About the Nonprofit Overhead Project: Why does nonprofit overhead matter now?

A window for changing the paradigm on nonprofit overhead and indirect costs has opened, thanks to the new OMB guidance on improving government contracting with nonprofits -- particularly regarding support for funding indirect costs -- as well as increased philanthropic attention to the funding of nonprofit overhead. This window presents a tremendous opportunity to improve the financial sustainability of nonprofits and service ecosystems, and to create government-foundation-nonprofit partnerships working together on making the nonprofit capital market more efficient.

With $11 billion in government contracts to California nonprofits each year, and $2 billion in California foundation grants to California nonprofits[1], the stakes are high. If we move the needle just a little bit, a great deal of money can be leveraged for nonprofits. The California Association of Nonprofits -- CalNonprofits -- recognizes this unique opportunity and through this initiative, is working to move that needle.

Components of the CalNonprofits Nonprofit Overhead Project:

1. OMB Uniform Guidance and overhead regulations: Working with state, county and local government agencies and nonprofits for full implementation of OMB Uniform Guidance, which mandates a minimum of 10% indirect costs in nonprofit contracts that include federal money (currently many nonprofits have contracts allowing for only 3% or 4% overhead).

Education and forums

• Webinars and in-person training workshops on calculating overhead properly, taking advantage of the new OMB rules, and whether/how to apply for a federal indirect cost rate
• Webinars and in-person workshops on the specifics of the OMB Uniform Guidance, led by accountants, nonprofit finance experts, and OMB staff
• Conference sessions at CalNonprofits and other events raise the issue of nonprofit overhead and various approaches to it
• Our "Open Letter to the Board of Charity Navigator" not only raise important questions about their methodologies, but gained traction with the public

Articles about overhead from our staff and from others -- such as "A Board Member's Guide to Nonprofit Overhead" will appear on this site, and we welcome hearing about must-read materials we should let our readers know about.

Advocacy with state agencies and the Los Angeles County initiative

• Meeting with elected and appointed state officials (such as the Government Operations Agency, California State Association of Counties) to encourage full implementation of the OMB Guidance and to open discussions about streamlining government-nonprofit contracting.
• As the largest county in the United States, Los Angeles County has the opportunity to be a leader in better government-nonprofit contracting. We are working with elected and appointed officials to explore ways to move this agenda forward.

2. Changing the philanthropic paradigm: engaging foundations and the three California regional associations of grantmakers to identify and support leaders in changing how foundations treat overhead in grants to nonprofits.

• Focus groups: Five focus groups with nonprofit finance staff were held across California to inform foundations on how nonprofit experience foundation policies about overhead in grantmaking. A summary of each session was provided to give parallel convenings of foundations discussing the issue. These groups were in partnership with the Real Cost Project.
• Supporting the philanthropic dialogue about overhead: We're involved with national discussions such as an Illinois-based project to develop a "pledge" about overhead for foundations.

3. The Nonprofit Overhead Toolkit: Resources and training (web and in-person) in accounting, financial analysis, raising the issue with funders and the public, and other resources. [The Toolkit is still in development . . . not all components are completed.]

Funding partners

The Nonprofit Overhead Project is generously supported by the California Community Foundation, the California Wellness Foundation, the James Irvine Foundation, and the Weingart Foundation. We are also grateful to the foundations which give us unrestricted, core support, which makes projects like this one possible: the David and Lucile Packard Foundation, the Weingart Foundation, the Evelyn & Walter Haas Jr. Fund, and the California Wellness Foundation. In addition, our 9,400 CalNonprofits members are our most important funding partners of all.

CFO Task Force

The CFO Task Force advising the Nonprofit Overhead Project:

For more information on the Nonprofit Overhead Project, contact CalNonprofits CEO Jan Masaoka or Policy Director Lucy Salcido Carter.

[1] Causes Count: The Economic Power of California's Nonprofit Sector, 2014