Lessons Learnt From Humentum’s Administration Costs Research Project

The Youth Café was privileged to participate in a research project “Administration Costs Research Project (ACRP)” conducted by Humentum. Humentum is a global nonprofit organization that partners with over three hundred members and client organizations to strengthen humanitarian and development organizations and advocate for data-driven policies and standards which make the sector more equitable, accountable, and resilient.

Humentum builds community; through advancing individual and organizational capability through online training; and providing solutions to organization- wide problems through consultancy services. This project was led by Tim Boyes-Watson, Global Director of Insights at Humentum and assisted by Joe Baker and Rob Hayes, specialists in Non-Governmental Organization financial management and cost recovery and have been working on this for many years.

Humentum has a vast experience with such projects as they have conducted a number of similar studies and have been working with funders to address the starvation cycle over the last ten years. The Youth Café, through its staff Synthia Ontita, a Senior Project Research & Management Associate, actively took part in a series of recommendations and interventions led by Humentum to address insufficient cost coverage in project grants in ten countries around the world.

The aim of this project was to assess funding practices among global foundations and public donors through gathering information on Non-Governmental Organization experience of cost coverage by donors to better understand whether or not donors are sufficiently covering their grantees’ financial needs and the impacts of covering, or not, grantees’ financial needs. Through this research we hope to help inform donors’ future policies in relation to cost coverage and for advocacy with other international donors. Hopefully this research will lead to real and fundamental change in how costs get covered in international grant-making.

This project occurred in two phases. Phase One started on November 06, 2020 when organizations signed up to take part in the project and ended on February 26, 2021 lasting four months. This phase entailed collection of data; attending informational/ introductory webinars and three support clinics which were conducted through Zoom and providing organizational financial information which were collected through questionnaires, surveys and one-on-one calls held over Zoom with the Humentum team.

The Induction/ Introductory Webinar was held on 8th February 2021 which provided an overview of the project, a good understanding of the work that will be required by organizations to participate in the research , research tools to be used and how to use the research tools. These research tools entailed an Excel based Data Collection template which is designed to gather financial information in a consistent format from all organizations participating in the research, Cost Coverage Survey to collect basic information and cost coverage approach and a Cost Coverage Self-assessment Questionnaire to enable self assessment of organization’s cost coverage practices.

To complete the template, the information that was needed were:

1.) Financial Statements for The Youth Cafe’s last three complete financial years,

2.) A detailed breakdown of income by source and donor agreements for all the three years we submitted data on

3.) A detailed breakdown of expenditure (to be able to map our organization’s expenditure to the categories and cost classifications as defined in the research) for all the three years we submitted data on.

In the Excel Data Collection template, we had different sheets that provided detailed instructions, definitions and cost functions on how to fill each sheet under organizational data, restricted and unrestricted income, restricted and unrestricted. Three support Clinics were held to be able to assist the selected organization representatives use and navigate the research tools with ease and for Humentum to answer any questions that the participating organizations had. These materials were uploaded through the Humentum portal, a safe place where confidential data is stored and where these data can be used for research purposes only.

Phase Two which took place from March 2021 to June 2021 lasting 4 months involved a detailed analysis of the participating organizations experiences and practice in cost recovery. This was through one-on-one calls held over Zoom with the Humentum team to provide details to the submitted work and provide a clear understanding of The Youth Cafe’s organization’s financial information.

The key areas of cost coverage practice include: financing the organization’s work, structuring, calculating and explaining costs, preparing donor budgets to accompany funding proposals, negotiating with donors, charging costs to projects/ programmes, monitoring restricted and unrestricted funds, developing cost coverage capabilities and maintaining and improving cost- efficiency.

Some of the key lessons drawn in developing cost coverage capability include: having adequate reserves to guard against financial risks that the organisation may face, financial risks associated with inadequate cost coverage should be included in the risk register and risk management activities, cost coverage targets set for the organization should be monitored against the performance regularly, cost coverage should be discussed during performance reviews of staff with relevant responsibilities, regularly refresh and update cost recovery skills and knowledge through formal and informal training, peer learning and networking, regularly scrutinise administration costs and look for ways to improve cost-efficiency in such areas and select areas for investment in human or other resources carefully, considering the major risks and opportunities.

It is also important to have a clear and well understood financing policy or strategy which sets out how we expect our different types of costs to be funded by our different income sources and the need to develop clear and documented policies on how to: 1.) Charge project/ programme donors a fair allocation of the administration costs of the organization 2.) Calculate the administration costs that relate to a donor budget for a project/ programme 3.) Setting out what proportion of the direct cost of project activities and administration costs must be covered by a donor.

Our participation in this project contributed to a novel study that informs global funding approaches to cover the total cost of project grants. A group of funders is working together to address the “starvation cycle” impacting civil society organizations and to more appropriately fund total costs associated with delivering grant-funded projects. The starvation cycle refers to a phenomenon in which nonprofit organizations continuously underinvest in their organizational infrastructure in response to external expectations for low overhead expenditure. This cycle starts with funders’ unrealistic expectations about how much running a nonprofit costs, and results in nonprofits’ misrepresenting their costs.

Through this program, we have further explored different potential collaborations including attending monthly Roundtable meetings for NGOs from Africa, getting free resources, free workshops attendance and scholarships/ bursaries opportunities for the online courses.

The Youth Café works with young men and women around Africa as a trailblazer in advancing youth-led approaches toward achieving sustainable development, social equity, innovative solutions, community resilience and transformative change.