FAQs: Increasing our indirect cost commitment
What is the Ford Foundation’s indirect cost (IDC) rate policy?
As of January 1, 2023, the Ford Foundation will pay a minimum indirect cost rate (IDC) of 25% for eligible project grants. The foundation will also consider a higher documented IDC rate under certain circumstances, which are detailed below.
What is changing from Ford’s previous policy?
Through the end of 2022, our policy is established to provide an IDC rate minimum of 20%. This commitment was raised to 25%, starting in 2023, so that we can continue to ensure our grantees have the vital funds needed to cover the true cost of their work. This change will not be retroactive and applies to new grants made in 2023 and beyond.
What are direct costs and what are indirect costs?
Direct costs are expenditures that are directly identifiable with and attributable to the grant-funded project. Examples of direct costs include salaries or travel for project staff, stipends for project consultants, and expenses for conducting meetings.
Indirect costs are expenditures that are shared across multiple projects or cost centers within an organization and therefore are difficult or impossible to attribute to a specific project. For example, such costs might arise in the organization’s accounting department, technology department, or office of their chief executives.
Why did the foundation make this change?
The expenses of a social justice organization can be complex, and grantees cannot do their work effectively without receiving adequate funding for indirect costs like heat, electricity, and other legal and technical services, and more. Research consistently indicates that funders underpay grantees’ indirect costs, resulting in what has been dubbed the nonprofit starvation cycle.
Since 2017, the foundation has participated in the Funders for Real Cost, Real Change collaborative (FRC), a consortium of 12 foundations focused on developing tools and moving toward a pay-what-it-takes model that reflects the range of true expenses needed by social justice organizations.to advance change.
Which grants are affected by this policy?
This policy applies to project grants to 501(c)3 or equivalent organizations.
It will not apply to expedited grants, general operating and core support grants, or grant increases.
The policy will apply differently to fiscally sponsored organizations, universities, and non-501(c)3 or equivalent organizations.
What is a documented rate?
The following can count as a documented IDC rate:
- In the United States, the federal negotiated indirect cost rate agreement rate, as well as similar state and local rates
- Outside the United States, IDC rates that are approved by government entities, if available
- An IDC rate that another institutional funder determined
- A rate that organizations determine for themselves using tools developed by the FRC
How can grantees document their indirect cost rate?
As part of the work of the FRC collaborative, BDO-FMA developed a set of resources that can guide U.S.-based grantees to calculate their IDC rates. Additional resources and tools about indirect costs for staff and grantees are available on the FRC website.
How long do IDC rates remain valid?
Once we accept an IDC rate, it will remain valid for five years or until the grantee submits a new documented rate, whichever comes first.
Whom can I contact with additional questions or concerns?
Please reach out to your Ford Foundation program officer with any additional questions or concerns.