of FEGS: A Call to Action,” the Commission to Examine Nonprofit Human Services Organizations Closures shares lessons-learned and guidelines for helping nonprofits set a course for sustainability. While focused on a New York City story, the report is much more broadly applicable across the sector.”

PIMCO Foundation Announcement Move to Fund Real Costs!
“We are beyond thrilled to adopt the practice of Real Cost funding within our grant-making structure. It is a necessary and vital evolution. And we are very proud, that as a corporation, we have a Board that sees the extreme value in dispelling the myth that overhead equals organization impact and effectiveness. “

Moving the Ford Foundation Forward
“All of us in the nonprofit ecosystem are party to a charade with terrible consequences—what we might call the “overhead fiction.” Simply put, because of this fiction, foundations, governments, and donors force nonprofits to submit proposals that do not include the actual costs of the projects we’re funding.”

Irvine Foundation to Explore Real Cost Funding
“We understand how important it is to fund the full cost of an organization’s work. We are exploring with grantees the scope of their indirect costs, so that our grants reflect their full cost of the outcomes they are seeking to achieve.”


Real Cost Funding

Real Cost funding is a holistic approach to grantmaking that starts with the end in mind – what are the outcomes we are looking to achieve and what does it really cost to deliver those outcomes? By understanding what is the real cost for delivering those outcomes, funders can then determine what role they want their grant dollars to play in supporting their grantees.

Simply put, the real cost of outcomes includes all of the necessary costs for a nonprofit organization to deliver on mission and to be sustainable over the long term. Like any enterprise – including for-profit corporations – nonprofits must be able to cover the real cost of their programs and operations if they are to deliver excellent outcomes. Whether an organization is serving the needs of returning veterans, providing health and human services to the most needy, or building vibrant communities, the cost of delivering results includes not only direct programmatic expenses but also the capacity and capital needs of the organization.

Funding Strategic Outcomes

One of the most significant means funders have to increase impact in this evolving sector, is by adopting new funding strategies designed to meet the needs of today’s social sector organizations. By providing real cost funding for the programs and projects they support, funders can expect to see a range of results:

  • Increased impact as their grantees are better able to deliver on mission;
  • More efficient use of limited resources;
  • Funding that better aligns with funders long term strategic goals; and
  • Increased capacity for funders and nonprofit organizations.

To learn more about the Real Cost Project, please visit the About Us page.

To sign up for news and announcements, please visit the Contact Us page.