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Increasing strategic investments of philanthropic funding in nonprofit organizations

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Increasing strategic investments of philanthropic funding in nonprofit organizations

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INCREASING STRATEGIC INVESTMENTS OF PHILANTHROPIC FUNDING IN
NONPROFIT ORGANIZATIONS
by
Jason Kehoe

A Dissertation Presented to the
FACULTY OF THE USC ROSSIER SCHOOL OF EDUCATION
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
Doctor of Education

December 2020

Copyright 2020 Jason Kehoe

ii
Dedication
I dedicate this dissertation to my daughter, family and friends that have supported me
along this journey. To my daughter, Briana Nicole, I want you to know that daddy will always
love you. This achievement is a testament that no matter the circumstance you can achieve
anything. My family and friends, near and far, thank you for supporting me in my dream to
achieve this goal. Additional thank you to cohort 11 of the OCL program. The friendships we
have made and continue to carry on are invaluable. I thank all of you for being who you are.
Finally, to the nonprofit organizations, portfolio managers and philanthropic organizations doing
such great work, you are delivering and building upon important services across all sectors. I
appreciate the work that you are doing and so do those clients that benefit from it. Most
importantly, it is my desire that the content I provide in this study resonates and provides insight
on how we can move forward in addressing this problem of practice.

iii
Acknowledgements
Dr. Phillips, I cannot begin to thank you enough. You are the dissertation chair that
everyone wishes they had. You always provided me with efficient and effective feedback and we
were able to create a friendship throughout this process. Truly, I thank you for all that you have
done and continue to do. A special thank you to Dr. Helena Seli for taking part in my dissertation
committee. The feedback you provided, different from that of Dr. Phillips only improved on this
study. To my final member of my dissertation committee, Dr. Felipe Massa. Thank you for
providing a truly unique perspective to this study. Thank you for taking the time to provide
insight and assist me when you were able. Finally, I look forward to the celebration of Cohort 11
once we walk across that stage. We all grew together in this program, and I thank all of you.
Fight On!

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Table of Contents
Dedication ....................................................................................................................................... ii
Acknowledgements ........................................................................................................................ iii
List of Tables ................................................................................................................................. vi
List of Figures ............................................................................................................................... vii
Abstract ........................................................................................................................................ viii
Introduction to Problem of Practice .................................................................................................1
Field Context and Mission ...................................................................................................1
Importance of Addressing the Problem ...............................................................................2
Global Performance Goal ....................................................................................................4
Stakeholder Group of Focus and Stakeholder Goal .............................................................4
Purpose of the Project and Questions ..................................................................................5
Current Performance Status .................................................................................................6
Methodological Approach and Rationale ............................................................................8

Review of the Literature ..................................................................................................................9
Philanthropic Funding History .............................................................................................9
Philanthropic Organizations’ Beliefs .................................................................................10
Philanthropic Evaluation of Nonprofits Through Form 990 ..............................................11
Funding Practices of Philanthropic Organizations ............................................................12
Clark and Estes (2008): Conceptual Framework ...............................................................14
Conceptual Framework: The Interaction of Stakeholders’ Knowledge and Motivation and
the Organizational Context ................................................................................................32

Data Collection and Protocols .......................................................................................................36
Interviews ...........................................................................................................................36
Documents and Artifacts....................................................................................................37
Data Analysis .....................................................................................................................38

Study Findings ...............................................................................................................................39
Participating Stakeholders .................................................................................................39
Discussion of Findings .......................................................................................................41

Synthesis of Findings .....................................................................................................................56
Limitations and Delimitations............................................................................................66
Future Research .................................................................................................................68
Conclusion .........................................................................................................................69

References ......................................................................................................................................72

v
Appendices .....................................................................................................................................79
Appendix A Participating Stakeholders: Sampling and Recruitment ................................80
Appendix B Credibility and Trustworthiness ....................................................................84
Appendix C Ethics .............................................................................................................87
Appendix D Interview Guide .............................................................................................89
Appendix E Information Sheet for Exempt Studies ..........................................................91
Appendix F Implementation and Evaluation Plan .............................................................93
Appendix G Evaluation During and After Each Training ...............................................107
Appendix H Evaluation of Implementation Plan .............................................................108

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List of Tables
Table 1 Global and Stakeholder Goals ............................................................................................5
Table 2 Knowledge Influences ......................................................................................................18
Table 3 Motivational Influences ....................................................................................................25
Table 4 Organizational Influences .................................................................................................31
Table 5 Participating Stakeholders ................................................................................................40
Table 6 PM’s Self-Efficacy ...........................................................................................................50
Table 7 Participant Quotes Related to Authority to Make Funding Decisions ..............................53
Table 8 Key Concerns of Portfolio Managers Related to Indirect Costs .......................................54
Table 9 Identified Influences, Literature Source for Influence, and Finding Synopsis .................58
Table 10 Summary of Knowledge Influences and Recommendations ..........................................61
Table 11 Summary of Organization Influences and Recommendations .......................................63

vii
List of Figures
Figure 1 Indirect Costs Representation ..........................................................................................22
Figure 2 Portfolio Managers Portfolio ...........................................................................................24
Figure 3 Conceptual Framework ...................................................................................................34
Figure 4 Philanthropic Funding Sectors ........................................................................................41
Figure 5 Indirect Costs Breakdown ...............................................................................................43

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Abstract
The purpose of this study was to explore, understand, and bring creative ways to increase
philanthropic funding of indirect costs in nonprofit organizations. The study focused on what
knowledge, motivation, and organizational influences contributed to philanthropic organizations'
current funding of nonprofits, and used the Clark and Estes (2008) gap analysis framework as the
foundation of the influencers. Specifically, this research took a deeper dive into what existing
knowledge, motivation, and organizational influences are in place that support or limit the
funding of indirect costs in nonprofit organizations. The desired outcome was to understand
from the philanthropic perspective what portfolio managers' current influences are in limiting or
capping indirect costs, and how that could be improved upon moving forward. To gather data,
qualitative interviews were used, leveraging a convenience snowball sampling method and hour-
long interviews with eight participants across all sectors of philanthropy (e.g., healthcare,
education, advocacy). Data findings were highlighted in a series of tables that captured key
findings for the 17 research questions. The research participants provided clear understanding
and knowledge of what indirect costs were and what the perceived impacts of limiting indirect
costs are. Their answers varied on what impacts, if any, limiting or capping indirect costs had on
the nonprofits they were funding. The study concluded with recommendations to address the
knowledge, motivation, and organizational gaps that were reported, and an implementation and
evaluation plan was developed using the foundation of Kirkpatrick and Kirkpatrick’s (2016)
New World Model.

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Introduction to Problem of Practice
This study addressed the problem of starvation in a nonprofit cycle. Gregory and Howard
(2009) first coined the term “starvation of a nonprofit cycle,” which is driven by persistent
underfunding of essential nonprofit overhead costs. This study focused on portfolio managers
working within philanthropic organizations and the role they play in this starvation cycle.
Keeping overhead costs low leaves nonprofits with a lack of resources necessary to run
an organization (Mauer, 2017). The common conception among philanthropic organizations is
that healthy nonprofits only perform as they should when indirect costs are minimal (Mauer,
2017). Starvation happens when a nonprofit reduces its overhead in efforts to gain a competitive
advantage in donor markets (Lecy & Searing, 2015). Philanthropic organizations cap indirect
costs rates at a percentage significantly lower than that of the range of indirect costs required to
operate nonprofit organizations. It is important to note that not all nonprofits have to reduce their
overhead in efforts to gain that competitive advantage. In some instances, it can be a resource
misallocation. However, what causes the starvation in some nonprofits is the pressure they
experience from philanthropic organizations to conform to the unrealistic expectations with
respect to administrative cost ceilings (Gregory & Howard, 2009). This is a problem worth
exploring because overhead costs are not indicative of a nonprofit’s efficiency. Philanthropic
organizations do themselves and nonprofits a disservice with unreasonable expectations of what
the indirect costs should be (Eckhart-Queenan et al., 2016).
Field Context and Mission
This study explored the field of philanthropic organizations and why they limit or cap
indirect costs of nonprofit organizations. The philanthropic organizations evaluated through this
study are located in the southern region of the United States, specifically southeastern Louisiana.

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Philanthropic organizations limit indirect costs because of their belief that an organization is
more efficient with lower indirect costs. Due to this limitation, nonprofits need to find a way on
how to fully fund their indirect costs. In doing so, this will decrease the external pressures often
faced from philanthropic organizations to keep those indirect costs low.
Research shows that philanthropic organizations operate under the assumption that their
donations or funding they provide are better served funding direct costs. In doing so, this leaves
nonprofits at a deficit in covering their indirect costs. Historically, philanthropic organizations
have deemed nonprofits as more efficient based on lower indirect costs (Eckhart-Queenan et al.,
2016). To philanthropic organizations, efficiency of a nonprofit is based on their ability to create
an impact of programmatic funding with minimal indirect costs (Spokoiny, 2019). When indirect
costs are low within an organization, philanthropic organizations expect low indirect costs in
others as well (Nobel, 2015). Philanthropic organizations reward lower indirect costs rates by
donating more to those nonprofits that they deem as efficient (Burkart et al., 2018). Philanthropic
organizations want to see that their funding is going directly to programmatic objectives
(Eckhart-Queen, et al., 2016). As a result, nonprofits are left to fill the funding gap of those
indirect costs.
Importance of Addressing the Problem
It is important to address the starvation of the nonprofit cycle for many reasons. The
primary reason is for financial stability and longevity of the nonprofit organization. If
philanthropic organizations only want to fund programmatic services of a nonprofit organization,
they negate the core competencies that overhead costs complete (Stahl, 2013). It would be
beneficial for philanthropic organizations to reevaluate their interpretation of indirect costs. If
they do not and continue to be unrealistic in their expectations of overhead costs, they could see

3
a drop-off in the programmatic services they wish to fund. In 2016, Darren Walker (president of
the Ford Foundation), stated that “All of us in the nonprofit ecosystem are party to a charade
with terrible consequences – what we might call the ‘overhead fiction’” (Eckhart-Queenan et al.,
2016, p. 37). Initially, the Ford Foundation funded only 10% of indirect costs but doubled that to
20% in 2015. They did this to develop more dialogue around what operating costs are at
nonprofit organizations (Eckhart-Queenan et al., 2016). In a study conducted by the Bridgespan
Group, the median indirect cost rate of the 20 nonprofits studied was 40% (Eckhart-Queenan et
al., 2016). Most foundations are only willing to fund 15%. Furthermore, the premise that a
nonprofit is more efficacious because of its lower indirect costs is a myth and does not truly
measure efficacy or efficiency (Gregory & Howard, 2009). This is a myth commonly held by
philanthropic organizations. The thought that nonprofits are better suited for funding is widely
held based on their indirect costs but is held on a false premise as demonstrated by the
Bridgespan Group (2016) study.
Additionally, this problem is important to address because many nonprofits have cut
overhead expenses, such as personnel development, to provide the appearance that they are more
efficient to potential donors (Lecy & Searing, 2015). Nonprofits cannot be looked at as efficient,
just because their overhead costs are low; rather, they need to be evaluated based upon the work
that they do (Burkart et al., 2018). Research shows that philanthropic organizations are looking
to fund nonprofit organizations for the potential of the greatest impact (Gregory & Howard,
2009). Philanthropic organizations are looking for legitimate nonprofits and assurances that the
funding will be utilized for its intended use (Gregory & Howard, 2009). Over 70% of
philanthropic organizations state that a nonprofit’s dollars going to indirect costs gain the most

4
attention in the evaluation of a nonprofit (Gregory & Howard, 2009). Nonprofits with higher
indirect costs are not the preferred type philanthropic organizations seek to fund.
Global Performance Goal
The global goal of this study is to increase philanthropic organizations’ understanding of
nonprofit direct and indirect costs in order to encourage investment/giving to nonprofits with
higher indirect costs. Philanthropic organizations currently seek to fund programs that reward
them with the highest impact. Changing philanthropic understanding of indirect costs, and
funding indirect costs, is an essential function in correctly funding programs and achieving
impactful differences on those very programs being funded.
Stakeholder Group of Focus and Stakeholder Goal
Portfolio managers at philanthropic organizations were the key stakeholders interviewed
for the purposes of this study. Portfolio managers have the specific task of funding nonprofit
organizations. The goal ascribed to portfolio managers for the purpose of this research is that
portfolio managers will fund nonprofits, regardless of indirect cost rates. Based on the field goal
of this research, portfolio managers were the only stakeholders considered. Philanthropic
organizations’ actions need to be influenced in efforts to meet the field goal. In order to
effectively evaluate starvation within nonprofits, one must look at the source of funding and the
perspectives and mindsets of those providing the funding. Portfolio managers provide funding to
address a vast array of programmatic issues in which they seek to make an impact. To that end,
in 2009 a National Study of Philanthropic Practice showed that 90% of philanthropic
organizations have met with the grantees to learn more about issues (Enright & Bourns, 2010).
Ultimately, the goal is to bring awareness around nonprofit indirect costs so philanthropic

5
organizations understand the importance of fully funding programs with indirect costs above
their indirect cost caps.
Table 1
Global and Stakeholder Goals
Global Goal
Increase philanthropist understanding of nonprofit direct and indirect costs in order to
encourage investment/giving to nonprofits with higher indirect costs.
Stakeholder Goal
Portfolio managers to fully fund nonprofits, regardless of indirect cost rates.

Purpose of the Project and Questions
The purpose of this research was to evaluate how portfolio managers view indirect costs
among nonprofit organizations. The starvation of the nonprofit cycle affects many nonprofit
organizations. The focus was to examine knowledge, motivation, and organizational influences
that impede portfolio managers from funding organizations with higher indirect costs.
To facilitate this research the following research questions guided this study:
1. What are portfolio managers’ knowledge and motivation related to funding nonprofits
with higher indirect costs?
2. What is the interaction between organizational culture and context, and the portfolio
managers’ knowledge and motivation to funding nonprofits with higher indirect costs?
3. What are the recommendations for organizational practice in the areas of knowledge,
motivation, and organizational resources related to funding nonprofits with higher
indirect costs?

6
These questions are a derivative of this research, and to further understand the knowledge,
motivational, and organizational influences impacting portfolio managers working in
philanthropic organizations. These stakeholders provide crucial perspectives and essential data
needed regarding the starvation of the nonprofit cycle.
Current Performance Status
Practices for funding nonprofit indirect costs are lagging (Gregory & Howard, 2009).
Portfolio managers often seek to fund only the programmatic aspects of what they seek to fund.
However, funding primarily on programmatic or direct costs alone creates a direct shortfall for
the nonprofits completing the programmatic application. In a study conducted by the Bridgespan
Group (2016), one of the clients added up hours that staff members spent on reporting
requirements for a grant. The organization found that 31% of the grant was being spent on
actually administering it, while they were directed by the funder to only spend 13% (Gregory &
Howard, 2009).
The Bridgespan Group found that indirect costs varied from 21% to 89% of direct costs
(Bridgespan Group, 2016). Within the study conducted by the Bridgespan Group, all nonprofits
exceeded the average 15% indirect cost rate cap that most philanthropists provide (N.A., 2016a).
The indirect costs rate cap provided among philanthropic organizations is not reasonable for
nonprofits to function. To ensure successful completion of the programs that philanthropic
organizations fund, indirect costs are just as important to fund. The reasoning behind this is that
indirect costs directly support the programs that philanthropists seek to fund. Bridgespan’s
researchers stated, philanthropists “need to focus on what it takes to achieve an impact” (N.A.,
2016b, p. 1). Nonprofit excellence is often derived by their overhead cost ratios. Donors and
government entities alike use the ratios and can lead to underfunding of nonprofits everywhere.

