Breaking the Starvation Cycle: How international funders can stop trapping their grantees in the starvation cycle
Full title: Breaking the Starvation Cycle: How international funders can stop trapping their grantees in the starvation cycle and start building their resilience; Research into the coverage of administration costs being provided by funders to national NGOs in ten countries
It is a myth that low overheads in non-profits is a sign of efficiency. This myth has led to many donors underfunding the associated administration costs of their project grants. And it has driven a vicious ‘starvation cycle’ of non-profits.
Through the Administration Costs Research Project, the authors gathered evidence on the extent to which international donor funding covers the real administration costs of national NGOs.
There are three key findings:
1) Most funders provide inadequate coverage of their grantees’ administration costs, contributing to a starvation cycle with significant negative organisational impacts.
2) Inadequate cost coverage and limited access to unrestricted income is making it extremely challenging for most NGOs to achieve stable financial health.
3) To stop trapping grantees in the starvation cycle and start building resilience, funders will need to provide:
a) full cost coverage
b) means by which grantees can contribute to unrestricted reserves and
c) support to strengthen grantees’ cost recovery capabilities.
Review by Wilde Ganzen
Humentum is an American organisation, describing itself as: “The leading global non-profit working with humanitarian and development organizations to improve how they operate and to make the community more equitable, accountable, and resilient. We have staff based across the United States, United Kingdom, Africa, Latin America, Europe, and India.” (https://humentum.org/about-us/).
The present report focusses on the plight of many NGOs in the Global South: donors should cease to fund only specific, ‘tangible’ projects and programmes, ‘forgetting’ the operational/financial needs of the local organisation which will carry them out. The report is an important wake-up call for donors.
It is very interesting reading.
What we miss, is an analysis about why international donors are reluctant to finance organisational costs. This why may have much to do with the expectations of individual donors in rich countries who, in turn, finance the donors. Quick, tangible ‘results’ with high visibility are expected. What is behind such results is considered ‘not interesting’ by many individual donors. These individuals donors need to be made aware that the funding of organisational costs is crucial for success.
CSO and funders
Author: Tim Boyes-Watson Siham Bortcosh
Publisher/source/organization: Humentum https://humentum.org/about-us/
Place and year of issue: USA 2022
Type: Research report