By Jim Simpson, CPA and director, Financial Technologies & Management |

Last year, the Nonprofit Finance Fund in its State of the Nonprofit Sector reported that only seven percent of nonprofits received full project costs from foundations.

Let’s make sure we have the same definition for defining full costs because it is not just expenses. Using the following formula helps to define what denotes full costs: day-to-day operating expenses + reserves + fixed asset additions + debt reduction.

Nonprofits that recover full costs prevent financial crises and interrupted services and enable leaders to stay focused on mission and related outcomes.

Many nonprofit organizations don’t know their full costs and settle for less recovery than full costs.