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Philanthropist organizations’ goal is to fund programs and not the overhead associated with those
programs.
Indirect costs are a direct result of the funding needed to effectively manage direct costs.
Indirect costs support direct costs of the programmatic perspective that philanthropic
organizations want to fund. Philanthropic organizations are seeking to fund nonprofits and look
to make the biggest impact. To support programmatic expenses, indirect costs are a direct result
of that. As reported by Berlin et al. (2017), nonprofits feel pressure from philanthropic
organizations, both private and federal, to keep overhead cost rates low. In their study, four out
of 10 responding non-profits felt the pressure to keep the overhead costs low; but donors expect
the overhead costs to be even lower. According to Tevel et al. (2015), private donors are not the
only sources requiring low overhead costs. In addition to philanthropic organizations, the federal
government requires little to no overhead costs when awarding funds to nonprofits (Tevel et al.,
2015). Reducing overhead costs proves harmful to many nonprofits and not enough money is
spent on overhead.
Philanthropic organizations look at staff as part of their overhead and try to avoid those
costs. Stahl (2013) stated that philanthropic organizations will not support talented organizations
due to the belief that low overhead leads to high effectiveness. It is harmful to the organizations’
ability to perform and negatively impacts the very programs that philanthropic organizations
want to support. Nonprofit organizations feel the pressure to keep overhead costs low, to satisfy
private and federal donors. However, the ultimate impact is negative to the very programs that
philanthropic organizations want to support.
Philanthropic organizations would much rather fund a program that is in line with its core
as it relates their mission and vision (Nobel, 2015). The idea that they are funding a chief

8
executive’s salary is not something that sits well with these philanthropic organizations. As a
result, they limit the amount of funding provided for what is considered overhead. In October
2014, Keenan conducted a study to provide insight on overhead costs and the willingness to
donate. The result of the study was that the participants were not keen on the idea of overhead.
Keenan’s study shows that when the participants were provided with organizations to choose
from to donate to, they chose the organizations with lower indirect costs (as cited in Nobel,
2015). It did not matter to the participants of the research what or who they were funding. The
participants would rather fund an organization that had lower indirect costs, regardless of how
well Kennan and her research team explained its importance.
Methodological Approach and Rationale
The methodological approach conducted in this research is qualitative. To obtain a more
in-depth understanding of the knowledge, motivational, and organizational influences impacting
philanthropic funding of nonprofit organizations with higher indirect costs, qualitative interviews
were utilized for this study. Qualitative research is a set of methodologies, including
interviewing, observation, and document analysis (McEwan & McEwan, 2003). The researcher
conducted eight interviews with portfolio managers to evaluate the knowledge, motivation, and
organizational influences impacting their funding indirect costs for nonprofit organizations.
Interviewing was an integral part of understanding how portfolio managers understand and view
indirect costs. Qualitative research explores two forms of research questions: a central question
and associated sub-questions (Creswell & Creswell, 2018). In addition to the qualitative
interviews, the researcher completed document analysis of four organizations across the
philanthropic sector. The review of documents included policies and procedures, mission and
vision statements, and requests for proposals (RFPs). The benefit of using this methodology is

9
that qualitative studies tend to be emergent and flexible, which enabled the researcher to respond
to the changing conditions of this study (Merriam & Tisdell 2016).
Review of the Literature
A disconnect between the indirect costs of running an effective nonprofit organization
and the expected costs philanthropic organizations are seeking when selecting nonprofits to fund
is what drives the starvation of the nonprofit cycle. This literature review will examine the
common belief amongst portfolio managers, introduced in previous sections, that nonprofits are
more effective with lower overhead administrative (indirect costs). This review begins with
general research on philanthropist ideals in funding nonprofit organizations and continues with
an overview of the literature on philanthropists and funding of nonprofit organizations. This
section then provides a detailed discussion on peer-reviewed research based on the common
funding practices of philanthropists. Finally, this section concludes with current research on
philanthropist funding practices nationally and globally. Following the review of the research
literature, this study provides an analysis using concepts of Clark and Estes’s (2008) gap analysis
of the process of philanthropist funding to nonprofit organizations.
Philanthropic Funding History
The term philanthropy is derived from the Greek word philanthropia, meaning love of
mankind (Sulek, 2010). Since the inception of philanthropy, mankind has depended on the act of
kindness in giving to strangers. The National Philanthropic Trust shows that philanthropy and
helping others dates back to the 1500s. Philanthropy has changed and evolved based on world
events. As research takes a look at philanthropic organizations it defines what philanthropic
organizations look to achieve. Throughout history, philanthropic organizations want to help
others. In today’s modern society, philanthropic organizations seek to improve and strengthen

10
communities and it is achieved in many ways. Whether it is through supporting the arts, building
schools, or providing relief to victims of natural disasters; philanthropic organizations want to
help others by making an impact.
Philanthropic Organizations’ Beliefs
Donors believe that nonprofits with lower overhead costs are more efficient than those
with higher overhead costs. Grey Matter Research (2018) reported that, in a survey of 1,000
donors, donors see nonprofit organizations as more efficient when they have lower overhead
costs than those that have higher overhead costs. This is based on data collected by both Grey
Matter Research and Opinions 4 Good (2018). While the number of donors in this study is
limited to 1,000, it indicates a common misconception amongst donors that nonprofits are more
effective due to lower overhead costs. Lecy and Searing (2015) have reported nonprofits are
directing their efforts to decrease overhead costs. By doing so it may deem harmful to the
organization.
Gregory and Howard (2009), show the starvation of a nonprofit cycle as a three-step
process. The first step is philanthropic organizations’ unrealistic expectations of what indirect
costs should be (Gregory & Howard, 2009). The second step is that because of those unrealistic
expectations, nonprofits feel that pressure from philanthropic organizations (Gregory & Howard,
2009). Finally, the third step occurs in two ways: the nonprofits spend too little on indirect costs,
and they underreport their expenditures on tax forms in fundraising materials (Gregory &
Howard, 2009). In a study completed by the National Center for Charitable Statistics (NCCS),
data shows that nonprofit organizations are filing a 990 differently than what the findings from
audits show (Burkart et al., 2018). This is important because the 990 form is a reflection of the
organization's financial positioning. The IRS form 990 is a reporting form that most nonprofits

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are required to file each year with the IRS. Donors favor a lower overhead cost ratio. However,
reducing administrative expenses might impact the nonprofit negatively by decreased
administrative abilities. Seventy-eight percent of those funding nonprofits believe that more than
70% of their donations should go toward programmatic expenses (Burkart et al., 2018).
Starvation of the nonprofit cycle stems from unrealistic donor expectations and followed by
nonprofits' desire to obtain funding. Nonprofits deprive themselves of administrative capabilities
by reducing overhead expenses.
Philanthropic Evaluation of Nonprofits Through Form 990
Unrealistic expectations of potential donors have nonprofit organizations reevaluating
overhead costs and how to represent them on financial statements. For instance, each year
nonprofit organizations are required to file Form 990 with the Internal Revenue Service (IRS).
The 990 form is labeled by the IRS as “Return of Organization Exempt from Income Tax.” This
reporting form allows the IRS and the general public to view nonprofit operations. Information
such as mission, programs, and nonprofits finances. The 990 serves as the ability for the
nonprofit to represent itself and give potential donors and the public the ability to see what they
do and how they stand financially. This form is important to show philanthropic organizations
exactly where and how funds are being expended through the organization. Gregory and Howard
(2009) state that philanthropic organizations maintain unrealistic expectations about nonprofits’
overhead costs. In a study conducted by the Bridgespan Group completed in 2004, called
“Nonprofit Overhead Cost Study,” 36% of nonprofits felt extreme pressure from government
agencies, 30% felt pressure from private donors, and 24% felt pressure from foundations to keep
overhead costs low (Gregory & Howard, 2009). A Grey Matters Research (2018) study showed
that six in 10 donors believe nonprofits spend too much on overhead expenses. Donors believe

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that 19% or under, are a reasonable ratio for overhead costs. As a result, nonprofits are left with
trying to make themselves more appeasable to potential philanthropic organizations. Depending
on the nonprofit, there are a variety of ways they look to increase philanthropic funding. One of
the most common ways is to reduce their indirect costs (Gregory & Howard, 2009). A reduction
in those costs may include a reallocation of the current structure of what the organization deems
as direct as compared to indirect costs (Wilson, 2018).
Funding Practices of Philanthropic Organizations
Philanthropic organizations of different backgrounds have many different reasons for
funding. Some do it out of religious beliefs and others do it because they themselves have been
beneficiaries of a nonprofits programmatic service. In today’s modern society philanthropic
organizations are funding nonprofits to make an impact. In a study completed by Goldseker and
Moody (2017), they found that today’s philanthropic organizations do not just want to be known
for writing checks. Their study found that next-generation donors want to see an impact to the
programs they are funding. To accompany the funding philanthropic organizations provide and
the impact they seek to achieve, there are also stipulations to how the funding is being expended.
Portfolio managers and philanthropic organizations alike want to see that the financial
support being provided is going to address the issue. For instance, if funding is supposed to
provide feeding homeless children, philanthropic organizations want to see that homeless
children actually are getting food. However, organizations such as the Wounded Warrior Project,
are often exposed by their spending and producing negative press as a result. The Wounded
Warrior Project raises over $372 million a year, but that money was not necessarily going to the
veterans (Paynter, 2016). Further investigation showed over 40% of the annual revenue was
going towards travel, expensive hotels, and inflated salaries (Paynter, 2016). As a result of

13
nonprofits such as the Wounded Warrior Project, philanthropic organizations have fought back
by limiting nonprofits indirect costs. Often those indirect costs are not to exceed more than 15%
to cover office space and salaries (Paynter, 2016).
Indirect Costs
Due to the exposure of large nonprofit organizations and their lavish expenses, smaller
nonprofits that are truly making a difference, suffer by the limitations inflicted on indirect costs.
Nonprofit Business Advisor (2016) research from the Bridgespan Group makes a case for
rethinking the standard or idealized 15% overhead cost rate. For nonprofits, the study shows that
overhead rates vary amongst nonprofits. Costs varied from 21% to 89% and by providing a
standard rate is not only wrong, but it minimizes these nonprofits from maximizing their impact.
Nonprofit organizations are continually seeking ways to gain attention and traction in
efforts of being funded by philanthropic organizations. A five-year research project was
conducted by the Urban Institutes, NCCS, and the Center on Philanthropy at Indiana University
(Gregory & Howard, 2009). In this research, nonprofits with lower indirect costs had ailing
technological systems, poor training programs, and a plan to cut even further. The reduction in
indirect costs in this study ranged from support services, personnel, and technology.
Furthermore, nonprofits are resorting to underreporting on their expenditures on tax forms such
as their 990’s (Gregory & Howard, 2009). Nonprofits continuing to do this further philanthropic
organizations’ unrealistic expectations of what indirect costs rates should truly be (Gregory &
Howard, 2009). Donors have unrealistic expectations of what the nonprofit overhead expenses
should be. Setting limits to each of the nonprofits can prove to be detrimental to the impact they
can make.

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Clark and Estes (2008): Conceptual Framework
This review of current literature focuses on the knowledge, motivation, and
organizational influences impacting portfolio managers within philanthropic organizations to
achieve their stakeholder performance goal. The performance goal of the stakeholder is for
portfolio managers to fully fund nonprofits regardless of indirect cost rates. Using the Clark and
Estes (2008) gap analysis, I evaluated knowledge, motivational, and organizational influences
that impact performance gaps. Knowledge, motivation, and organizational influences will be
addressed below in understanding portfolio managers, and how to raise awareness around what it
takes to support the programs that philanthropic organizations fund. Each of the influences
(knowledge, motivational, and organizational) was examined through the methodology discussed
further in this study.
Knowledge, Motivation, and Organizational Influences
Starvation of the nonprofit cycle occurs when the misconception that a well-functioning
nonprofit has or only requires very minimal indirect costs in order to operate (Mauer, 2017).
Clark and Estes (2008) state that performance increases when the employee ascertains the
knowledge and skills to achieve organizational performance measures. In an effort to evaluate
their ability to achieve performance goals, understanding an employee’s ability, and developing a
plan for them can help them grow (Rueda, 2011). An analysis of employee’s knowledge and
skills within their jobs are essential in defining how successful they will be in achieving what
they have been tasked with (Clark & Estes, 2008). This review of current literature focuses on
the knowledge, motivation, and organizational influences of portfolio managers to achieve their
stakeholder performance goal. The performance goal of the stakeholder is for portfolio managers
to fully fund nonprofits regardless of indirect cost rates. Using the Clark and Estes (2008) gap

15
analysis, the following section will explore knowledge, motivational, and organizational
influences that impact performance gaps. Knowledge, motivation, and organizational influences
will be addressed below in understanding portfolio managers, and how to raise awareness around
what it takes to support the program's portfolio managers fund. Each of the influences was
examined through the methodology discussed in the succeeding chapter.
Knowledge Influences
Knowledge is one of the first variables pertinent to philanthropist’s ability to achieving
their stakeholder goals. Clark and Estes (2008) state that an employee’ (or stakeholder in this
case) ability within the realm of knowledge and skills dictates an organization’s ability to
perform at a high level. When employees are able to improve upon knowledge and skills, it
increases their ability to address gaps related to the performance goal; ultimately the organization
benefits from this (Clark & Estes, 2008). Whether it is employees of a nonprofit organization or
portfolio managers, having the knowledge and skills are essential in reaching any goal (Rueda,
2011). To back this argument, Clark and Estes (2008) state that it is essential to invest in all
employees. The investment in their knowledge and capability provokes an increase in
organizational capacity; in turn, the organization becomes stronger (Clark & Estes, 2008).
Portfolio managers need to have specific knowledge and skills to correctly identify
organizations in which they should fund. They also need to be aware of what costs are associated
with the nonprofits they fund. Nonprofit organizations do essential work and programmatic
funding is necessary. However, nonprofits desperately need help to fund their indirect costs.
With this information, it is essential to assess relevant knowledge influences and types. There are
four different types of knowledge: factual, conceptual, procedural, and metacognitive
(Krathwohl, 2002). Factual knowledge is predicated upon the element or facts specific to

16
discipline and activities (Krathwohl, 2002; Rueda, 2011). Conceptual knowledge focuses on the
relationship between the four core elements (Krathwohl, 2002). With conceptual knowledge, it is
important that an individual understands the principles, theories, generalizations, and
categorizations as it pertains to one of the core elements. Procedural knowledge references an
individual’s ability to do something (Krathwohl, 2002; Rueda, 2011). The fourth knowledge type
is metacognitive knowledge. This type of knowledge is about an individual’s knowledge of their
own way and ability to process something (Krathwohl, 2002; Rueda, 2011). Metacognitive
knowledge needs an individual to extrapolate at the highest possible level, then consider how
relevant information is in their decision making; in doing so it helps them how to proceed when
completing an objective (Krathwohl, 2002; Rueda, 2011).
In the next section, this study will be addressing the two most important knowledge
influences essential for portfolio managers to achieve a better understand of indirect costs for
nonprofit organizations and categorize each influence into one of the knowledge types previously
reviewed. This is an important step to determine approach and assess the progress of the
philanthropist and achievement of the stakeholder goal.
Portfolio Managers’ Understanding of Indirect Costs. Conceptual knowledge of
indirect costs is the first influence that portfolio managers need to understand. Krathwohl (2002),
defined conceptual knowledge based on one’s ability to utilize all four elements. When portfolio
managers only look at one aspect of where their funding is utilized, they discredit all four
elements, and, in turn, nonprofits lose out on essential funding or are not funded the way they
need to be funded. Portfolio managers' primary focus is to ensure that they are funding an
organization that meets their own criteria. Oftentimes, portfolio managers only take a look into
what the programmatic costs are, but they do not examine the indirect costs that are associated

17
with carrying out a program. This relates to portfolio managers' thoughts on indirect costs based
on their assumptions that indirect costs make an organization more effective.
Evaluation of Indirect Costs On a Case-By-Case Basis. Evaluation of indirect costs on
a case-by-case basis is a goal within the knowledge influence. This knowledge type is conceptual
and takes understanding why portfolio managers fund, or do not fund, on a case-by-case basis.
Indirect costs rates are not a one size fits all application. Indirect costs rates are more complex
than just the organization’s size, structure, and service provided (National Council of Nonprofits
[NCN], 2013). To further illustrate this point, the Government Accountability Office (GAO),
conducted a study in 2010. This study showed that a 26% indirect cost rate established in 1991,
was not close to adequate for 83% of the universities studied (NCN, 2013). For example, the top
49 funded universities in the US, have an average indirect cost rate of over 59% (Datahound,
2014). The rest of the award goes to programmatic costs or research. In 1993, the GAO decided
that they could not limit these institutions to a 26% rate and proposed a new rate of between
51.7% and 53.6% (NCN, 2013). Other nonprofits reviewed within this study showed that a
negotiated indirect cost rate of between 30% and 45% was reasonable (NCN, 2016).
Review of the literature suggests that re-evaluation of how philanthropic organizations
fund programs are needed. Grants made to nonprofit organizations need to not only fund the
programs and services they wish to support, but the operations that support those very same
programs. As noted in the research by NCN, different nonprofit types have different cost
structures. Hence the indirect costs will vary from nonprofit to nonprofit dependent on the
services they provide. Darren Walker, President of the Ford Foundation, stated that “All of us in
the nonprofit ecosystem are party to a charade with terrible consequences – what we might call
the ‘overhead fiction’” (Eckhart-Queenan et al., 2016, p. 37). In January of 2016, the Ford

18
Foundation doubled its indirect cost rate reimbursement from 10% to 20% (Eckhart-Queenan et
al., 2016). Their thought process behind doing so was to better fund the nonprofits they
supported in a more honest dialogue of what operating a nonprofit entailed (Eckhart-Queenan et
al., 2016). Providing funding to nonprofits is only half of the battle. Accurately understanding
what nonprofits need funding for, and how to support them, provides better interactions between
philanthropic organizations and those organizations that they fund. Philanthropic organizations
can be detrimental to the very programs they seek to fund by shorting the nonprofits’ indirect
costs. Indirect costs support those programs that philanthropic organizations support. Table 2
categorizes the aforementioned knowledge influences by knowledge type. Furthermore, this table
explains the assessment methods preceded by the stakeholder and global goal.
Table 2
Knowledge Influences
Global Goal

Increase portfolio managers understanding of nonprofit direct and indirect costs in order to
encourage investment/giving to nonprofits with higher indirect costs.

Stakeholder Goal

Portfolio managers to fully fund nonprofits, regardless of indirect cost rates.

Assumed Knowledge
Influence

Knowledge Influence Assessment
Portfolio managers must
understand the principles
behind indirect costs.

Interviews of portfolio managers at philanthropic
organizations to understand nonprofit organizations’
understanding of indirect costs.

Portfolio managers need to
evaluate indirect costs on a
case-by-case basis, not on an
overall percentage of what
they deem acceptable.

Interviews of portfolio managers at philanthropic
organizations to understand if indirect costs are evaluated on
a case-by-case basis.

