I would like to learn what other nonprofits do regarding charging overhead costs (management and general and fund raising) to restricted funds. The question is does your organization allocate overhead expenses to funds which have been restricted by a donor? If yes, do you inform the donor in solicitation letters, gift acknowledgement letters, annual report and/or web site? Can you share the wording or point to your web site page. If no, can you explain your reason. Further, I am developing a survey on this topic. If you would like to participate in it and have the results shared with you, please email me at [Email Removed] Thank you for your responses Gary Leeds Controller Americares Foundation 203-658-9643

When we recieve restricted gifts, we do inform the donor that a small portion of their gift will be used to offset administrative costs related to the fund. On the fund agreement that they sign, we include language that states "EdTA may assess reasonable administrative costs against the Fund for investment, custody and administrative services." If the donor asks for more specifics, we usually specify that no more than 2-3% of the original gift would be used. I'm also curious to know whether or not other organizations do this as well. I'm conflicted about it and in some ways feel that we should just eat the administrative expenses as the cost of doing business. Sabrina Sutton Educational Theatre Asssociation

In the past few years, WaterPartners International has received several large restricted grants which increased the size of our annual budget considerably. We quickly realized that our ability to administer them was going to be overwhelmed unless we made some changes. So, we instituted a policy of trying to re-coup our administrative costs in each restricted grant through a line-item in the grant budget called indirect costs. Our target is 10%, but that would vary depending on your organization and programs. We're very open about it and find that most foundations and donors are pretty understanding about it. I don't think this is something that non-profits need to apologize about, unless the levels are excessive. Donors and the general public need to understand that programs don't operate in a vacuum and that it costs something to keep the lights on. Steve

Our restricted funds are generally for a specific program/project. So while we don't charge administrative and fundraising costs to a specific grant, etc., we do directly and/or indirectly charge admin and fundraising costs to programs since that is part of the program cost. We do include these costs in grant proposals and/or solicitations with donors. Most of our corporate donors understand this and don't have a problem with it; foundation donors understand it for the most part; as far as individual donors go, they are a little more difficult. I am interested in hearing from others though regarding their allocation methods, etc. Curtis

Our organization charges overhead costs to restricted programs as long as the donor did not specifically request otherwise, although we do disclose to our new funders that this will occur. These costs are assessed on a monthly basis as a percentage of salary time that was dedicated to that project. For instance, if staff charged a combined 5% of their time to the project, 5% of office rent and telephone costs would then be charged to that project. Our funders do not seem to mind at all, as they realize it does take administrative oversight to ensure that their funds are being utilized properly.

Our Foundation Board adopted a policy this year for a gift fee. The fee is 10% of Temporarily Restricted Gifts and 5% of the Permanently Restricted Gifts. We are a University Foundation and as the gifts get larger, the gifts tend to be named scholarships or endowments. The costs of running the Foundation have to be paid. Our donors, for the most part, have accepted this reality.

We are also a University Foundation and previously we did have a similar gift fee policy - 15% on gifts arrising from annual giving efforts (Phonathon & mailings, etc) and 4% on all other gifts. We recieve the gifts at 100% into whatever Fund (Endowed-perm restricted or Spendable-temp restricted) and then charge the fee agaisnt the Spendable component on the fund/project. This led to problems with the spendable component of the fund/project being overspent in the first year or more due to fees. We also had dissatifaction from donors and our fundraisers - "How can I ask for a $25,000 endowed gift & then tell the donor that, due to fees, it will be 1 or more years until there will be any scholarships awarded?" We have since changed to 15% fee on gifts arrising from annual giving efforts (Phonathon & mailings, etc) and 5% on all capital gifts (will be transferred to the university for building projects). This is not providing fee revenue sufficient to cover current operating costs and we may have to look at another formula. I would truly appreciate if anyone else could share fee or cost recovery policies That are working! Deb Hoppenjan

We do charge indirect costs to all of our programs based on a formula of direct program costs, whether or not a Grant allowes us to recoupe fringes or indirect costs is part of our revenue recongnation agains the grants. The difference between the allocation and the recovery is funded by our unrestricted revenue