The Latest Lowdown on Government Money

If your contract negotiations come down to this, it would mean that your nonprofit will serve fewer people, but perhaps you can provide better services to the people you DO serve.

Direct vs. indirect costs
OMB has provided a bit of flexibility for determining whether a cost is direct or indirect. For example, traditionally, a receptionist would almost automatically be considered indirect. However, now, if that person does things that directly relate to the program, an appropriate portion of costs can be considered direct.

So, if the receptionist spends 10 percent of his or her time signing people up for the program when they call the organization, then 10 percent of that person's costs can be considered direct.

Or, usually the costs for utilities is indirect, but if you can clearly identify higher costs due to a program, that increased amount can be considered direct. Say you start using a pool for some sort of therapy or recreation and as a result there is an increase in your water costs as well as electric bill to heat the pool — these increases can be charged as direct costs. This one is a bit tricky because the organization will have to be able to prove that it is in fact the program that caused the increase.

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As of this writing in October, OMB recently had issued its second set of FAQs. It stated that it is the state pass-through's choice whether or not it is willing to negotiate a rate higher than 10 percent for nonprofits that have never had an indirect cost rate. Essentially, this means there will be little if any negotiations. (Why would a state voluntarily pay a higher amount?) The National Council of Nonprofits is challenging this with OMB, as that is not what the Uniform Guidance indicates.