19

Table 2 is a direct correlation to what philanthropist’s knowledge looks like conducted in this
study. The next section of this review will evaluate the motivational influences of portfolio
managers.
Motivation Influences
Motivational influences are another dimension to portfolio managers achieving their
stakeholder goals and global goals. The previous section of this review focused on knowledge
and what portfolio managers know and are assumed to know. This section will focus on
philanthropists’ motivation and how they hope to meet their vision.
Rueda (2011) stated that the two dimensions of knowledge and motivation are not looked
at alone, but both are related. Motivation is essential to one’s performance. Clark and Estes
(2008), claim that organizations have gaps that stem from motivation. Clark and Estes (2008)
continue on to say that increasing motivation helps address performance gaps and ultimately
gives the organization outcomes that are positive even if no gaps are identifiable. As this relates
to philanthropists, the objective of the evaluation model applied is to progress philanthropist
understanding of indirect costs.
Motivation enables us to set goals and work to achieving them (Mayer, 2011; Rueda,
2011). Mental effort, persistence, and active choice are the three main components of motivation
(Clark & Estes, 2008). Mental effort is the mental work someone invests into a task; persistence
is one’s ability to stay committed and work on their goals regardless of obstacles; and active
choice is the want to actually pursue a goal (Clark & Estes, 2008). The following sections will
focus on utility value goal orientation. All of which are essential to philanthropist and nonprofit
organizations’ ability to achieve their goals.

20
Portfolio Managers Need to See the Value in Indirect Costs Within Nonprofits.
Portfolio managers traditionally seek to only fund programmatic costs and not the indirect costs
necessary to support those very programs. As identified in Table 1, the stakeholder goal is to
bring awareness around nonprofit indirect costs, so portfolio managers understand the
importance of fully funding programs with indirect costs above their indirect cost caps. The first
motivational influence related to nonprofits achieving their necessary funding in utility value.
Utility value is the value of the task for facilitating one’s long-range goals, or in helping one
obtain immediate or long-range external rewards (Eccles, 2006). In order for nonprofits to
achieve their goal of being appropriately funded, creating utility value for portfolio managers and
philanthropic organizations will help them to achieve their goal. Philanthropists need to see the
value in indirect costs with nonprofits.
Charitable giving is motivated by many things dependent on the individual or
organization providing the funding. Some giving reflects the values of the donor and helps
causes that the donor believes in (Rubin, 2017). Philanthropic motivations that support a cause
that they believe in also provide tangible benefits. This support can be categorized with class and
status (Rubin, 2017). Further proving this, the trustees at Indiana University (2009), conducted a
study looking at regional variations and motivations of giving. The study showed that there were
differences in the selection of motivations for giving by region. One of the key findings in
motivation was that philanthropic organizations wanted to provide for people’s basic needs and
helping (Trustees Indiana University, 2009). Based on philanthropic organizations want to help
those in need, they ultimately want to create and see impact. In 2017, a study conducted by
Goldseker and Moody, over 300 philanthropic organizations were surveyed. The survey asked
the philanthropic organizations to indicate the importance and various reasons for engaging in

21
philanthropy. Out of the 23 choices Goldseker and Moody provided philanthropic organizations
selected “seeing that my contribution makes a real difference in the organization and has a real
impact” as one of the top reasons for giving (Golseker & Moody, 2017). The want and need for
funding are constant. Based on the research by the trustees at Indiana University, philanthropic
organizations will fund what they are passionate about and what they will see an impact from.
Who they fund, what they fund, all ties into the organization and how they fund a nonprofit
organization.
Philanthropic funding affects our daily lives more than we are aware of with the
programs or services they choose to fund. Goldseker and Moody (2017), stated that we are
entering a “Golden Age of Giving.” The wealthiest 10% of Americans own 75% of all the
wealth, while the wealthiest 1% own 43% of the wealth (Goldseker & Moody, 2017). What were
are seeing is generational wealth continues to get richer. Many of the wealthiest 10% of
philanthropic organizations provide support for an array of services. This generation of
philanthropists is focused on increasing their impact and moving the needle in the programs and
services they fund (Goldseker & Moody, 2017). The next generation of philanthropists is looking
to redefine philanthropic funding from being looked at as check writers, to impact makers
(Goldseker & Moody, 2017). The general idea to provide funding for great causes is inherent.
However, funding cannot just fund the cause, it needs to support the infrastructure that supports
these programs, which leads this study into the next portion of motivation, goal orientation.
Portfolio Managers Should Seek to Fund Organizations Based on Result and
Program Goals The second motivational influence is goal orientation. Portfolio managers
should seek to fund organizations based on results and organizational goals, not just on indirect
costs. Research shows that portfolio managers and philanthropic organizations as a collective,

22
seek to make an impact. The primary objective of their goal is to make an impact through the
programs they fund. Goals are what motivate and direct us to work for what we want (Eccles,
2006). In a study conducted by Bridgespan, the cost structures of 20 nonprofit organizations
reflected indirect costs ranged from 21% to 89% (Eckhart-Queenan et al., 2016). Figure 1 depicts
how Bridgespan studied deciphered indirect costs and the four elements.
Figure 1
Indirect Costs Representation

Note. Diagram by (Eckhart-Queenan et al., 2016)
As Figure 1 demonstrates, indirect costs are an essential function of how an organization
runs and operates. Motivation in funding these organizations by portfolio managers are many
times categorized on the program their organization seeks to fund and how little of it will be
going to those indirect costs. Unfortunately, portfolio managers wish to see the program’s results
without accurately funding the infrastructure in a nonprofit that it takes to support those
programs (Goggins & Howard, 2009). In most cases, research shows that philanthropic

23
organizations fund nonprofits in which their goals align with the nonprofit. Brest (2015) asserted
that strategic philanthropy should be adopted within the philanthropic sector. He defined
strategic philanthropy as synonymous with outcome-oriented, result-oriented, and effective
philanthropy (Brest, 2015). This type of philanthropy is when donors articulate and define clear
goals; and they and/or their grantees explore and use evidence-based strategies for achieving
those goals (Brest, 2015). Working together to achieve a common goal and ensuring that
alignment between the philanthropic organizations and the nonprofit achieve all the objectives
set forth. This approach just does not put an emphasis on one particular area of the nonprofit, but
it puts the premise on what will create the biggest impact.
Portfolio Managers Have Confidence in Their Ability to Make Decisions Regarding
Nonprofit Funding Without Using Standardized Ratios for Indirect Costs. The third
motivational influence is self-efficacy. Self-efficacy can be defined as the judgements that
individuals have about themselves and their ability to learn or perform courses of action at
designated levels (Pajares, 2006). Portfolio managers have the ability to make decisions on
whether or not to fund nonprofit organizations, regardless of their indirect costs (Eckhart-
Queenan et al., 2016). Philanthropic portfolios can be both conservative and aggressive
dependent on what their giving tendency is, and to what sector they are seeking to make an
impact (Thompson, 2014). Many factors play into a donor and their giving tendencies such as
their age, assets, capacity, approach and ultimately motivators (Thompson, 2014). Figure 2,
listed below, provides an example of what a portfolio managers portfolio may look like:

24
Figure 2
Portfolio Managers Portfolio

Note. Notional representation above created by author.
Pajares (2006) noted that one’s personal cognitions are vital in their success or failure in
all endeavors. Research suggests that portfolio managers seeking to make an impact on areas
important to them indicate that self-efficacy is an important element for inducing action
(Bandura, 1986, as cited in Basil et al., 2008, p. 2). Basil et al. (2008) further stated that self-
efficacy increases donation intentions by increasing anticipatory guilt. The guilt being discussed
here is that of advertisements one will hear through a TV ad, such as “For less than a cup of
coffee a day, you can help save a needy child.” Figure 2 provides a depiction of the areas that
philanthropists seek to fund. Which they choose to fund and how they fund it is all related in
their own self-efficacy or that of the philanthropic organization. Self-efficacy is important to
achieving the objectives of providing for programmatic areas in which portfolio managers seek
to make an impact.
If nonprofit executives want to become better funded, and philanthropists want to keep
indirect costs down, both will put a higher value on completing the tasks so that ultimately

25
programs are successful. Table 3 shows the two motivation influences and methods used to
assess them.
Table 3
Motivational Influences
Global Goal

Increase portfolio managers understanding of nonprofit direct and indirect costs in order to

encourage investment/giving to nonprofits with higher indirect costs.

Stakeholder Goal

Portfolio managers to fully fund nonprofits, regardless of indirect cost rates.

Assumed Motivation
Influence

Motivation Influence Assessment
Utility Value – Portfolio
managers need to see the
value in indirect costs within
nonprofits to achieve program
goals.

Interviews with portfolio managers to understand motivational
influences in how they fund nonprofit organizations’ indirect
costs and impact on programmatic goals.
Goal Orientation – Portfolio
managers should seek to fund
organizations based on results
and program goals, not
solely based on indirect costs.

Interviews with portfolio managers to understand motivational
influences in funding nonprofit organizations’ program goals
and indirect costs.
Self-Efficacy – Portfolio
managers have confidence in
their ability to make decisions
regarding nonprofit funding
without using standardized
ratios for indirect costs.
Interviews with portfolio managers to understand their
motivational influence in the management of their portfolios.

Table 3 reflects what portfolio managers assumed motivations are in this study. The final
portion of this section will be evaluating the organizational influences portfolio managers utilize
in their funding of nonprofits.

26
Organizational Influences
Organizational influences define the model and the setting of the culture. These
influences have a monumental impact on stakeholders and their ability to reach organizational
goals (Clark & Estes, 2008). Quick solutions to problems that may arise are not always the best
route to take. It is important to complete a full evaluation to get to the root cause of an issue. By
doing so and understanding the organization’s influence, a leader can identify the gaps and
implement change to be effective (Clark & Estes, 2008. An organization’s ability to implement
efficient and effective resources (such as policies and procedures) helps to solve organizational
challenges and create the ability to change for the future. More important is accountability within
this respect. An organization’s accountability assists in organizational climate providing them the
ability to sustain change (Clark & Estes, 2008; Kezar, 2001). This section of the literature review
focuses on the organizational influences affecting philanthropic funding of nonprofits.
Rueda (2011) explained that cultural models embody the mental composition and typical
understanding within an organization that explains how the environment works. Essentially,
these are unseen elements of the organization that people know exists. On the other hand, we
evaluate cultural settings. Cultural settings are a visible reflection of the organizational culture in
action. This includes something that would support organizational mission and goals, such as
policies and procedures. For an organization to be effective their cultural model and cultural
setting need to be aligned. In doing so embraced values within the organization will become
acted upon through behavior. Kezar (2001), noted that challenges occur when procedures are not
in alignment with that of the organization. A systemic issue from the lack of alignment causes a
huge challenge to the key stakeholders in their ability to be successful in reaching organizational
goals (Burke, 2004). Furthermore, unless stakeholders are working towards the same propensity,

27
organizations do not have the ability to inflict change (Clark & Estes, 2008). Organizations need
to have the ability to establish concrete goals, without that, production becomes relatively
stagnant (Clark & Estes, 2008). Furthermore, transparency within leadership is important to
inform strategy for organizational goal achievement (Albu & Flyverbom, 2016).
Cultural Model: A Culture of Trust Needs to Exist Between Nonprofits and
Philanthropic Organizations his model will help to better understand funding of indirect costs.
Cultures form in any group within the organization. These cultures can be pervasive and can
affect the organization. Research has shown that an organization’s culture dramatically affects its
effectiveness (Joyaux, 2015). Philanthropic culture has been set up to only fund costs associated
with the programmatic side, not all-encompassing of the indirect costs. In 2011 the National
Committee for Responsive Philanthropy reported that 75% of all U.S. foundation grantmaking is
restricted (Paynter, 2016). Unfortunately, restricted funding limits what exactly the funding can
be used for, preventing non-profits from moving funds between programs or activities.
Research shows that trust is a pressing need between philanthropic organizations and the
nonprofits in which they fund. The primary concern is that the funds provided by philanthropic
organizations to nonprofits are not being utilized as intended (Wynn, 2015). The mismanagement
of funds is a very real concern. This causes pause for philanthropic organizations to fund
nonprofit organizations. Trust is the foundation of every prosperous relationship, and nowhere is
that more prominent than the nonprofit sector (Wynn, 2015). The Millennial Impact Project
conducted a study in 2011, and 90% of consumers age 20–35 said they would stop giving to a
nonprofit altogether “if they did not trust the organization” (Grossnickle, 2011). In order for
nonprofits to gain and obtain trust from philanthropic organizations, transparency is essential. To
obtain trust, nonprofits must be transparent in their dealing with the philanthropic organizations.

28
This can include, but not be limited to, providing them data and information prior to being asked.
Readily sharing information to the philanthropic organizations and or its portfolio managers is a
great way to show transparency, thus gaining the philanthropic organization’s trust.
The restriction of funding in indirect costs has the potential impact to hurt the very
programs portfolio managers seek to fund. When nonprofits are provided adequate funding, it
provides them with the ability to invest in indirect costs such as infrastructure. For example, an
organization by the name of Learning Goes on Network provides an afterschool program for
students. They provide services such as tutoring and enrichment (Bedsworth et al., 2008). In
2004, the organization was rapidly growing and they needed to invest in their infrastructure. By
2007 they doubled in size and the communities that they served. Consequently, their indirect
costs went from 5% to 20% (Bedsworth et al., 2008). The executive director, Amelia Johnson,
noted that if she would have continued to pinch pennies, the impact to the children they served
would hurt more than it would help (Bedsworth et al., 2008). Nonprofit organizations need the
ability to invest in their infrastructure so that the very programs they provide are not negatively
impacted.
In a TED Talk, Dan Pallotta described that keeping nonprofits at bay in having lower
indirect costs is “What happens when we confuse morality with frugality…Our generation does
not want its epitaph to read: ‘We kept charity overhead low.’ We want it to read that we changed
the world.” (Pallotta, 2013). In order to change the world, funding nonprofit organizations fully
is the first step.
Cultural Model: Employees in Portfolio Managers Need to Be Authorized to Make
Funding Decisions Regardless of Nonprofit Indirect Costs. This cultural setting, within
organizational influences, will enable the organization to understand inherent programmatic

29
expenses within indirect costs being one of them. The document and artifacts section of this
research will delve into why the organization limits indirect costs. This will be done through the
use of documents such as policies and procedures, mission and vision statements, and the
organization budget. Portfolio managers generally shy away from funding anything other than
programmatic costs. Indirect costs support programs. In order to achieve philanthropic objectives
based on the programs they support, funding an organization’s indirect costs are essential. Stahl
(2013) argues that philanthropic organizations could make major strides in efficiency and
efficacy of their support by not just funding programmatic costs, but the systems that support
them as well.
For a study conducted in 2018, Norma Altshuler and Marissa Tirona teamed up with the
Ford, Hewlett, MacArthur, Open Society, and Packard Foundations. This study was initiated to
define if portfolio managers of philanthropic organizations were adequately covering grantees’
indirect costs (Altshuler & Tirona, 2018). Their study found that grantees were unable to secure
sufficient funding for indirect costs correlated to project work (Altshuler & Tirona, 2018). What
the study found is that portfolio managers inadequate funding of the nonprofits undermined the
nonprofits ability to reach programmatic goals.
Cultural Setting: Philanthropic Organizations Need to Have Policies in Place that
Prohibit Funding Nonprofits When Indirect Costs Exceed Specific Percentage. Indirect
costs are an inherent cost within the nonprofit sector. Indirect costs are costs that are not
considered to be directly associated with a program. In fact, indirect costs include utilities, health
insurance, supplies, building costs, and depreciation to name a few (N.A, 2017). People need
nonprofit services to assist in solving social problems and understanding true costs of what it
takes to fund these nonprofits to keep them healthy and functioning is essential.

30
In order to achieve the impact that philanthropic organizations are looking to achieve,
philanthropic organizations’ funding of indirect costs is shown to be associated with the
nonprofits’ ability to make a difference (Altshuler & Tirona, 2018). Altshuler and Tirona (2018)
study finds that adequately covering a nonprofit’s costs are vital for the overall health and
functionality of a nonprofit to ultimately make a difference.
Cultural Setting: Nonprofits Need to Effectively Communicate the Importance of
Indirect Costs to Portfolio Managers. Effective use of funding nonprofits is all relative to the
portfolio managers’ ideals and motivation to what they want to fund. Granting funds to nonprofit
organizations is not just the premise of funding, but how the portfolio managers fund nonprofits.
In order for portfolio managers to be effective catalysts for change, structures, and relationships
of grantmaking by philanthropic organizations, are often preventing the goals in which they seek
to achieve (Levine, 2017). Studies have shown that nonprofit issues of underfunding continue to
perpetuate and grow (Levine, 2017). Furthermore, the study showed that issues arise from the
way philanthropic organizations work, and not from the organizations that they are funding
(Levine, 2017). The implications of the starvation of a nonprofit cycle are quite concerning. In
1991 Tuckman and Change developed the financial ratio analysis for nonprofits. This financial
ratio analysis showed that organizations who have significantly lower indirect costs in
comparison to the average are at risk due to unforeseeable events. These events can be referred
to as economic shock. This shock has such a large widespread effect and the macro impact to
nonprofits can be detrimental (Lecy & Searing, 2014). Reassessing how indirect costs are viewed
will not only change the starvation of the nonprofit cycle, but it will further benefit those
programs that they seek to fund and make a difference within. Table 4 presents the assumed

31
organizational influences, and the literature review that supports those factors preventing
nonprofits from being appropriately funded.
Table 4
Organizational Influences
Global Goal

Increase portfolio managers understanding of nonprofit direct and indirect costs in order to
encourage investment/giving to nonprofits with higher indirect costs.

Stakeholder Goal

Portfolio managers to fully fund nonprofits, regardless of indirect cost rates.

