Helping local humanitarian organizations with overhead costs is fundamental

What do you do when people give you something you really needbut insult you or hurt you along the way? You smile, thank them, and quickly walk away to hide your feelings.

That’s how it is when a local organization like ours receives a grant that does not include funding for its overhead costs — for what we call Indirect Cost Recovery (ICR). A grant that only covers the direct costs of a given project, in other words.

WHY ICR MATTERS

People often describe ICR as the money that allows organizations to pay rent and keep the lights on, and it’s true. But it means so much more.

  • It supports strong partnerships. For an organization to survive – let alone thrive – it must pay its office rent, maintain its equipment and systems, and employ people to perform a range of roles not directly related to funded projects. If this money is not available from its grants, the group may have to close. INGOs and other donors who do not understand or pretend not to understand this cannot hope to earn the respect and trust of local organisations.
  • This makes fair labor practices possible. Our staff must work for free. Often. It is as painful and as simple as that. When a project is underway, we sometimes work 12 to 14 hours a day, seven days a week, for months. And there is never enough money left over to pay project staff for the report they have to do after the project is finished. Long hours may be unavoidable, but ICR can allow us to pay people for ALL their work.
  • This reduces staff turnover. Organizations that limp from grant to grant with no money for overhead must lay off key staff after each project ends. This is extremely hard on project staff and damaging to organizational morale. It is also a financial waste: we invest in staff training and then have to let the trained employees go.
  • This can help prevent discrimination against women in the workplace. A small organization working under tight and inflexible budget constraints cannot afford something as basic and essential as offering female employees maternity leave.
  • In politically charged contexts, this allows aid to be neutral and impartial. Organizations that align themselves with political parties receive financial rewards for doing so, and they have the security of knowing that the party has their backs, no matter how many mistakes they make. Agencies like ours, committed to delivering aid based on need – not politics – and delivering high-quality responses, play a critical role in emergencies. But we pay a high price for our independence, neutrality and impartiality, and without ICR, our survival is still at stake.
  • It allows staff to take care of themselves and their families. It is difficult to describe the stress of our daily life. We work long hours, putting aside the needs of our families. When grant budgets are insufficient, we spend our own money to fill the gaps. We work under such pressure that we inadvertently injure ourselves. (“It’s your fault the project is late!”) All of this takes a toll on our mental and physical health, but without ICR we are chronically – often extremely – understaffed and overworked. .
  • It is an investment in sustainability. Achieving sustainability means investing time and money in creating stable funding, building a staff that is both well-trained and well-paid, and continuous learning and capacity building. These are just a few examples of what the ICR makes possible.
  • This allows local leaders to truly lead. The pressure to assign our staff all the time to narrowly targeted grants prevents local leaders from growing professionally and building our organizations’ influence and networks. Participate in forums, engage in advocacy, work on localization, be part of humanitarian country teams and make our voices heard.
  • It represents trust. We know how to spend money wisely and we don’t need anyone to tell us how important it is to keep our costs down while providing help to those in need.

A BADGE OF HONOR

Some funders refuse to grant us an ICR and also, through strict budget guidelines and monitoring, effectively cut off any further possibility of charging our indirect costs. What are they thinking? Do they imagine that the indirect costs are not real, or that they somehow represent corruption? Do they think projects will go better if we close our offices and do our work from public benches, using paper and pencil? Or are they just reluctant to share and refuse to see the consequences?

In Iraq, Oxfam has proven to be an ally on this issue. They strategized with us on how to qualify for the ICR; they recently negotiated for 7% ICR on a large grant given to us by a western government-funded agency; and in the grants they give us, they build flexibility into the budgets that allows us to allocate indirect costs. Yet, although Oxfam encourages its affiliates around the world to share the ICR with local partners, it does not require it. We hope and trust that they will continue to move forward on this issue, both in their advocacy work and through their own example, to provide leadership on CI around the world.

The ICR is not just an administrative complement. It represents and enables much of what we all care about in this work. I look forward to the day when INGOs and other donors generously share the RCI and wear it as a badge of honor. When they proudly say, “we care about equity, strong partnerships, aid effectiveness, sustainability, impartiality, trust, women’s rights and well-being and fellow workers, local leadership, healthy organizations and waste reduction, so OF COURSE we provide local organizations with the KPI they need.

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