A new report by Social Ventures Australia and the Centre for Social Impact has demonstrated that not-for-profit indirect costs are often not being recognised or covered by funders in Australia, leading to lower capability and effectiveness across the sector. This research is consistent with research and practice changes among the largest US Foundations.The Paul Ramsay Foundation supports paying what it costs.
A new policy will formally recognise existing practice at the Paul Ramsay Foundation to support the indirect costs of the sector and grow the capability of organisations who work alongside us to help break cycles of disadvantage for children, families and communities to thrive.
From 1 July 2022, the Foundation will implement a policy* that incorporates:
- An interim standard of 30% for indirect costs for NFPs with flexibility for lower or higher indirect costs where a clear rationale can be shown;
- Support to assist sector capability to determine the real direct and indirect costs;
- A review period over the next 12 months to work towards PRF supporting the real direct and indirect costs for different organisations, recognising that the range of indirect costs can vary significantly.
*This will apply to new grants contracted from 1 July 2022. The Foundation funds a wide range of grants. This policy will vary for some different types of Paul Ramsay Foundation grants, such as capability building, fellowships and fee for service regranting. We invite the conversation about identifying the real direct and indirect costs.
 Brown, J., Thorpe, S., Heard, C. and Garrow, M. (forthcoming 2022), Indirect costs in the Australian for-purpose sector: Paying what it takes for Australian for-purpose organisations to create long-term impact, Social Ventures Australia & the Centre for Social Impact.
 Indirect costs, or overhead, are costs incurred by an organisation that cannot be directly and easily attributed to a specific project (i.e. if the project did not exist, the organisation would likely still need to incur this cost). This includes finance, learning and development, IT, measurement and evaluation, HR, etc. Note that which costs are categorised as direct or indirect depends in part on the organisation and the project. For a more detailed definition, see the report.