Assumed Organizational
Influence

Organizational Influence Assessment
Cultural Model – Nonprofits
need to foster a culture trust
surrounding the use of
philanthropic donations. A
culture of trust exists between
nonprofits and portfolio
managers.
Interview of portfolio managers to understand the
organizational influence(s) that will foster a culture of trust
with the utilization of philanthropic funds.
Cultural Model – Portfolio
managers need to be
authorized to make funding
decisions regardless of
nonprofit indirect costs.
Interview of portfolio managers to understand the
organizational influence(s) that will allow the researcher to
understand authorized funding of nonprofit organizations.
Cultural Setting –
Philanthropic organizations
need to have policies in place
that prohibit funding
nonprofits when indirect costs
exceed a specific percentage.
Interview of portfolio managers to understand the
organizational influence(s) of philanthropic organizations’
policies in funding nonprofits with higher indirect costs.
Cultural Setting – Nonprofits
need to effectively
communicate the importance
of indirect costs to portfolio
managers.

Interview to understand the organizational influence(s) of how
nonprofits communicate the importance of funding indirect
costs to portfolio managers. Influences that will be assessed
through document analysis are cultural competition,
organizational goals (lacking or conflicting), and rules
(policies).

32

This section has addressed the knowledge, motivation, and organizational influences of
philanthropic support of overall costs, direct costs, and indirect costs. The review of literature
supports the influences identified and confirmed that this issue is widespread through theory and
empirical research. These influences further reflect the issue of the starvation in a nonprofit
cycle. Validating this process will be presented more in the next section.
Conceptual Framework: The Interaction of Stakeholders’ Knowledge and Motivation and
the Organizational Context
This section will outline the conceptual framework for the research study of the portfolio
manager’s role in providing funding to not only direct programmatic costs but also to the indirect
costs of the programs. Portfolio managers want to make a difference in the areas that they are
seeking to fund.
Maxwell (2013) explained that theconceptual framework of a study is influenced and
guided by the concepts, assumptions, expectations, beliefs, and theories that affect the integrity
of one’s research design. Merriam and Tisdell (2016) also defined aconceptual framework as the
guide for a research study. Conceptual frameworks are developed from revisable concepts and
derived from individual experiences (Merriam & Tisdell, 2016). An individual’s previous
experience can assist a researcher in focusing on concepts to guide their study, These guiding
principles are accompanied by what method of data collection and analysis to help the integrity
of the research as well as the research design (Maxwell, 2013; Merriam & Tisdell, 2016).
The conceptual framework of research guides the researcher in the development of their
goals and keeps them on track in their research questions as well as the sampling methods, which
help, limit threats to the research (Maxwell, 2013; Merriam & Tisdell, 2016). By taking this

33
approach to conceptual framework the researcher is able to key in on their study with limited
bias and the threat of missing variables, ensuring a more trustworthy study has been completed.
Figure 3 is a representation of the relationship between the field (organization), portfolio
managers, and how they are intertwined; all of which is directly represented through this
diagram.

34
Figure 3
Conceptual Framework

Nonprofit Industry
Cultural Model Nonprofits need to foster a culture
trust surrounding the use of philanthropic
donations.
Cultural Setting Nonprofits need to fully fund their
indirect costs rather than underfunding indirect
costs to meet external pressures from portfolio
managers.
Cultural Setting Nonprofits need to effectively
communicate the importance of indirect costs to
portfolio managers.
Portfolio managers to fully fund nonprofits, regardless of
indirect costs rates.
Portfolio Managers
Declarative (conceptual) Portfolio managers must
understand the principles behind indirect costs.
Declarative (conceptual) Portfolio managers need to
evaluate indirect costs on a case by case basis, not on an
overall average percentage of they deem acceptable.

Utility Value Portfolio managers need to see the value in
indirect costs within nonprofits to achieve program goals.
Goal Orientation Portfolio managers should seek to fund
organizations based on results and program goals, not solely
based on indirect costs.
Self-Efficacy Portfolio managers have confidence in their
ability to make decisions regarding nonprofit funding
without using standardized ratios for indirect costs.

35
Knowledge, motivation, and organizational insight are all essential in understanding the
influence behind philanthropic funding. This study delves further into the Clark and Estes (2008)
gap analysis to identify the gap between philanthropic funding of direct costs, and the lack of
funding for nonprofit organizations’ indirect costs. Clark and Estes (2008) have described three
causes of performance that occur due to the knowledge, motivation, and organizational
challenges. Analyzing problems through Clark and Estes (2008) gap analysis, allows this study
to identify the organizational issues, and how to diagnose and ultimately solve those issues.
Figure 3, the conceptual framework, identifies the assumed knowledge, motivational, and
organizational influences that affect philanthropic funding of nonprofit organizations.
The circles represent the key stakeholder (green), the field (blue), and the stakeholder
goal (yellow). The green circle is for the philanthropic organizations and portfolio managers,
who are they key stakeholders of this study. Portfolio managers must understand how to provide
funding that supports their programs and the nonprofits’ application of the programs the
philanthropic organizations support. Philanthropic leadership motivation shows that they believe
programmatic results are the primary objective and that in order to be effective the nonprofits
must have low indirect costs. As this study seeks to describe and understand how philanthropic
organizations fund nonprofits, the blue circle is representative of the nonprofit field
(organization). Philanthropic funding of nonprofits mandate that funding is reserved for
programmatic costs, with only little funding (10%-15%) provided for indirect costs (Eckhart-
Queenan et al., 2016). The arrows between the key stakeholder and field show how the two
interact with one another. Finally, we look at the yellow square that identifies the stakeholder
goal. The stakeholder goal is for philanthropic organizations to fully fund nonprofits, regardless
of indirect cost rates. The yellow square directly feeds from the yellow circle. The way the

36
stakeholder goal is influenced is by philanthropic knowledge and motivation, which is affected
by that of the field. These influences were identified down based on a review of the literature.
Data Collection and Protocols
Due to COVID-19, this qualitative study was conducted in a virtual setting. The
participants were eight portfolio managers who have experience in funding nonprofit
organizations and were capping a nonprofits’ indirect costs. The interviewed portfolio managers
cover multiple sectors within the nonprofit realm. Interviewing portfolio managers across
multiple sectors ensured the data captured were well versed. Additionally, the process of
conducting these interviews was completed through purposeful and snowball sampling within
the researcher’s network. Data has been organized through a deductive approach (Creswell,
2014). The deductive process starts off with a generalization or hypothesis and confirms the
hypothesis through research. Clark and Estes’s (2008) gap analysis framework was utilized to
complete this qualitative study. In addition to the qualitative interviews, document analysis was
completed to further triangulate of the data gathered from interviews and surveys (Creswell,
2014).
Interviews
Interviews with portfolio managers were completed through the utilization of a semi-
structured format. Interviews opened with explanatory, open-ended questions to inquire into the
reasons portfolio managers have for funding decisions. An interview guide (see Appendix D),
with pre-established questions, was used to help guide the interview. The questions within this
guide looked for consistencies or patterns of portfolio managers’ reasoning for limiting indirect
cost funding. Additionally, the questions sought to understand philanthropic ideals of indirect
costs among portfolio managers, and what motivates them to limit those costs. Questions for this

37
study also addressed their personal belief of indirect costs, and whether or not they deem indirect
costs an essential part of funding the programs they support. These questions sought to gain
understanding of portfolio managers’ feelings toward the efficacy of nonprofits and how
spending is executed through indirect costs. First, the questions looked to gain further
understanding of the stakeholders’ (portfolio managers) conceptual knowledge. Secondly, the
questions sought to define what motivates them (motivational influences). Specifically, the
questions looked at philanthropic utility value and their goal orientation. Finally, the questions
obtained information on each of the organizational influences. Furthermore, the researcher
conducted two types of sampling approaches. The first approach was completed through
purposeful sampling. Purposeful sampling is selected based upon the criterion used in Appendix
A. This criterion is a non-probability sample and is selective in the portfolio managers being
interviewed. The selective nature can be defined further through the criterion established in
Appendix A. The second approach was done through snowball sampling. Snowball sampling is a
non-probability sampling method. In this approach, the researcher identified participants and
asked those participants to recruit other people meeting the same criterion.
Documents and Artifacts
Organizational influences were evaluated in this section of the study. Specifically, the
cultural setting that nonprofits need to fully fund their indirect costs to meet external pressures
from portfolio managers were examined. In this study of the organizational influences, the
researcher reviewed documents and artifacts of four organizations. These documents included
each organization’s individual policies and procedures, mission and vision statements, and RFPs.
A review of the documents provided insight for the study as to why portfolio managers limit
their funding of indirect costs. The researcher compared the policies and procedures across the

38
four organizations to identify whether or not there were policies surrounding the funding of
indirect costs. The policies did not specifically state the limitations of funding indirect costs in
any of the organizations reviewed. However, when looking into RFP’s of the organizations, that
is where they specified their limit on indirect costs. Additional review of the four organizations’
mission and vision statements made no mention of indirect costs, only the desire to create an
impact in the fields in which they operate.
Data Analysis
Merriam and Tisdell (2016) defined data analysis as the process through an individual
provides meaning to the data that was collected. For this study, the researcher utilized qualitative
data analysis. A priori codes were developed prior to examination of the qualitative data
obtained. The knowledge, motivation, and organizational influences served as the basis for
establishing a priori codes. A priori codes assisted the researcher in testing theory against
empirical data. Creswell (2014) noted that the utilization of a priori codes serves to limit the
analysis to the prefigured codes as opposed to additional codes emerging during the analysis.
Qualitative interviews were conducted, and the researcher had the interviews transcribed. Once
the transcription process was completed, analytic codes were developed to support the
conceptual framework. Utilization of the conceptual framework focused on the knowledge and
motivation of the portfolio managers at philanthropic organizations, as well as the organizational
culture and setting. The organizational culture influences that were assessed through document
analysis are the cultural competition of the organization (culture performance orientation),
organizational goals (lacking goals, conflicting goals), and the rules of the organization
(policies).

39
Study Findings
This study was enacted to find out why portfolio managers limit indirect cost funding of
nonprofit organizations, and to bring awareness around the effects on nonprofits they fund to
carry out these programs. The study has explored the knowledge, motivation, and organizational
factors that influence portfolio managers’ funding of nonprofit indirect costs. All of the findings
are organized on the basis of Clark and Estes’s (2008) framework. This study presents, in order,
the findings for knowledge, motivation, and organizational influences. The following questions
have guided this study:
1. What are the portfolio managers’ knowledge and motivation related to funding
nonprofits with higher indirect costs?
2. What is the interaction between organizational culture and context and the portfolio
managers’ knowledge and motivation to funding nonprofits with higher indirect
costs?
3. What are the recommendations for organizational practice in the areas of knowledge,
motivation, and organizational resources related to funding nonprofits with higher
indirect costs?
Research question one will be addressed in the Knowledge Influence Findings and Motivation
Influence Findings sub-sections, and research question two will be addressed in the
Organizational Findings sub-section. Research question three will be addressed in the
recommendations section.
Participating Stakeholders
Participants of this study were portfolio managers at philanthropic organizations who
have over two years of experience in providing funding to nonprofit organizations and limiting

40
their indirect costs. Eight portfolio managers were interviewed across four different
organizations. Pseudonyms have been used to provide confidentiality of the participants. In the
subsequent knowledge, motivation, and organizational influence finding sections, each of the
participants is labeled as Participant 1 through Participant 8 (P1-P8). The sampling criterion is
provided in Appendix A. Table 5 provides an overview of the participant years of experience in
philanthropy, experience with capping indirect costs, and their genders.
Table 5
Participating Stakeholders
Participant
Philanthropic
Tenure in
Years
Indirect Cost
Experience in
Years
Portfolio
Managers
Gender
Representation
1 10 10 M
2 5 6 F
3 10 8 F
4 15 8 M
5 2 2 F
6 5 6 F
7 5 6 F
8 5 6 F

The first research question partially sought to address how portfolio managers decide
which nonprofits they fund and what approach is taken to funding a nonprofit. The finding
derived from these interviews is that the focus areas are defined at the board level. Some
portfolio managers indicated that there were high-level areas of focus that had baseline
statements outlining what they were looking to achieve through their funding programs, which
were also designated at the board level. Additionally, portfolio managers within the philanthropic
organizations had teams that were designated to an assigned programmatic area. Teams were
responsible for working within those areas, and the needed to define a strategy in how to address

41
the area the organization was seeking to make an impact on. From that point, the portfolio
managers would then seek out and target nonprofits that worked in that area or field. Figure 4
reflects the funding sectors identified during interviews.
Figure 4
Philanthropic Funding Sectors

It became clear through the interviews that portfolio managers fund based upon the sector
and area of impact they seek as having the most opportunity. Specifically, portfolio managers
within philanthropic organizations were dedicated to an area identified by the board of directors,
and it was put upon them to strategize and ultimately target nonprofits who work in that field.
Discussion of Findings
It became clear through interviews that the portfolio managers, regardless of their
knowledge and motivation, do not have the authority to change the caps imposed by the
philanthropic organization board. The researcher evaluated the declarative aspects of knowledge.
Motivation influences further explored the portfolio managers' utility value of indirect costs, goal
orientation, and self-efficacy of the organizations’ ability to meet programs’ goals, regardless of
Philanthropic Funding Sectors
Health & Wellness
Affordable Nutrition
Improve Life for Socio‐Economic Challenged
Education

42
the indirect cost rates. The organizational influences identified were the cultural model and
cultural setting. The cultural model influences were that nonprofits needed to foster a culture of
trust in the use of philanthropic donations and that portfolio managers be authorized to make
funding decisions regardless of the indirect costs of a nonprofit. The researcher identified three
influences as needs. The following section reflects the detailed findings of this study and the
research questions associated. Data related to knowledge, motivation, and organizational
influences were obtained, and detailed data from the interviews accompany the discussion of the
findings.
Knowledge Influence Findings
This section of the research developed assumed influences regarding portfolio managers'
knowledge of indirect costs. Research question one directed the approach for this section. There
are two findings for this section related to the knowledge influences. The first is that portfolio
managers understand the principles behind indirect costs. The second was that portfolio
managers are evaluating indirect costs on a case-by-case basis.
Finding 1: Portfolio Managers Understand the Principles Behind Indirect Costs.
The findings related to the first knowledge influence were enlightening as to how the portfolio
managers defined indirect costs. One participant 1 (P1) noted that “These are shared costs not
directly attributable to a program such as rent, human resources, finance team, legal team, and
so-on.” Participant 2 (P2) stated, “Those are all of the things that make it possible to manage a
grant or donation that are behind the scenes, and you cannot directly attach it to a grant but
cannot do other things without these costs.” Participant 6 (P6) noted, “Indirect costs are the
necessary evil of doing business.” Figure 65 provides a depiction of what indirect costs meant to
the portfolio managers involved in this study.

43

Figure 5
Indirect Costs Breakdown

In addition to the interviews, a document analysis of all four philanthropic organizations
was conducted of their policies and procedures. The researcher found that policies and
procedures did not address indirect costs. Additionally, the document and artifact analysis did
not provide any additional insight into this knowledge influence. The researcher explored further
into the RFP’s, at which point all four organizations defined how much of the indirect costs they
were willing to fund. The RFP’s indicated the organizations limited or capped indirect costs
(indirect costs) at a rate of 10% to 20%, but did not adequately provide insight into this
knowledge influence. This particular aspect of capping indirect costs will be addressed as an
organizational finding though as it does not relate directly to the participants’ knowledge.
The common theme amongst the participants was that indirect costs were all costs
associated with an organization but not necessarily directly relatable to a specific grant. Through
0
1
2
3
4
5
6
7
8
9
Rent Finance Supplies Human Resources Benefits
Number each time category discussed

44
the interviews of the portfolio managers, it was clear that they understood the principles behind
indirect costs. This particular knowledge influence is an asset.
Finding 2: Portfolio Managers Are Able to Evaluate Indirect Costs on a Case-By-
Case Basis. The finding throughout the interviews was that portfolio managers have a desire to
account for funding going to the actual program. Specifically, P1 stated,
Funders will choose to cap because they have a desire to fund a program and ensure it is
directly attributable to the impact being made; and there is a fear that indirect costs can be
bloated and not deliver on the impact of a particular project.
P7 stated that “They’re limited because philanthropists want the money to go to their actual
mission and indirect costs are limited because they are perceived to be a wasteful aspect of the
funding.” P8 stated that “There is fidelity in the way that the money is spent.” Throughout this
finding it was clear that portfolio managers are able to evaluate indirect costs on a case-by-case
basis. Specifically, P1 stated that “Nonprofit organizations are not always forthcoming with the
data requested.” In the interview with P2, P2 remarked, “I want to see clear documentation as to
what the funding is being spent on, and nonprofits do not always provide that upfront,” adding,
“They eventually do after it is requested, but that is something that should just be given without
question.” Additionally, portfolio managers do not always see a direct correlation between
funding indirect costs and the impact it has on the program of which is being funded.
The common theme within this finding is how funding is being spent. Portfolio managers
want to ensure that nonprofits are not wasteful of the funds they are being provided with. To
further depict this in the interview of P5, this individual remarked that “The intention is to force
a constraint upon nonprofit organizations to ensure that they are being extra judicial in how they
are using funders’ dollars regarding a program they are supporting.”

