The Latest Lowdown on Government Money

The state government is refusing to pay for the true cost of providing services. Most nonprofit executive directors are tremendously afraid to speak up about this. They're afraid that if you speak up and say there's a problem, it will mean you won't get the contract again. And very often they are right.

So what's the good news?
Many nonprofits that get into government contracting do not know how it works. They get the runaround and don't think that they can speak up. But in 22 U.S. states, nonprofit associations are putting government contracting reform on their agendas. They want to act as a buffer between the nonprofits and the states they contract with, so the nonprofits are shielded from the wrath of these government entities and not forced to lose their contracts.

Recently a new Federal Office of Management and Budget (OMB) Guidance — Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards — was passed at the federal level. Bottom line? It states that local government, including towns, counties and states, have to pay indirect costs of providing services when nonprofits contract or get grants with them. The default is 10 percent of the indirect costs if you don't negotiate.

But think higher! Do you know what it really costs to provide services? Negotiate that. This means instead of the nonprofit saying it will cost $110 per day to take care of a person and the government agreeing to pay $90 of that $110, the government will have to pay at least a 10 percent overhead cost.

Unfortunately this does not mean that more money is allocated for nonprofit contracts. So if a government contract was paying for 100 beds to shelter the homeless, if it is forced to add a 10 percent overhead cost onto the contract, it may just say, "Well, we'll pay for 90 beds instead."