Building on the Public Policy Momentum – Sector Leadership SpotJanuary 30, 2020
By David L. Thompson, National Council of Nonprofits
2019 was a pretty good year from the perspective of nonprofit advocacy and public policy. Can the positive momentum continue into 2020? Based on what’s already happened, the answer is an emphatic: Yes. Especially for human service providers. (Spoiler alert: forward progress is being made in getting governments to pay nonprofit grantees the true costs for performing services, as detailed in a recent Reframing Human Services newsletter.)
This past year was a net positive on public policy issues for all charitable nonprofits, and particularly for those in the human service subsector. Congress increased funding for many domestic programs through which nonprofits provide services and repealed the tax on nonprofit transportation benefits, while also resisting calls to weaken the law that protects and promotes nonprofit nonpartisanship (the Johnson Amendment). While the regulatory front produced wins and losses, courts mostly blocked the most onerous rules and executive orders that would curb access to programs designed to build well-being and community support. Similar progress was made in the states, where the worst ideas were blocked through effective advocacy and there were some clear-cut victories, such as the creation of new tax incentives to promote charitable giving to support important work in communities.
Given that record of successes, the fact that Congress is mired in the impeachment drama, and the reality that the 2020 elections are on the minds of most politicians, some people were pondering whether anything of significance could happen in public policy this year. There ended up not being much time to ponder the question. Barely three weeks into the New Year, a policy trend at the center of human services’ well-being launched forth at the federal, state, and local levels.
That emerging trend is the concerted effort across the country to undo decades of flawed government grantmaking practices and start paying nonprofits more of the costs of what it actually takes to provide services in communities on behalf of governments. In short, policymakers are starting to agree that governments must reimburse nonprofits for their indirect costs.
The launch to national prominence of the trend to pay indirect costs came on January 22 with the publication of proposed revisions to the Uniform Guidance of the Office of Management and Budget (OMB). These are the rules that govern federal grants to nonprofits, states, local governments, and Indian tribes. Since those rules were posted in 2014, various granting agencies have misinterpreted the OMB Uniform Guidance in ways that deny nonprofits their rights to be reimbursed for their costs. The proposed rules, if adopted, take away the wiggle room that states and local governments have exploited and clarify that nonprofits are vital partners in building well-being in communities.
Most notably, the proposed revisions seek to clarify that all granting agencies paying nonprofits with federal funds must pay a nonprofit using the nonprofit’s existing negotiated indirect cost rate. If the nonprofit does not have a negotiated rate, then the nonprofit controls the option either to negotiate its indirect cost rate or be paid a flat rate of 10 percent. This clarification of the rule would strengthen the guarantee that grantees receive reimbursement of indirect costs of at least 10 percent of their modified total direct costs (de minimis rate).
The likely revisions to the OMB Uniform Guidance represent the federal response to the problem of underpaying nonprofits, but it’s not the only response. Already this year, we’ve seen legislation introduced in Massachusetts that would eliminate the pay disparity between state workers and human service workers at nonprofits doing similar work under state contracts by 2025. It also calls for reports on the current pay disparity and recommendations for new strategies to recruit and retain human services workers at community-based nonprofits.
We understand that lawmakers are drafting bills to improve government-nonprofit grantmaking practices, perhaps including mandating payment of indirect costs, in California, Delaware, Nevada, New Jersey, Ohio, and Rhode Island. Human service providers in those states should reach out to their state associations of nonprofits and/or subsector associations to get in on the advocacy actions there.
Let’s close with some exciting news here in Washington, DC, home of both the National Human Services Assembly and the National Council of Nonprofits. On January 28, a committee of the DC Council held a hearing on legislation requiring payment of nonprofit indirect costs that can only be described as remarkable.
The hearing was a true testament to the power of collective action by human service providers. The witnesses included two National Assembly board members (from the National Council of Nonprofits and Latin American Youth Center), representatives of two state associations of nonprofits (from DC and Maryland), more than a dozen CEOs and board members from local nonprofits, and the Director of the Illinois grants office, who is nationally recognized for leading efforts to fix broken contracting systems. Witness after witness spoke to the common challenge: multiple government grants that set wildly inconsistent reimbursement rates for work performed on governments’ behalf, causing administrative nightmares, costs, and frustration – for governments and nonprofits alike. See the recording of the hearing.
Since this article is all about building momentum, I’ll close with some inspiring words from DC Council committee Chair Robert White, who showed that our voices have been heard: “This bill is about ensuring that we treat fairly the nonprofit organizations we work with every day. It’s about paying them the full cost of the services we ask them to provide.” Chair White acknowledged the injustice of knowingly underfunding grants to nonprofits that likely will perform the work anyway because they are committed to their missions. He stated, “The District government shouldn’t force nonprofits to choose between their mission and their survival.”
As we all know, Americans need a healthy nonprofit sector to play its vital role in ensuring that everyone has the opportunity to reach their full potential and contribute to their communities. 2020 is looking good for efforts to improve nonprofit sustainability.