45
P2 had similar remarks to P5. When asked, P2 elaborated that “It is an attempt to create
purity in the work being done.” Additionally, in the interview with P4, P4 provided clarity about
indirect costs within nonprofits being disproportionate to other nonprofits, saying, “Some
nonprofits are way out of proportion in comparison to other similar nonprofits.”
The research participants were very clear that they wanted their philanthropic dollars
being directly attributed to the area they sought to make an impact. They viewed indirect costs as
necessary, but not something they wanted their philanthropic organizations’ dollars going to. All
eight of the portfolio managers wanted to ensure that their dollars were being spent efficiently
and effectively. According to P8, “If I have one nonprofit in a particular field, who has an
indirect cost rate of 50% but another that has 25%, I am going to look to the cheaper nonprofit –
it’s just a part of doing business.” In the interview with P1, P1 remarked “I want to ensure that a
nonprofit is spending the money appropriately as opposed to spending on a lavish office space.”
It was abundantly clear throughout the interviews that portfolio managers want their
dollars going directly to the program that they are seeking to make an impact in. The portfolio
managers interviewed reiterated their wanting to ensure the judicial use of funds. Tying expenses
directly to programmatic costs was a top priority for these portfolio managers. Within this
finding, portfolio managers did not demonstrate their knowledge of evaluating indirect costs on a
case-by-case basis.
In addition to the interviews, a document analysis of all four organizations was conducted
of their policies and procedures. The policies and procedures did not address indirect costs so
that portfolio managers could evaluate on a case-by-case basis. The RFPs indicated how much of
the indirect costs they were willing to fund. The RFPs limited or capped indirect costs at a rate of

46
10% to 20%. Thus, regardless of their knowledge capacity, they are restricted in their ability to
evaluate indirect costs on a case-by-case basis.
Motivation Influence Findings
Research question one directed the approach for this section. This section of the research
evaluated assumed influences regarding philanthropist’s motivation in funding indirect costs.
There are three findings for this section related to value, goal orientation, and self-efficacy.
Finding 1: Portfolio Managers See the Value in Indirect Costs Within Nonprofits.
Within this finding, the researcher sought to understand portfolio managers’ value in funding
indirect costs. The prevailing response of participants within this finding was they valued
funding indirect costs primarily so that nonprofit organizations may operate effectively and
efficiently. Providing clarity about portfolio managers and the value in funding indirect costs, P2
remarked that “Indirect costs are vital for nonprofits and are necessary to higher people to
maintain the organization as a whole.” P5 provided a similar response stating that “Indirect costs
are invaluable and it helps the nonprofits cover operations.”
Portfolio managers understood the need for having indirect costs. The interviewees
provided an in-depth understanding of the value for funding indirect costs, but they identified to
the researcher that they were limited in what they could fund given organizational constraints.
Those organizational constraints (of philanthropic organizations) will be discussed further in the
organizational influences section. The participants were understanding of the vital necessity of
indirect costs. According to P1, “When you go into Starbucks, you don’t ask how much of those
costs are indirect.” P1 went on to add, “Philanthropists are too reluctant in general of funding
indirect costs and that indirect costs should have an informed cap, not just a generalized cap.”

47
P7 made a similar statement as P1, expressing their value for indirect costs: “I understand
the frugality in funding those costs, but nonprofits should not have to struggle ensuring that they
are funded.” Portfolio managers working for philanthropic organizations made it clear that they
understood the need for indirect costs, but the philanthropic organizations limited those costs as a
part of business. Their personal beliefs did not align with what their organization did in limiting
the funding of indirect costs in nonprofits. This misalignment will also be addressed further in
the findings for the organizational influence.
The common theme throughout the responses was value for needing to ensure that the
nonprofit organizations were judicial in their utilization of funding provided. P8 stated, “It is
important to cap because there are instances where funds are spent predominantly on indirect
costs as opposed to the mission.” “The reason is to ensure fidelity in how the funds are spent.”
P1 addressed this by stating, “Indirect costs need to have an informed cap and not just a general
cap.” While portfolio managers, working for philanthropic organizations, wanted to ensure a
nonprofit was meeting the mission they also valued the importance of indirect costs.
The finding shows that portfolio managers see the value of indirect costs. The portfolio
managers were understanding of the indirect costs and valued what those costs mean to nonprofit
organizations. However, organizational influences limited their ability to appropriately fund
nonprofits that philanthropic organizations fund.
Finding 2: Portfolio Managers Fund Organizations Based on Results and Goals. In
this finding, portfolio managers on an individual level wanted to fund nonprofit organizations
based on their perception of the nonprofit’s ability to make an impact in the sector in which they
work. All eight of the portfolio managers interviewed provided their individual perspectives, that
they wanted to fund nonprofits who can make an impact. They also wanted to understand

48
nonprofits with higher indirect costs and what those costs were attributed to within proposed
budgets.
However, the eight interviewees abided by their organizational directive regarding what
percentage of indirect costs they could fund. Those organizational influences (of philanthropic
organizations) will be addressed further in the organizational influence section. To provide
further insight of funding nonprofit organizations based on results and goals, P1 provided some
insight regarding the type of organization they work with and the influence indirect costs have on
funding, stating,
It depends on the organization. Universities are difficult to work with because they have
policies and the only way to work around with a letter of indirect cost rate policy is that
has to be issued with them. However, if the indirect costs are higher than 10% we want to
see more detail about what the expenses are so they can tie them to what the organization
is trying to accomplish.
P2 provided a different perspective stating, “I’d want to understand why their costs are higher.”
Adding “Some organizations are going to have higher costs depending on what they do.”
Throughout the interviews of the portfolio managers in this finding, all eight of the portfolio
managers operated on the premise of what their organizations directed capping the indirect costs.
However, the portfolio managers still worked with nonprofits that had higher indirect costs, but it
didn’t necessarily mean that they would fund all of those indirect costs in their grants to the
nonprofits.
The finding reflected the participants did not themselves limit funding an organization
based on how low or high the indirect costs were. However, the portfolio managers were limited
in how much of the indirect costs they could fund based on the philanthropic organizations they

49
worked for as organizational directives. Portfolio managers within the study wanted to create an
impact in the field of focus; because a nonprofit had higher indirect costs did not mean they
wouldn’t work with them. It also did not mean that they would fully fund the indirect costs of
those nonprofits with higher rates. The goal of all eight portfolio managers was to fund nonprofit
organizations based on their ability to make an impact and their ability to meet programmatic
results and goals.
Finding 3: Portfolio Managers Have Self-Efficacy In Their Ability to Fund Indirect
Costs Without Using Standard Ratios Even If Not Permitted by Their Philanthropic
Organization. The finding based on interviews with participants was that each of their
organizations set limits on what their respective organization was willing to fund as it pertains to
indirect costs. However, all eight of the portfolio managers in this study were very confident in
their ability to make decisions of nonprofits without using standardized ratios for indirect costs.
To that end P5 stated,
I will work with any organization regardless of their indirect cost rate if I believe they can
make an impact. However, I am limited by my organization in the amount or percentage
of indirect costs that I am able to find for a given award.
Of the eight portfolio managers that participated in this study, all eight were confident in
their individual ability to make decisions regarding nonprofit funding without using standardized
ratios for indirect costs. However, each one of the portfolio managers made similar mention to
the aforementioned comment of P5 in that they are limited by their organization. Table 6
provides a further depiction of what the portfolio managers interviewed saw as self-efficacy in
funding nonprofit organizations.

50
Table 6
PM’s Self-Efficacy
Portfolio Manager Statements That Reflect Self-Efficacy
P1 “Nonprofit organizations indirect cost rates do not affect whether
or not I work with them, their impact does.”
P2 “My organization limits the amount of indirect costs that I can
fund, but does not affect me in working with them.”
P3 “I look at a nonprofits ability to create an impact in the area of
focus.”
P4 “Indirect costs of nonprofits come with the territory, but do not
affect whether or not I work with an organization.”
P5 “I will work with any organization regardless of their indirect cost
rate if I believe they can make an impact. However, I am limited
by my organization in the amount or percentage of indirect costs
that I am able to find for a given award.”
P6 “As a portfolio manager my responsibility is to work with
nonprofits who can make an impact, and regardless of what their
indirect costs are, my ultimate objective is to make an impact.”
P7 “I can fund a nonprofit regardless of how high their indirect costs
are, but it doesn’t mean that I can fund all of their indirect costs.”
P8 “My focus is on funding a nonprofit who meets the criterion of
what my organization is looking to achieve.”

Organizational Influence Findings
The approach for this study was a qualitative analysis via interview. Research question
two directed the approach for this section. This section of the research developed assumed
influences regarding organizational influences in funding indirect costs. There are four findings
for this section addressing both cultural models and cultural settings.
Finding 1: Nonprofits Are Transparent but Can Improve Upon Communication
With Portfolio Managers To Build Trust. This finding indicated that nonprofits need to foster
a culture of trust surrounding the use of philanthropic organizations’ donations. Portfolio
managers indicated that nonprofits are generally transparent, but they felt but nonprofits can
improve upon the information provided to the portfolio managers upfront.

51
Of the eight portfolio managers interviewed, six of them specifically used the term
transparency. Through the research, the overall belief of the eight portfolio managers was that
nonprofits were transparent. However, depending on the nonprofit organization they were
interacting with, it took more effort to get the information from the nonprofit. P1 stated,
For the most part yes. Sometimes it takes pushing from a nonprofit to get them to reveal
more detail. I never had an organization unwilling, but power dynamics go into how
much or how quickly they want to provide costs and intentions. The most restrictive is
when a nonprofit provides a high-level budget, but when I ask for detail they might push
back and provide reasoning as to why they don’t release detail. Then the nonprofit will
request that I keep it confidential.
In an interview with P3, P3 expressed a similar sentiment:
I think there is a game that is played because organizations do what they have to do to get
funding. I do not believe it is nefarious, but in presentations to get funding, additional
emphasis to philanthropists may hide actuality. However, I do not believe there is a
strategic attempt to withhold information.
Of the eight portfolio managers interviewed, all eight indicated that nonprofit
organizations could do a better job being forthcoming with the portfolio managers. P3 stated,
“For the most part I believe they are transparent, but sometimes it takes some pushing to get
them to reveal more detail about the request for funding.” P8 stated, “I believe nonprofits do
what they have to do to get funding, and, on some level, there is some game playing involved.”
The participants were very passionate about funding nonprofit organizations. Their
overarching goal was to make an impact on the area being funded. They expressed that while
obtaining all of the requested data needed from nonprofits, at times, can be daunting, portfolio

52
managers in this study believed nonprofits want to provide them with all necessary inputs.
Nonprofits can foster the culture of trust by being transparent with portfolio managers with the
data they need so that the portfolio managers can make informed decisions on funding. This
issue of transparency and trust is closely related to organizational finding 4 in regards to
communication, which will be discussed later in this chapter.
Finding 2: Portfolio Managers Are Authorized to Fund Nonprofits Regardless of a
Nonprofit’s Indirect Costs But Cannot Fund Indirect Costs Above Established Caps. The
eight portfolio managers interviewed in this study were able to make decisions to fund nonprofits
regardless of a nonprofit’s indirect costs. However, even though they can fund a particular
nonprofit’s activities, they were not able to exceed the threshold their philanthropic organization
allowed for indirect costs percentages. Quite simply put, portfolio managers were given the
authority to fund nonprofit organizations whose indirect costs exceed the threshold of indirect
costs that the philanthropic organization is willing to fund. However, the portfolio manager was
limited in the percentage of funding they could provide to a nonprofit’s indirect costs. As an
example, if the nonprofit organization has an indirect cost rate of 50%, the philanthropic
organization would fund the nonprofit’s work but only fund up to 15% of the nonprofit’s indirect
costs. The onus then falls on the nonprofit organization to fund the difference. The percentage of
indirect cost funding allowed by each of the philanthropic organizations ranged from 10% to
15%.
Portfolio managers unanimously indicated that nonprofit organizations that meet their
criterion for making an impact will always be looked at for funding, regardless of the indirect
cost rates. P7 stated, “We will definitely evaluate a nonprofit if their costs are high, if they are
meeting our criterion.” “This is done on a case-by-case basis.” P1 noted, “We will make

53
organizational grants to these nonprofits because we believe in their work and want to help them
and our impact of the programs of focus.”
All eight respondents indicated that no matter what the indirect cost rates are, their
organizations do not automatically disqualify a nonprofit predicated upon indirect costs.
Ultimately, they may not be able to fund all of the indirect costs, but they want to fund a
nonprofit that will make an impact on the area of focus. Table 7 provides key quotes of the
participants.
Table 7
Participant Quotes Related to Authority to Make Funding Decisions
Participant Quote
P1
“We will make organizational grants to these nonprofits because we
believe in their work and want to help them and our impact of the
programs of focus.”
P2
"The threshold would be set as a guide but not a cutoff; it’s more of a
trigger to obtain more information as to why it’s that high."
P3
“I am able to fund nonprofits as long as they meet the requirement for the
field of impact. I can't exceed a 10% funding of indirect costs though.”
P4
“My organization’s indirect costs are set at 15%. Funding an organization
is based on impact.”
P5
“Authorization of funding a nonprofit is inherent in the work that I do. The
organization I work for will not fund indirect costs over 10%.”
P6
“I fund nonprofits based on the area my organization is seeking to make an
impact. If their indirect costs exceed 15%, that does not prohibit my ability
to fund them, my organization just limits how much of the indirect costs
we fund.”
P7
“We will definitely evaluate a nonprofit if their costs are high, if they are
meeting our criterion.” “This is done on a case-by-case basis.”
P8
“In my organization, I am able to fund nonprofit based on their area of
focus. Regardless of indirect costs, I can fund the nonprofit, but I can’t
exceed 15%."

54
Finding 3: Philanthropic Organizations Do Not Have Policies in Place That Prohibit
Funding Nonprofits Based on Indirect Costs. Portfolio managers included in this study do not
prohibit nonprofits on the basis of indirect cost rates. P2 stated, “No, it would be a start of a
negotiation and an attempt to understand what the costs are.” P7 emphasized, “Our threshold is a
set guide of what we will fund, but it would not be a cutoff, it is more of a trigger to obtain more
information as to why the nonprofit’s indirect costs are high.”
Portfolio managers of philanthropic organizations within this study generally want to
obtain as much data as they can from the nonprofit to make an informed decision about funding.
Indirect cost rates that are higher do not stop them from pursuing and or funding a nonprofit.
However, they are limited by the philanthropic organization's policies of capping how much they
will fund of indirect costs. Table 8 provides the key concerns of portfolio managers and
questions related to indirect costs.
Table 8
Key Concerns of Portfolio Managers Related to Indirect Costs
Indirect Costs: Key Qualifiers and Concerns of Portfolio Managers
We Need to Maximize Resources of Our Foundation
Why are A Nonprofit’s Indirect Costs So High?
Making An Impact
Lavish Expenditures on Office Space
Organizational Limitations of Funds

In addition to the interviews, a document analysis of all four philanthropic organizations
was conducted of their policies and procedures. The policies and procedures did not address

55
indirect costs, but they did identify that the board of directors (BOD) was responsible for setting
what areas across the nonprofit sector that they wanted to fund and see the impact in.
Finding 4: Nonprofits Effectively Communicate the Importance of Indirect Costs.
This finding reflected that portfolio managers have an open door of communication with the
nonprofits with which they are working. Nonprofits are responsive in their communication with
portfolio managers. However, all eight portfolio managers within this study indicated that the
nonprofit organizations could provide more substantive information pertaining to their indirect
costs. The portfolio managers stated that information that nonprofits are providing in terms of
indirect costs is only basic information. The eight portfolio managers interviewed indicated that
they would like to see additional data regarding the indirect costs of the nonprofit they are
funding or seek to fund. The common response in this finding was that the portfolio managers
communicated with the nonprofits organizations approximately once every other month. When
asked about communication with nonprofits, P2 remarked,
It’s all over the map, but on an average 3-6 month process talking or visiting with the
organization over the phone or in-person (or as of late just via phone due to COVID-19),
it’s at least once a month.
In addition to P2’s remark, P3 shared a similar response “I am in contact with them once a month
or once every other month.” Portfolio managers of this study are in constant communication with
the nonprofit organizations they are funding. Communication allows them to obtain the data they
seek from those that they are looking to fund or those that they have already funded.
Communication is the foundation of which these relationships are built and maintained.

56
This finding reflected that larger, more aggressive nonprofits are always addressing needs
within communications. The larger nonprofits are more experienced and do not hesitate in asking
portfolio managers what they need the funding for, outside of programmatic costs.
P5 provided insight on working with more experienced and larger nonprofits:
This always comes up. Larger more sophisticated nonprofits tend to be more aggressive
in asking to see what they can get from us. Smaller organizations that are less familiar
working with philanthropists tend to be less aggressive because they do not want to be
seen as greedy or asking for too much.
P7 stated, “It’s all about the program when it comes down to it.” “What they ask for and what we
fund in terms of indirect costs, we can’t always provide.” However, as one respondent noted,
“Philanthropists need to do a better job to make it known how they are willing to fund those
costs.” Within the context of this study and research question, portfolio managers seek to
understand the request for funding of indirect costs even if they cannot fully fund those said
costs.
In addition to the interviews, a document analysis of all four philanthropic organizations
was conducted of their policies and procedures. The policies and procedures stated that the BOD
was responsible for setting what areas across the nonprofit sector they wanted to fund and see the
impact in. These policies and procedures not only identified what area of focus were being
funded by philanthropic organizations but specified within the RFPs what percentage of indirect
costs they were willing to fund for nonprofits.
Synthesis of Findings
The results from the qualitative interviews conducted demonstrated the portfolio
managers' knowledge, motivation, and organizational influences of funding indirect costs.

