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Funding for Real Change - MacArthur CFW Case Study
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This resource is unrelated to AI safety; it covers philanthropic funding reform in the nonprofit sector and has no direct relevance to AI alignment, governance, or safety topics covered in this knowledge base.
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Importance: 8/100organizational reportanalysis
Summary
This case study examines how the MacArthur Foundation and Chicago Foundation for Women worked to reform indirect cost policies in philanthropic grantmaking. MacArthur participated in the Funders for Real Cost, Real Change Collaborative, using IRS 990 data from 137,000 nonprofits to establish a 29% benchmark indirect cost rate associated with financially healthier organizations, ultimately shifting away from a 15% cap.
Key Points
- •MacArthur was an early member of a five-funder collaborative formed in 2016 to address insufficient indirect cost coverage in project grants
- •A 2018 True Cost Project pilot by Bridgespan Group found one-on-one consultations cost $16k-$31k each and were not scalable
- •Analysis of 137,000 nonprofit IRS 990s identified 29% as the benchmark indirect cost rate for financially healthier organizations
- •MacArthur shifted from a 15% indirect cost cap to a more flexible policy through participatory internal culture-change processes
- •The initiative was framed around core values: creativity, diversity/equity/inclusion, empathy, integrity, and learning
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| Page | Type | Quality |
|---|---|---|
| MacArthur Foundation | Organization | 65.0 |
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# Chicago Foundation For Women + MacArthur Foundation
Video by Paul Johannessen
#### Learn more about:
### [MacArthur Foundation](https://www.fundingforrealchange.com/case-study-macarthur-cfw\#macarthur)
#### Learn more about:
### [CFW](https://www.fundingforrealchange.com/case-study-macarthur-cfw\#cfw)
## The MacArthur Foundation: Embracing core values
### **An early innovator**
For MacArthur, a key takeaway from the pilot was that this process – although illuminating and effective – was prohibitively time-consuming and expensive. Each consultation lasted between eight to 12 weeks, costing between $16,000 to $31,000. Replication would not be feasible given the scale of its grantmaking operations, disbursing hundreds of grants each year totaling upwards of $300 million.
Undeterred and committed to improving its then-policy of capping indirect costs at 15 percent, the foundation pivoted to a new approach.
What began as a presidential initiative evolved into an expansive, participatory process imbued with MacArthur’s [core values](https://www.macfound.org/about/how-we-work/values): creativity; diversity, equity, and inclusion; empathy; integrity; and learning.
**Kenneth Jones,** MacArthur Foundation, Chief Operating Officer and Chief Equity Officer
The MacArthur Foundation was one of the original members of the ambitious [five-funder collaborative](https://www.philanthropy.com/paid-content/edge-funders-alliance/project-grants-need-not-be-the-enemy-a-three-part-series-a-funder-collaborative-tackles-the-nonprofit-starvation-cycle), which later evolved into [the Funders for Real Cost, Real Change Collaborative](https://www.philanthropy.com/paid-content/edge-funders-alliance/project-grants-need-not-be-the-enemy-a-three-part-series-a-funder-collaborative-tackles-the-nonprofit-starvation-cycle), that came together in 2016 to gather empirical evidence of how insufficient indirect cost coverage in project grants is harmful to grantees and to explore solutions. The presidents of these peer foundations initiated the True Cost Project pilot in 2018, undertaken by the Bridgespan Group, which entailed one-on-one consultations with nonprofit organizations to verify their “true” indirect cost rates.
#### “We try in everything we do to lead with our values, internally and externally...having a consistent value-driven culture that crosscuts our grantmaking, our business practices, and our organizational practices.”
**Stephanie Platz,** Macarthur Foundatio
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