While many foundation funders have allowed for more general operating requests due to the current pandemic, funders overall still favor project-based support. I often hear distress from nonprofit leaders unable to raise as much money for salaries and day-to-day operations—the real costs that allow your organizations to run and your programs to flourish. Our clients often ask whether there are ways to incorporate indirect costs (also called overhead or administrative costs) into project budgets for grant applications, and if so, how to do that. Here are two ways to approach it:
Project salaries - Most of you know that a salary and fringe benefits can be included in your program budget if it is directly related to that program—for example, the School Outreach Coordinator for a School Outreach program. But did you know that a percentage of other nonprogram staff salaries/fringe benefits can also be included if they are involved directly with that program? For example, if your Executive Director spends 10% of her time in activities related to the School Outreach program, you can also include 10% of her total salary and fringe costs in that project budget.
Indirect costs - Most foundations allow you to include a percentage of your organization’s indirect costs into a program budget. To determine the amount, you may need to consult the finance professional at your organization to help you calculate your organization’s indirect cost rate (organizational indirect costs/organizational direct costs). Generally, it falls between 10-30%. Once that rate is determined, you can multiply the project expenses by that rate to determine the amount of indirect to include. For example, if your program budget is $100,000, and your indirect cost rate is 20%, you can include $20,000 in the budget as indirect costs.
That said, some foundations or government agencies do not allow their funds to be used for indirect costs, or they limit the percentage you can include in your budget. Make sure you read the guidelines before you apply.
Do you have more questions about indirect costs and program salaries? Or are you interested in building an effective program budget for your next grant application or proposal? If so, please reach out. We have helped clients raise millions of dollars for programs and special projects, and we’ve been working remotely for decades.