57
Specifically, the portfolio managers of this study understood indirect costs and the need to fund
them. However, organizational influences affected their ability to fully fund a nonprofit
organization’s indirect costs. Portfolio managers of this study fund nonprofits based on their
ability to make an impact. Indirect costs rates did not affect the portfolio managers' willingness
or ability to fund a nonprofit, but organizational restrictions impacted their ability to fully fund a
nonprofit’s indirect costs above a certain threshold.
Portfolio managers in this study were confident in their ability to fund nonprofit
organizations, regardless of what the indirect costs were. However, throughout the knowledge
and motivational influences, organizational influences affect the portfolio managers’ abilities to
fully fund a nonprofit’s indirect costs. It is important to mention within these findings, nonprofit
organizations can improve upon their communication with the portfolio managers. As part of this
communication, portfolio managers voiced a need for nonprofits to provide portfolio managers
with everything they are requesting. Doing so will enable the portfolio managers to trust the
nonprofits’ use of the funds being provided. Table 9 provides a recap of the assumed knowledge,
motivation, and organizational influences that were identified as assets versus those identified as
a need based upon the findings of this study.

58
Table 9
Identified Influences, Literature Source for Influence, and Finding Synopsis
Influence
Type
Influence Literature Finding Synopsis
Assets
Knowledge
Portfolio managers need to understand the
principles behind indirect costs.
Eckhart-
Queenan et al.,
2016; Nobel,
2015
8 of 8 PMs
understand the
importance of
indirect costs.
Motivation
Portfolio managers need to see the value in
indirect costs within nonprofits to achieve
program goals.
Golseker &
Moody, 2017
8 of 8 PMs see value
of indirect costs.
Motivation
Portfolio managers need to seek to fund
organizations based on results and program
goals, not solely based on indirect costs.
Eckhart-
Queenan et al.,
2016; Goggins
& Howard,
2009
8 of 8 PMs fund
organizations based
on impact.
Motivation
Portfolio managers need to feel confident in
their ability to make decisions regarding the
funding of nonprofits, regardless of indirect
costs.
Eckhart-
Queenan et al.,
2016)
Thompson,
2014
8 of 8 PMs were
confident in their
ability to fund
nonprofits
Organization
Employees in philanthropic organizations
need to be authorized to make funding
decisions regardless of a nonprofits’ indirect
costs.
Levine, 2017
Lecy &
Searing, 2014
8 of 8 PMs were
authorized to make
funding decisions.
Organization
Philanthropic organizations need to have
policies in place that prohibit funding
nonprofits when indirect costs exceed
specific percentages
Stahl (2013);
Altshuler &
Tirona, 2018
8 of 8 PMs were not
prohibited in funding
nonprofits due to
indirect costs
Needs
Knowledge
Portfolio managers need to evaluate indirect
costs on a case-by-case basis.
Rubin, 2017;
Golseker &
Moody, 2017
8 of 8 PMs were
restricted in their
ability to fund more
indirect costs
Organization
A culture of trust needs to exist between
nonprofits and philanthropic organizations.
Joyaux, 2015;
Paynter, 2016

8 of 8 PMs indicated
nonprofits can be
more forthcoming
with data
Organization
Nonprofits need to effectively communicate
the importance of indirect costs.
Levine, 2017;
Lecy &
Searing, 2014
8 of 8 PMs indicated
frequency and
substance of
communication
from nonprofits
lacking

59
Utilizing these interviews, accompanied by document and artifact analysis, the
knowledge influences confirmed that portfolio managers utilize a flat rate in funding indirect
costs. The documents that were examined to confirm this were the RFP’s of the four
organizations that were reviewed. None of the organizations stated anything specific within their
policies and procedures. The researcher found this information in each of the RFP’s for the
organizations examined. Portfolio managers are unable to evaluate a nonprofit based on their
programmatic performance in their decision making to fund indirect costs. Motivational
influences reflected that portfolio managers understood the need for indirect costs, however
organizational policy and procedure did not allow them to fund indirect costs over the
established rate for that organization. Organizational influences of both the cultural model and
cultural setting were confirmed throughout the interviews. The interviewees noted that they
trusted the nonprofit organizations; however, they were not authorized to make such revisions to
the flat rate previously established by the philanthropic organizations. Additionally, nonprofit
organizations were communicative of their need for portfolio managers to fund indirect costs and
policies of philanthropic organizations existed to limit those costs. However, the limiting of the
indirect costs did not impede upon the nonprofit accepting the philanthropic donations.
Recommendations
This study examined the knowledge, motivation, and organizational influences of
philanthropic funding of indirect costs of nonprofit organizations. The previous section provided
the summarized findings of the knowledge, motivation, and organizational influences and
validated the findings through the use of qualitative research methods of interviews and
document analysis. Throughout the findings, the motivation influence of portfolio managers
were identified as assets, and recommendations for this influence will not be made.

60
Subsequently, the following section provides recommendations to address gaps observed in
knowledge and organizational influences of portfolio managers limiting or capping a nonprofit's
indirect costs. Evidence-based recommendations are provided to address knowledge, motivation,
and organizational influences identified as needs through this study. This study provides an
implementation plan through the lens of the Kirkpatrick model (Kirkpatrick & Kirkpatrick,
2016) in Appendix F, and the recommendations were based on Clark and Estes’s (2008)
knowledge, motivation, and organizational influences. The utilization of Clark and Estes (2008)
gap analysis framework identified the needs of portfolio managers in fully funding nonprofit
organizations, and through the use of the Kirkpatrick model (Kirkpatrick & Kirkpatrick, 2016),
increasing philanthropic funding in nonprofit organizations indirect costs enhances the
probability of the stakeholder and organizational goals being met.
Knowledge Influence Recommendations
The knowledge influences in Table 10 were identified as a need. The knowledge
influences identified are predicated upon research based on the literature review and the
interviews the researcher conducted. The literature review provides the high probability of
influences and how they are validated in attaining stakeholder goals. The knowledge influences
are followed by recommendations based on research through the use of the literature review and
qualitative interviews.

61
Table 10
Summary of Knowledge Influences and Recommendations
Knowledge Influence Principle and Citation Context-Specific Recommendation
Portfolio managers need
to evaluate indirect costs
on a case-by-case basis,
not on an overall
percentage of what they
deem acceptable.
(D)

Provide scaffolding and
assisted performance in a
person’s ZPD promotes
developmentally
appropriate instruction
(Scott & Palincsar, 2006)
A Representative from the
nonprofit organizations will provide
sufficient scaffolding and tools to
portfolio managers in the form of
job aids, as well as creating a
dialogue between the nonprofits
and portfolio managers furthering
the discussion to assist in
philanthropic understanding of
how to evaluate indirect costs of
each nonprofit on a case-by-case
basis. These tools will be provided
through a detailed budget and
programmatic pamphlets

Improve Portfolio Managers’ Ability To Evaluate Indirect Costs on Case-By-Case
Basis Through the Utilization of Scaffolding and Tools. Data has been collected and analyzed,
and the findings of this study are that portfolio managers are unable to evaluate indirect costs on
a case-by-case basis. The theory selected to close this declarative gap is sociocultural. Provide
scaffolding and assisted performance in a person’s ZPD promotes developmentally appropriate
instruction (Scott & Palincsar, 2006). The recommendation is for a representative from the
nonprofit organization to provide sufficient scaffolding and tools to portfolio managers in the
form of job aid, as well as creating a dialogue between the nonprofits and portfolio managers
furthering the discussion to assist in philanthropic understanding of how to evaluate indirect
costs of each nonprofit on a case-by-case basis. These tools will be provided through a detailed
budget and programmatic pamphlets.

62
Research has shown that providing portfolio managers with aid and programmatic
documentation assists in their want to fund a nonprofit. Foster et al. (2009) provided 10 nonprofit
funding models. The heartfelt connector is one of them in which the organization tells the story
and impact of the services being provided. Another model the writers identified is called the
local nationalizer. The local nationalizer are nonprofits, such as Big Brothers Big Sisters of
America, that focus on societal issues. Those issues include poor schools or children in need of
adult role models (Foster et al., 2009). They are able to provide donors and portfolio managers
with the story and programmatic information needed, to help them better understand the
budgetary request and provide additional funds for indirect costs. That is why providing job aids
in the form of collaboration with the nonprofit organizations is one way to close this gap.
Collaboration, in theory, is essential to the success of the nonprofit organization and the impact
the portfolio managers are seeking to make.
Organizational Influence Recommendations
Organizational influences define the model and the setting of the culture. The findings of
this study identified two organizational influences, cultural model and cultural setting, as a need.
These influences have a monumental impact on stakeholders and their ability to reach
organizational goals (Clark & Estes, 2008). Quick solutions to problems that may arise are not
always the best route to take. It is important to complete a full evaluation to get to the root cause
of an issue. By doing so and understanding the organization's influence, a leader can identify the
gaps and implement change to be effective (Clark & Estes, 2008. An organization's ability to
implement efficient and effective resources (such as policies and procedures) help to solve
organizational challenges, and create the ability to change for the future. More important is

63
accountability within this respect. An organizations accountability assists in organizational
climate providing them the ability to sustain change (Clark & Estes, 2008; Kezar, 2001)
Table 511
Summary of Organization Influences and Recommendations
Assumed
Organization
Influence*
Principle and Citation Context-Specific
Recommendation
Nonprofits need to
foster a culture of
trust surrounding
the use of
philanthropic
donations. A
culture of trust
exists between
nonprofits and
portfolio
managers.
Cultural Model
“Organizations with high levels of cultural trust
tend to produce high-quality products and
services at less cost because they can recruit and
retain highly motivated employees.” (Colquitt et
al., 2007 as cited in Starnes, Tuhon & McCarthy,
2010, p. 6).

Organizational effectiveness increases when
leaders are trustworthy and, in turn, trust their
team. The most visible demonstration of trust by
a leader is accountable autonomy (Colquitt et al.,
2007 as cited in Starnes, Tuhon, & McCarthy,
2010, p. 6).
To create trust using
philanthropic dollars nonprofit
organizations need to be
transparent with philanthropic
organizations. They need to
provide them the story-telling
of programs they’ve funded
and the positive impacts that
have been created as a result of
the funding. This cross-
functional recommendation
enhances trust through
collaboration and transparency.
Nonprofits need to
effectively
communicate the
importance of
indirect costs to
portfolio
managers.
Cultural Setting
Effective leaders are knowledgeable about the
use of effective communication skills to
facilitate change and enhance organizational
capacity (Lewis, 2011).
Conduct meetings via zoom,
phone, and/or email so that
nonprofits can communicate
the importance of funding
indirect costs, and how it will
positively impact the programs
portfolio managers seek to
fund.

Effective communication will
be provided to ensure that staff
has all the necessary
information to make informed
decisions. This includes
programmatic data,
programmatic support and
budget line items to provide a
clearer depiction of what is
needed.

64
Build a Culture of Trust Through Transparency. Nonprofits need to foster a culture of
trust surrounding the use of philanthropic donations. The findings of this study indicate that a
culture of trust exists between nonprofits and portfolio managers. However, nonprofit
organizations can improve upon and be more transparent with the data they provide and the data
that is requested by the portfolio managers. Organizations with high levels of cultural trust tend
to produce high-quality products and services at less cost because they can recruit and retain
highly motivated employees (Starnes et al., 2010).
Transparency of nonprofits with portfolio managers at philanthropic organizations helps
to build that culture of trust. Organizational effectiveness increases when leaders are trustworthy
and, in turn, trust their team (Starnes et al., 2010). The most viable demonstration of trust by a
leader is accountable autonomy. The recommendation is to create a culture of trust with the
utilization of philanthropic funds is communication between the nonprofit and portfolio
managers. To create trust using philanthropic dollars, nonprofits organizations will communicate
with portfolio managers, providing them the story-telling of programs they’ve funded and the
positive impacts that have been created as a result of the funding. Nonprofits providing the
portfolio managers at philanthropic organizations with these items shows the portfolio managers
that the nonprofits are transparent in the information they provide. In addition to the
documentation portfolio managers are seeking, this also is an avenue to effectively provide
negative information. Ultimately, this encapsulates a culture of trust between both the nonprofits
and the philanthropic organizations’ portfolio managers.
Philanthropic organizations seek to fund nonprofit organizations who can best meet the
philanthropic organization’s want and need to make an impact in their field of focus. To ensure
that philanthropic organizations can trust nonprofit organizations, the nonprofit organizations

65
need to be more transparent about what they are providing to the philanthropic organization.
Transparency in the data and information provided by the nonprofit, can and will help build the
culture of trust. One of the ways to achieve this part of transparency is through communication.
Communication helps grant seekers and portfolio managers find targeted support (Corey, 2014).
This allows collaboration between grantee and portfolio managers, creating a framework,
to meet the needs of the nonprofit organizations and effectively communicate their work (Corey,
2014). Researchers suggest that communication is the ultimate success for both the nonprofit and
portfolio managers. Gibbons (2016) asserted that organizations that communicate are not
something that is in addition to the work; rather it is an essential part of the work. The
recommendation of communication between the nonprofit and the portfolio managers is not just
an idea, but ultimately how both the nonprofit and portfolio managers can win by making an
impact.
Increase Communication Around Indirect Costs. Nonprofits need to effectively
communicate the importance of indirect costs to portfolio managers at philanthropic
organizations. Part of effective communication comes through the nonprofits ability to be
transparent in the information they provided. Nonprofits open communication and transparency
about the need for what they are seeking funding for, allows for portfolio managers at
philanthropic organizations to make more informed decisions on funding. Effective leaders are
knowledgeable about the use of effective communication skills to facilitate change and enhance
organization capacity (Lewis, 2011). The recommendation is to conduct meetings via zoom,
phone, and or email so that nonprofits can communicate the importance of funding indirect costs,
and how it will positively impact the programs Philanthropic organizations seek to fund.
Additionally, effective communication will be provided to ensure that staff has all the necessary

66
information to make informed decisions. This includes programmatic data, programmatic
support, and budget line items to provide a clearer depiction of what is needed.
In order for portfolio managers at philanthropic organizations to be effective catalysts for
change, structures and relationships of grantmaking by philanthropic organizations, are often
preventing the goals in which they seek to achieve (Levine, 2017). Studies have shown that
nonprofit issues of underfunding continue to perpetuate and grow (Levine, 2017). Furthermore,
the study showed that issues arise from the way philanthropic organizations work, and not from
the nonprofit organizations that they are funding (Levine, 2017). In an article written by the
Nonprofit Association of Oregon Kay Sohl (2016) noted that philanthropic organizations,
particularly ones that have a history with the nonprofit, are often more open to investing in and
strengthening the nonprofits’ capacity. In order to obtain the funding necessary for nonprofits,
engaging in communications with portfolio managers and employees of philanthropic
organizations are the key to success. While this study is still being conducted, research shows
that strategic communications deliver impact, change, and advance the missions of both the
nonprofit and philanthropic organizations (Gibbons, 2016).
Limitations and Delimitations
All studies have limitations and delimitations. Limitations can be defined as the
influences that a researcher cannot control, thus causing potential weaknesses in a study beyond
the researcher’s control (Simon, 2011). This particular study was conducted during one of the
most unique times in American and global history. The onset of Coronavirus (COVID-19), left
this study with limitations in outreach and conducting interviews. Interviews had to be conducted
completely remote, with some of the interviews being conducted via phone. The phone
interviews took away the researcher’s ability to observe the portfolio managers during the

67
interview. The researcher’s inability to observe participants in response to the protocol questions
impacted the researcher’s ability to see how participants responded. Body language, when
questions are being asked, potentially is important to note in the research findings (Creswell,
2014). The researcher anticipated and learned emerging themes through the course of data
collection that would also be an area of continued focus, such as organizational limitations.
Delimitations are characteristics that limit the scope and define the boundaries of a study
(Simon, 2011). Delimitations are essentially the opposite of limitations in that delimitations are
within the researcher’s control. One of the delimitations in this study was the problem of practice
itself. There are other issues that affect the nonprofit organizations; however, the researcher
chose to address the limiting or capping of indirect costs in nonprofits.
Focusing on portfolio managers within philanthropic organizations was the selected
approach to determine their knowledge, motivation, and organizational influences that affected
how they fund indirect costs of nonprofit organizations. Expanding the population and looking at
a larger audience would have been beneficial to this study to obtain additional reasoning behind
limiting indirect costs. The participants (portfolio managers) operated within the restrictions set
by leadership within their respective philanthropic organizations. The BOD at each of the four
philanthropic organizations set the indirect cost rates that they were willing to fund.
Consequently, the portfolio managers could only fund the indirect costs of nonprofits up to the
amount the BOD had established. Any differential between funding received from the
philanthropic organization and what the nonprofit required in terms of indirect costs had to be
sourced by the nonprofit through other means. Including the BOD in this study would have
provided more insight into the influences impacting philanthropic decisions related to funding
indirect costs.

