The New York Times discovers a problem with project-specific grant-making that any nonprofit knows well:
“…when foundations switched to project-based accounting, they forced grantees to sacrifice long-term effectiveness for short-term efficiency, Ms. Enright said. Nonprofits could no longer afford to focus on important strategic activities like advocacy or working for social change, which require “deep resources and the ability to change tactics overnight if the situation demands it,” she said.
In addition, critics say, project-based funding allows grantees to collect only a fraction of their real overhead costs. According to “In Search of Impact,” a 2006 study of foundation grant-making practices from the Center for Effective Philanthropy, foundation chief executives will allow a nonprofit to add only 10 to 30 percent of direct project costs for overhead. Some refuse to provide any operational costs at all.
The financial strain knocks many promising nonprofits out of business.”