This study by OTT explores the critical role of adequately calculating and funding indirect costs for the sustainability and operational efficiency of think tanks.
It highlights the diverse definitions and approaches to indirect costs among various funders, such as the Ford Foundation, Bill and Melinda Gates Foundation, and Hewlett Foundation, and the resulting misalignment with think tanks’ actual needs. The document highlights that think tanks, especially smaller ones, face higher indirect cost rates and funder-imposed caps often do not reflect the real costs, leading to financial strain and deviation from their primary missions.
Key findings include the variability in funders’ indirect cost rates, ranging from 7% to 29%, and the significant gap between these rates and the actual indirect costs incurred by think tanks, which can range from 18% to 51%. This discrepancy perpetuates a cycle of underfunding and forces think tanks to allocate resources away from their core missions towards securing additional funding.
The study advocates for a change in narrative around indirect costs, urging for more dialogue, understanding, and flexibility from funders, and highlights the importance of operational efficiency and multi-year funding. It concludes with a call for more transparency and collaboration between funders and think tanks to ensure mutual understanding and support for sustainable think tank operations.
The publication invites further dialogue on this issue and seeks additional data and perspectives from both funders and think tanks to enrich the discourse and develop practical recommendations for enhancing think tank sustainability and effectiveness.