68
Additionally, and in the interest of time and effort, the study focused on a small
population of philanthropic organizations across all philanthropic funding sectors. In addition to
the aforementioned reasons, this study was comprised of a small population due to the amount of
time to complete the study. The researcher also controlled the study through how many
philanthropic organizations were being interviewed and criteria such as the region in which
participants were located and their experience level with funding indirect costs.
Future Research
This study focused specifically on portfolio managers’ perceptions of what indirect costs
should be for nonprofits and the limitations or capping of such costs. Future research could
include inputs from a larger sample as this study focused on a small sample size of eight
portfolio managers. A larger sample size would provide additional insight as to the knowledge,
motivational and organizational influences of limiting or capping indirect costs of a nonprofit
organization thus enabling the future researcher(s) to obtain a deeper understanding across all
philanthropic sectors Additionally, future research could conduct a deeper exploration of the
lived experiences of portfolio managers to determine if there are differences between experience
and a specific sector of nonprofits having a higher indirect cost rate. Also, in a time of COVID-
19, exploring the short and long-term impacts of funding these nonprofits and limiting or
capping their indirect costs would be valuable. This study was limited to the knowledge,
motivation, and organizational influences of portfolio managers, so future research could place
emphasis on additional influences to give an added layer of analysis of those possible influences
of portfolio managers’ expectations of indirect cost rates. The study was also limited to a small
population of eight philanthropic organizations across all sectors of philanthropy and utilized
qualitative data collection.

69
Future research could evaluate the effectiveness of the recommendations in this study and
the impact of the philanthropic organizations in making meaningful change with the suggested
improvement strategies. The board members at philanthropic organizations should be the
subjects of future research due to the limitations imposed by the boards on portfolio managers
related to funding indirect costs. This study found that board members of the four philanthropic
organizations evaluated were responsible for capping the indirect costs as opposed to the
authority resting with portfolio managers. Portfolio managers had no control over indirect cost
funding rates and operated within those restrictions set forth at the board level.
Additional stakeholders, such as nonprofit executives, could also be instrumental in
providing insights to see if providing training to the portfolio managers not only resonates but
helps to make effective change. Conducting studies that look at a larger population of portfolio
managers would be beneficial to future research to obtain additional insight of portfolio
managers and why they limit indirect costs, whether on a personal level or as directed by the
philanthropic organization. Other concerted initiatives that are focused on improving
organizational culture may also influence philanthropic funding of nonprofits to create the
programmatic impact philanthropic organizations seek. Future research could evaluate the
impact of fully funding nonprofit organizations and the impact on the programs being funded.
Conclusion
The purpose of this study was to understand the knowledge, motivation, and
organizational influences that impact portfolio managers limiting or capping the funding of
indirect costs in nonprofit organizations. The portfolio managers interviewed in this study
recognized the need to fund indirect costs as an essential function of a nonprofit organization’s

70
overall stability. However, the findings also presented additional insight as to why limiting or
capping indirect costs exists as a practice among philanthropic organizations.
Trust and communication with nonprofit organizations were both identified as needs.
Portfolio managers articulated that nonprofits needing to clearly provide justification behind
their indirect cost rate as one of the common themes identified in this study. To build
transparency, nonprofit organizations need to provide the portfolio managers at philanthropic
organizations more data upfront. Portfolio managers felt they needed to continually request
additional information.
Ultimately, of the eight portfolio managers interviewed, all eight were limited to how
much of a nonprofit’s indirect cost they can fund by the BOD at the philanthropic organizations.
Portfolio managers were authorized to fund those nonprofits based on their ability to meet the
objectives set forth by the philanthropic organization. However, nonprofits are left to fund the
differential between what the philanthropic organization is willing to fund of indirect costs and
the total of the nonprofit’s indirect costs on their own.
Portfolio managers interviewed in this study noted that nonprofits provide required
information for funding, but nonprofits are not necessarily forthcoming in the reasons behind
their indirect costs and why specific costs are needed. The literature review highlighted the
limitations of capping indirect costs of nonprofit organizations and their subsequent ability or
inability to effect the impact philanthropic organizations were seeking to make in programs they
fund. The Clark and Estes (2008) framework was utilized to identify the knowledge, motivation,
and organizational influences on understanding portfolio managers capping of indirect costs.
Finally, an implementation plan was proposed using the four levels of Kirkpatrick and
Kirkpatrick (2016) world model to establish possible solutions for the portfolio managers to fully

71
fund nonprofit organizations, to create meaningful impact on the programs philanthropic
organizations fund.

72
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Appendix A
Participating Stakeholders: Sampling and Recruitment
Participating Stakeholders
The stakeholder group of focus for this research was the portfolio managers at
philanthropic organizations who fund nonprofit organizations. These portfolio managers have
had prior experience funding on nonprofit organizations across all facets of the nonprofit sector;
from funding nonprofits whose focus is advocacy to others whose focus is healthcare. These
portfolio managers have experience in not only funding nonprofits but also limiting nonprofit
indirect costs. The stakeholder performance goal for this group is to fully fund nonprofits,
regardless of indirect cost rates. This goal is referred to as the stakeholder group goal throughout
this study.
This study examined the knowledge and motivation of philanthropic organizations in
relationship to the stakeholder group goal, and the knowledge and motivation influencing the
organizational model and setting. Philanthropic organizations were identified as those who
provide funding to nonprofit organizations. Using these criteria, the sample size for interviews is
expected to be approximately eight philanthropic organizations.
Interview Sampling Criteria and Rationale
Criterion 1. Participants to be sampled in this interview work for a philanthropic
organization and have the capacity of managing funds. Participants also have, at minimum, two
years’ experience in providing philanthropic support to nonprofit organizations. The reason for
this criterion is that experienced Philanthropic organizations can provide detailed information
necessary to their knowledge and motivation as depicted by Clark and Estes (2008).
Criterion 2. Participants of this study were available for face-to-face interviews or via
Zoom. Approximately one hour of time was needed.

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Criterion 3. Participants in this study have limited nonprofit organizations on indirect
costs. The reason for this criterion is these participants provide knowledge and motivation as to
why they limit nonprofit organizations’ indirect costs.
Criterion 4. Participants of this study have decision making power within the
organization. Participants of decision-making power were portfolio managers and above. The
reason for this criterion is that these participants provide knowledge, motivational, and
organizational background of how philanthropic funding is established.
Interview Sampling (Recruitment) Strategy and Rationale
For the purposes of this study, the researcher’s sampling strategy was purposeful, non-
random. This means that the process in selecting the sample is not random and the goal is not
generalizable to the larger population (Merriam & Tisdell, 2016). To narrow down the number of
stakeholders being interviewed the researcher used convenience sampling. Convenience
sampling is based on time, location, availability (Merriam & Tisdell, 2016). Philanthropic
organizations are seeking to make an impact and based on that their availability and time are
important. The next step is to ensure the sampling is purposeful. Merriam and Tisdell (2016),
defined purposeful sampling as a means of narrowing down the sample group. To ensure the
sampling was purposeful the researcher narrowed the sample size based on position, experience,
and availability. This ensured that the participants could go deeper into the research of this study.
This research conducted a relatively small sample size of eight in the target stakeholder
group. Due to the small size, the researcher conducted a qualitative approach of the philanthropic
organizations. Specifically, the researcher utilized a purposive approach interviewing the
stakeholders of this study. McEwan and McEwan (2003) described qualitative research as
naturalistic, descriptive, and focused on meaning. This approach to interviewing the key

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stakeholders was used understand the philanthropic organizations’ knowledge, motivation and
organization context that helps or diminishes their ability to properly fund nonprofits. Taking a
qualitative approach to this study, the researcher focused on the purposive aspect of
interviewing. As defined by Johnson & Christensen (2015), purposive sampling sets specific
criteria providing a defined method on how to support this research.
Explanation for Choices
This qualitative purposive sampling strategy invited the stakeholders to participate via
video conference through zoom. If the participant was unable to attend using zoom, a toll-free
phone number was be provided. The sample size of eight is small based on time, convenience,
and availability. Increasing the amount of interviews to philanthropic organizations within a 100-
mile radius for face-to-face interviews provided access to more philanthropic organizations, and
provided further creditability to the data, and additional confidence (Fink, 2013). However, due
to COVID-19, all interviews took place virtually. This smaller sample size was justifiable
because of the rich data the researcher obtained during this interview process. A qualitative
interview enabled the researcher to achieve in-depth information about the phenomenon being
researched (Maxwell, 2013).
Documentation Analysis Sampling Criteria and Rationale
Documentation analysis was conducted through electronic material (i.e. online mission
and vision statements, policies and procedures, and RFP’s). As a qualitative study, document
analysis of the data were examined and interpreted to gain further understanding, feedback, and
empirical knowledge of philanthropic organizations. Within the interviews conducted the study
sought to obtain corroboration amongst participants interviewed. In addition to documenting the

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interviews and taking notes, additional notes were made on the environment, tone of the
interview, and body language.

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Appendix B
Credibility and Trustworthiness
The researchers background in nonprofit organizations, having previously served as a
director of finance and a chief financial officer, has provided the researcher first-hand insight on
nonprofit struggles due to the lack of philanthropic funding for indirect costs. Based on the
researchers experiences, the researcher brought an increased risk and bias to understanding the
reasoning philanthropic organizations fund such a minimal amount of indirect costs. The
researchers analysis of the information provided could potentially affect the results of this
research (Maxwell, 2013). As the researcher of this study it is extremely important to focus on
the data provided. The researchers focus is on the research and not any previous experience.
Strategies that the researcher used was completed through reflection exercises to track
any biases in the research (Maxwell, 2013). Triangulation was utilized to reduce the risk that the
researchers conclusion would only show systematic biases or limitations (Maxwell, 2013).
Triangulation with archival materials, such as their mission statement and the use of information
from their website, allows the research to triangulate those things to obtain a more trustworthy
account and not solely dependent on the participants in the research. The researcher will be
allowing participants to speak about their processes and, in turn, allowed the researcher to
triangulate it with the aforementioned materials. Triangulation also afforded the researcher the
ability to gain a better assessment as to the validity of the explanations that are developed
(Maxwell, 2013). To rule out any validity threats, the researcher used the evidence collected to
make alternative hypothesis unconvincing. An important part in capturing the credibility of this
research was exercised through the peer-review. Merriam & Tisdell (2016) highly recommend
having this as a part of the research to get rid of any potential biases reflected in the research.

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The researcher has reached out to peers within the nonprofit sectors and for-profit sectors to
provide the researcher with their insight on this study. This provided the researcher with the
ability to look at the research from the outside in and see where their interpretation of the study
could reflect any biases shown. Most importantly, it was imperative that the researcher was
present (not just physically), when conducting the interviews. It was the researchers
responsibility to this study and to the interviewees, that the researcher provided full attention and
let them speak. This ensured that the researcher took everything in without interjecting their own
thoughts. Additionally, the researcher expected the participants of the interviews to provide
credible and trustworthy responses. The researcher provided the participants with confidentiality
(through the use of pseudonyms) so that their responses are confidential. Also, through the use of
insight and intuitive action, the researcher utilized this to assist in observing the interviewees
during responses.
The intended sample size was a minimum of eight. The researcher conducted multiple
interviews to collect qualitative data for this study. The interviews the researcher conducted and
the peer-reviews the researcher obtained, helped to support findings of this research. Data
collected through the interview process were kept within a shared, view only, google doc that
was shared with each interviewee to review for correctness. This allowed the subjects to correct
and or clarify notes taken from the interviews. Ultimately, the goal was to provide not only
clarity, but consistency within this study.
Responses that were received during the interviews were assumed to be credible and
trustworthy. Pseudonyms were utilized to protect the respondents as well as their organizations.
The researcher deemed that respondents were forthcoming, but also understood that there may be
some respondents that did not wish to answer certain questions. Questions such as “What do you

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believe a reasonable indirect cost rate to be?” If they did not agree with the standard 10% to
15%, they may not have felt comfortable answering that question. If the respondent was not
comfortable in answering, the researcher obtained this information through those respondents
willing to answer.

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Appendix C
Ethics
The data that was obtained and researched in this study was completed through the
application of Clark and Estes (2008) KMO framework. The primary source of data collection
was through the utilization of interviews. Interviewees in this study were provided with the
ability to, without penalty or judgement, withdrawal from the interview to protect themselves
and their well-being. Informed consent, as defined by Glesne (2011), is the empowering of
research participants and to make interviewees aware that the participation in this study is:
voluntary, research that might affect their well-being, and that they may choose to stop
participation at any point within the study. In efforts to provide all interviewees with informed
consent an information sheet was provided to them to define the following: what is being
researched, who the researcher was, the purpose of conducting the research, and ultimately how
the nonprofit sector can benefit from such research. Appendix E includes the information sheet.
As a part of the interview process it was the researchers responsibility to show the interviewees
that the researcher meant no harm, and it was the researchers responsibility to do no harm. No
harm in research is also known as beneficence (Rubin & Rubin, 2012). Beneficence means that
the researcher was responsible to not harm and to maximize the possible benefits and minimize
any possible harm. It was the researchers responsibility to provide interviewees with respect,
honor all promises, and not pressure them (Rubin & Rubin, 2012).
Participants of this study participated strictly on a voluntary basis. Full confidentiality
was provided through the use of pseudonyms. The participants were provided with the details of
the study and what the researcher was looking to obtain through the interview process. The
interviews were completed through the standardized open-ended interview. A standardized open-

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ended interview is a set of questions that are carefully worded and arranged with the intention of
taking each respondent through the same sequence and asking each respondent the same
questions essentially with the same words (Patton, 2002).

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Appendix D
Interview Guide
(Intro to interview)Good (morning, afternoon, evening) thank you for taking the time to
participate in this research study. As we have discussed, I will be asking you a series of interview
questions as it pertains to the starvation of the nonprofit cycle. For context, starvation has been
defined as happens when a nonprofit reduces its overhead in efforts to gain a competitive
advantage in donor markets. With your approval, I would like to go ahead and start the recording
for this interview (zoom, or phone recording, or both).
1. Tell me how your organization decides what nonprofits?
a. What impacts the decision making for funding them?
2. How competitive is the philanthropic industry?
3. Describe what the term indirect costs mean to you. In other words, if you had to explain
indirect costs, what would you say?
4. What are the reasons behind indirect costs?
5. If you had to explain to someone why indirect costs are limited, what would you say?
6. Why are indirect costs set as an overall percentage across all nonprofit organizations?
7. If you had to explain why the indirect cost rate is capped, how would you respond to
that?
8. What value do you see in indirect costs of the operation of a nonprofit organization, if
any?
9. Some may say that indirect costs are an inherent part of business operations. What are
your thoughts? What is your position on indirect costs as an inherent part of business
operations?

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10. Why is it important to you to cap the percentage of indirect costs you fund?
11. Do you think nonprofits are transparent in providing information about their indirect
costs, and intentions for their use of funds when working with philanthropic
organizations?
12. How do you approach funding nonprofits with higher indirect costs?
13. Is there a limit to how many nonprofits you will fund that have higher indirect costs? If
so, what is that limit and do you make any exceptions?
14. How frequent are you in communication with nonprofit organizations?
15. Do nonprofits address resources needs in their organizations as part of their
communications? (i.e. employees, equipment, buildings, etc…).
16. Does your organization strictly prohibit a nonprofit organization if their indirect cost is
over a set percentage?
17. What is your organizations limit on indirect cost funding? If a nonprofit meets the
organizational criteria for impact, will your organization make an exception if the indirect
costs are higher? If so, what are the stipulations, if any?

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Appendix E
Information Sheet for Exempt Studies
STUDY TITLE: Increasing Strategic Investments by Philanthropic organizations
PRINCIPAL INVESTIGATOR: Jason Kehoe
You are invited to participate in a research study. Your participation is voluntary. This document
explains information about this study. You should ask questions about anything that is unclear to
you.
PURPOSE
The purpose of this research is to study the perceptions, knowledge, and motivation of portfolio
managers. In this study the researcher seeks to learn how portfolio managers decide how they
fund nonprofit organizations. You are invited as a possible participant because of your
experience as a philanthropist.
PARTICIPANT INVOLVEMENT
As a participant you will be asked a series of questions. These questions will be asked via zoom.
If zoom is not available or you decline to be on camera, a telephone number will be provided to
call into. This interview is expected to take no longer than 60 minutes. Your personal
information will not be used or cited in this research. A pseudonym will be created to protect
your identity and the organization you work for.
If you decide to take part, you will be asked to answer questions the starvation of the nonprofit
cycle. Specifically, the researcher will ask questions as they pertain to indirect cost rates. The
researcher seeks additional insight as to how portfolio managers view indirect costs.

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CONFIDENTIALITY
The members of the research team, and the University of Southern California Institutional
Review Board (IRB) may access the data. The IRB reviews and monitors research studies to
protect the rights and welfare of research subjects.
When the results of the research are published or discussed in conferences, no identifiable
information will be used. As noted previously, a pseudonym will be utilized to protect the
identity of the participant as well as their organization.
All of the data will be kept through the duration of this research, approximately one year. This
data will be saved to a google drive that the participant will have access to. Audio/video
recordings, each participant will have the right to review/edit recordings or transcripts.
INVESTIGATOR CONTACT INFORMATION
If you have any questions about this study, please contact Jason Kehoe, jkehoe@usc.edu, (267)
246-2570.
IRB CONTACT INFORMATION
If you have any questions about your rights as a research participant, please contact the
University of Southern California Institutional Review Board at (323) 442-0114 or email
irb@usc.edu.

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Appendix F
Implementation and Evaluation Plan
The New World Kirkpatrick model was used to create an implementation plan to address
the recommendations identified based on the findings of this study. Results (Level 4), as defined
by Kirkpatrick and Kirkpatrick (2016), is the degree to which target outcomes occur as a result
of the training and the support and accountability package. Leading indicators are an essential
part of the results level. Kirkpatrick and Kirkpatrick (2016) identified two distinct types of
leading indicators. Those indicators produce or manifest both qualitative and quantitative results.
The first being internal leading indicators that come from within the organization. The second is
external leading indicators that come from outside of the organization. Identifying these
indicators helps us to keep goals on track, provide up to date information to stakeholders,
motivation for all parties involved and provide the date connecting performance that leads to the
highest level possible result (Kirkpatrick, 2016)
Nonprofits are not different from any other business (nonprofit or for-profit) with a
mission or vision. They incur similar costs that for-profit organizations carry. These costs
include overhead, administrative (indirect), and programmatic costs. Unfortunately, portfolio
managers of philanthropic organizations show favor in funding nonprofits that carry a lower
indirect costs rate (Eckhart-Queenan et al., 2016). Portfolio managers are under the assumption
that their donations go further toward making an impact.
The stakeholder goal for this study was for portfolio managers to fully fund nonprofits,
regardless of indirect cost rates. The reasoning behind this goal is to ensure that nonprofits are
being fully funded to make the desired impact being sought after. Achieving this goal will allow

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nonprofits to fully support the programmatic costs and make the difference or impact that
portfolio managers are seeking.
The expectations for the desired outcome and recommendations for the stakeholder is to
see nonprofits fully funded for both programmatic and indirect costs. The expectation is that by
evaluating the KMO of the portfolio managers and providing them with the resources to
overcome deficits in their knowledge, motivation, and organizational supports, an even bigger
impact can be made on the field they are funding.
Level 4: Results and Leading Indicators
The table below shows the proposed Level 4: results and leading indicators. These results
and leading indicators are shown as outcome, metrics and methods from an internal and external
perspective. The internal and external outcomes are both based on the stakeholder goals seeking
to have portfolio managers to fully fund nonprofits, regardless of indirect cost rates. If the
outcomes of both internal and external are met, the nonprofit organizations will be healthier,
more sustainable organizations that are able to make true impacts on the field of focus.

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Table F1
Outcomes, Metrics, and Methods for External and Internal Outcomes
Outcome Metric(s) Method(s)
External Outcomes
Nonprofit organizations
will be supported at 100%
of both programmatic and
indirect costs by portfolio
managers.
Percentage of funding
requirements that are met.
Budgetary documents
maintained by the nonprofit
organization.
Improved support to local
community by nonprofit
organizations.
Number of projects successfully
implemented
Program managers track
progress of projects under their
management.

Project status updates provided
to senior leadership.
Internal Outcomes
Portfolio managers fund
nonprofit indirect costs.
Percentage of nonprofits that
receive funding for their indirect
costs.
Internal review of grant
decisions and allocations to
audit the percentage of grants
that provide support for indirect
costs.

Level 3: Behavior
Behavior evaluations assess the degree to which participants apply their daily job goals
and skills learned during training (Kirkpatrick & Kirkpatrick, 2016). Success of this Level 3
evaluation is dependent upon the design (Kirkpatrick & Kirkpatrick, 2016). This level is utilized
to decipher whether or not the new skills obtained are being used in the learners everyday
activity (Kirkpatrick & Kirkpatrick, 2016).
Critical Behaviors
The stakeholders of focus are the portfolio managers at philanthropic organizations that
provide funding to nonprofit organizations. The first key behavior portfolio managers will need

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to exhibit is their knowledge of indirect costs and the importance of funding it. The second
behavior portfolio managers need to show is that they are committed to full and open
communication with nonprofit organizations. The third behavior is that the portfolio managers
embrace accountability. Embracing accountability will further their knowledge and
understanding of the nonprofit indirect costs requests and the subsequent fundings impact on the
programs being funded. Specific metrics, methods, and timing of each outcome can be found in
the below table.
Table F2
Critical Behaviors, Metrics, Methods, and Timing for Evaluation
Critical Behavior Metric(s) Method(s) Timing
Portfolio managers
fully fund indirect
costs for nonprofit
organizations.
100% of indirect costs
funded in grants
awarded by portfolio
managers.
Internal review of
funding decisions.
Quarterly review
Portfolio managers
communicate
openly with
nonprofit
organizations.
Number and type of
communications
between portfolio
managers with
nonprofit
organizations.
Portfolio managers track
number of type of
communications.

Supervisors review and
provide feedback on
communication plan and
approach.
Quarterly review
Portfolio managers
make inquiries
about specific
indirect cost line
items in nonprofit
grant applications.
Number of inquiries
made to nonprofits
about specific indirect
costs.
Feedback with
supervisors regarding
inquiries related to
indirect costs.
Monthly

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Required Drivers
Nonprofit organizations need full support from philanthropic organizations in funding of
not only programmatic costs, but the subsequent indirect costs as well. To obtain the stakeholder
goal of fully funding indirect costs regardless of what that rate might be, philanthropic
organizations play an essential role in their own motivation of funding those costs. These
behaviors of why philanthropic organizations might fund or limit funding the way they do are
broken down into four categorical behaviors. Those behaviors are reinforcement,
encouragement, rewards and monitoring. These drivers are identified in Table F3.

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Table F3
Required Drivers to Support Critical Behaviors
Method(s) Timing
Critical Behaviors Supported
1, 2, 3 Etc.
Reinforcing
Nonprofits offer training for
portfolio managers on indirect
costs.
Annual 1,2,3
Self-accountability Weekly 1,2,3
Encouraging
Success stories told by
nonprofit organizations
through newsletters and
reporting to portfolio
managers.
Continuous 1,2,3
Rewarding
Incentives for funding
nonprofits with higher indirect
costs. However, those
nonprofits are making the
desired impact the portfolio
managers are looking for.
Continuous 2,3
Monitoring
Review of portfolio and
successes of nonprofits by
portfolio managers.
Monthly 1,2,3
Supervisors ask portfolio
managers questions during
feedback about inquiries they
have made related to indirect
cost line items.
Monthly 2, 3

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Organizational Support
The organization will support its stakeholders through training and reinforcement of
success stories. The portfolio managers will be held accountable for the success of their portfolio
through one on one reviews with their direct supervisor. To support supervisor capacity to
conduct these reviews, supervisors will also need to participate in training on nonprofit indirect
costs. Under the direction of the portfolio manager, a model will be created to follow for all
funding of nonprofit organizations regardless of the indirect costs. Implementing a model will
require portfolio managers of philanthropic organizations to review policies and procedures
regarding the funding of indirect costs and revise them to ensure the nonprofits being funded are
making the sought after impact and funding is not hindered predicated upon indirect costs.
Finally, to ensure accountability for the Level 4 outcomes and Level 3 critical behaviors and
required drivers, portfolio managers may need to implement new procedures; however, the exact
mechanisms will vary from organization to organization.
Level 2: Learning
Level 2 of the Kirkpatrick and Kirkpatrick (2016) approach is about learning and the
degree to which those that participate are able to acquire the knowledge, skills, attitude and
confidence of their participation. Following completion of training, portfolio managers should
have the ability to evaluate indirect costs on a case-by-case basis (Procedural).
Program
The learning program recommendations consist of providing sufficient scaffolding and
tools to portfolio managers in the form of budgetary and programmatic information (i.e. budget
and programmatic pamphlets). Nonprofit organizations would be best suited to provide this
training. In theory, providing through providing this training, nonprofits would address the

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communication and trust considerations identified from an organizational cultural model and
cultural setting.
Through social interaction and cognitive learning, this will help portfolio managers of
philanthropic organizations to understand the principles of indirect costs. Additionally, training
programs within the portfolio managers will provide workshops, videos, and additional
information on how to evaluate indirect costs. The workshops will be conducted monthly for all
portfolio managers from nonprofit representatives.
During the workshops, nonprofit representatives will engage portfolio managers to
understand what currently influences their decisions regarding indirect cost funding and provide
them with supporting information to show how funding indirect costs impacts programmatic
goals.
Evaluation of the Components of Learning
In order to identify if Level 2 learning has occurred within the identified stakeholder
group, it is essential to evaluate the knowledge, skills, attitudes and commitment level of the
individuals (Kirkpatrick, 2016). The knowledge influence puts an emphasis on portfolio
managers understanding the principles behind indirect costs. This skill provides portfolio
managers with an understanding and implementation of financing for indirect costs. Portfolio
managers attitudes focus on whether they believe the importance of funding the indirect costs for
nonprofit organizations. Confidence then exacerbates the portfolio managers belief that funding
the indirect costs will have the desired impact on the area of focus being funded. The following
table includes the evaluation methods as well as time frame.

101
Table F4
Evaluation of the Components of Learning for the Program
Method(s) or Activity(ies) Timing
Declarative Knowledge “I know it.”
Conduct post training surveys Ongoing
Observe body language of participants during
training.
Ongoing
Procedural Skills “I can do it right now.”
Surveys to identify philanthropic understanding
of indirect costs.
Ongoing
Attitude “I believe this is worthwhile.”
Surveys to understand philanthropic trust of
nonprofits usage of funding.
Ongoing
Confidence “I think I can do it on the job.”
Authorized to make funding decisions regardless
of indirect costs
Ongoing
Communicate the importance of funding indirect
costs
Ongoing
Commitment “I will do it on the job.”
Review of philanthropic organizations policies Ongoing

Level 1: Reaction
Reaction is Level 1 of the Kirkpatrick New World Model. Kirkpatrick and Kirkpatrick
(2016) stated that Level 1 is the degree in which participants find the training favorable,
engaging and relevant to do their jobs. For portfolio managers, it is imperative to gauge their
reaction conducted via the scaffolding and training tools provided. Table F5 lists the method and
tools utilized to determine the efficacy and reaction of portfolio managers of the resources
provided.

102

103
Table F5
Components to Measure Reactions to the Program
Method(s) or Tool(s) Timing
Engagement
Frequent interaction with the nonprofit
organizations and portfolio
managers/philanthropic organizations.
Ongoing
Observe the portfolio managers during
training provided
Ongoing
Evaluate training provided After each session
Relevance
Check-in between portfolio managers of
philanthropic organizations and nonprofit
organizations seeking funding
Ongoing following of completion of workshop
Customer Satisfaction
Evaluation of training sessions After each session
Observe behavior/body language During training

Evaluation Tools
Evaluation provides an efficient way to study an initiative to see how successful it was in
achieving its objectives (Patton, 2002). The evaluation research strategy provides direction for
the evaluator and guidance in the selection of techniques or approach (Patton, 2002). The
researcher has provided implementation plans for evaluation in the sub-sections below modeled
after the Kirkpatrick and Kirkpatrick (2016) approach to evaluation.
Immediately Following the Program Implementation
The training program for portfolio managers will be evaluated after the completion of
each training seminar. Level 1, reaction, will be observed during each training session by the
organizational representative conducting the training. This representative will be interacting with

104
those partaking in the training, obtaining feedback regarding material and perceived efficacy of
said training. Aside from interaction with the participants, the organizational representative will
observe participants body language during the training.
Reaction and Learning (levels 1 and 2 respectively) will be observed and evaluated
during and after each training provided. The organizational representative will obtain feedback
from the participants of the training to obtain the efficacy of the training and satisfaction. Doing
so will enable the representative to find the reaction (Level 1) of the training. Additionally, the
representative will seek to evaluate the participants knowledge, self-efficacy and the overall
commitment to indirect costs of nonprofits. This evaluation will provide the representative with
the learning (Level 2) of the participants. See Appendix G.
Delayed for a Period After the Program Implementation
Every quarter, the organizational representative will delve further in to the training
session provided. This process will afford the representative to see what is working and what is
not. The evaluation will provide a larger sample size to see if the training method and topics are
providing further understanding and clarity regarding the funding of indirect costs to nonprofit
organizations. Appendix H will provide open-ended questions to evaluate the training through
the lens of Kirkpatrick’s (2016), reaction (Level 1) and learning (Level 2). See Appendix H.
Data Analysis and Reporting
The Level 4 (results) goal of the organization are predicated upon the portfolio managers
ability to exhibit the prior three levels of Kirkpatrick (2016). Satisfaction of the training provided
will be rated through the use of survey after each session. The goal is here is to ensure portfolio
managers knowledge and understanding of indirect costs have increased, thus providing them the
ability to provide proper funding for nonprofit organizations and in turn see the impact they seek

105
to create. The findings will be obtained through the use of surveys after each training session and
in each portfolio manager’s check-in/review with their supervisor. The results from the surveys
and the check-ins with their supervisors will occur immediately after the training, monthly,
quarterly and yearly. This provides better insight as to portfolio managers understanding of the
indirect costs and their ability to effect change in achieving the overall organizational goal.
Figure F1 provides an illustration of anticipated understanding results.
Figure F1
Post-Training Anticipated Results

Summary
Kirkpatrick and Kirkpatrick’s (2016) four levels of training evaluation can be utilized to
develop, implement and evaluate training for portfolio managers of philanthropic organizations.
The global goal is to increase portfolio managers understanding of nonprofit direct and indirect
costs in order to encourage investment/giving to nonprofits with higher indirect costs.
Additionally, the stakeholder goal is for portfolio managers to fully fund nonprofits, regardless
of indirect cost rates. Training was developed to address the gaps identified through the
Post Training
Relevance Satisfaction Engaging Informative Applicable

106
interviews conducted. Through the application of the four levels of the Kirkpatrick model
(2016), reaction, learning, behaviors and results, the training and evaluation methods were
created. The training programs have not been implemented to date, however they have been
created as a tool to increase portfolio managers funding of indirect costs and to create further
collaboration between the portfolio managers and nonprofit organizations. Analysis of the
assessments will be essential in guiding how the training program proceeds.

107
Appendix G
Evaluation During and After Each Training
Date:_____________
Title and Location:____________________________
Trainer:__________________________________
Instructions: Please indicate your level of agreement with the statements below:
Strongly Agree Agree Neutral Disagree Strongly Disagree
1. The objectives of this training were clearly stated
2. Participation and interaction were encouraged
3. Topics covered were relevant to me
4. The content was organized and easy to understand
5. The material distributed was helpful
6. This training will be useful to my work
7. The trainer was knowledgeable about the training topics
8. The trainer was well prepared
9. The training objectives were met
10. The time allotted was sufficient
11. The meeting room and facilities were adequate and comfortable

108
Appendix H
Evaluation of Implementation Plan
Evaluation (Quarterly Use)
Date:_____________
Title and Location:____________________________
Trainer:__________________________________
Instructions: Please indicate your level of agreement with the statements below:
Strongly Agree Agree Neutral Disagree Strongly Disagree
1. The information provided has afforded me the ability to apply to my philanthropic duties
1 2 3 4 5
2. This training was effective and efficient
1 2 3 4 5
3. I have been able to apply the information learned to my daily responsibilities
1 2 3 4 5
4. I knew what to expect coming into this training
1 2 3 4 5
5. I have the necessary tools needed to successfully complete my duties moving forward
1 2 3 4 5
6. This training has provided immediate positive impact
1 2 3 4 5

109
7. As a result of this training, I have increased my efforts to fully fund nonprofit
organizations.
1 2 3 4 5
Open-Ended Questions:
1. What can be added to the training to ensure relevance of your duties?

2. What, if anything, was not relevant to you?

3. What can be improved upon in this training, if anything?

4. How have you utilized the information obtained from training to your daily
responsibilities?

5. With the additional information obtained through this training, have you encountered any
challenges in applying what you have learned?

6. Are there any additional tools or topics in training that you would like to see covered?

7. Have you seen any success from implementation of information obtained through this
training?

8. What is your biggest takeaway from this training?

Abstract (if available)

Abstract The purpose of this study was to explore, understand, and bring creative ways to increase philanthropic funding of indirect costs in nonprofit organizations. The study focused on what knowledge, motivation, and organizational influences contributed to philanthropic organizations' current funding of nonprofits, and used the Clark and Estes (2008) gap analysis framework as the foundation of the influencers. Specifically, this research took a deeper dive into what existing knowledge, motivation, and organizational influences are in place that support or limit the funding of indirect costs in nonprofit organizations. The desired outcome was to understand from the philanthropic perspective what portfolio managers' current influences are in limiting or capping indirect costs, and how that could be improved upon moving forward. To gather data, qualitative interviews were used, leveraging a convenience snowball sampling method and hour-long interviews with eight participants across all sectors of philanthropy (e.g., healthcare, education, advocacy). Data findings were highlighted in a series of tables that captured key findings for the 17 research questions. The research participants provided clear understanding and knowledge of what indirect costs were and what the perceived impacts of limiting indirect costs are. Their answers varied on what impacts, if any, limiting or capping indirect costs had on the nonprofits they were funding. The study concluded with recommendations to address the knowledge, motivation, and organizational gaps that were reported, and an implementation and evaluation plan was developed using the foundation of Kirkpatrick and Kirkpatrick’s (2016) New World Model.

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Asset Metadata

Creator Kehoe, Jason D. (author)

Core Title Increasing strategic investments of philanthropic funding in nonprofit organizations

School Rossier School of Education

Degree Doctor of Education

Degree Program Organizational Change and Leadership (On Line)

Publication Date 11/04/2020

Defense Date 10/07/2020

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag administrative costs,funders,indirect costs,OAI-PMH Harvest,philanthropic organizations,philanthropists,portfolio managers

Language English

Contributor Electronically uploaded by the author (provenance)

Advisor Phillips, Jennifer L. (committee chair), Massa, Felipe G. (committee member), Seli, Helena (committee member)

Creator Email jason.d.kehoe@gmail.com,jkehoe@usc.edu

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c89-392681

Unique identifier UC11666469

Identifier etd-KehoeJason-9100.pdf (filename),usctheses-c89-392681 (legacy record id)

Legacy Identifier etd-KehoeJason-9100.pdf

Dmrecord 392681

Document Type Dissertation

Rights Kehoe, Jason D.

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the a...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus MC 2810, 3434 South Grand Avenue, 2nd Floor, Los Angeles, California 90089-2810, USA