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Government-Nonprofit Contracting Reform
The Office of Management and Budget (OMB) Uniform Guidance is the biggest change in government grant guidelines in over 30 years. The rules require that federal grants and contracts—including those that pass through state and local governments—include a “reasonable amount” for indirect costs. A “reasonable amount”, according to the guidance, is at least 10 percent of direct costs and, in some cases, nonprofits can negotiate a higher amount.
With the nonprofit sector earning nearly 33 percent of its revenue from government grants and contracts, this new requirement is a game changer. Nina Stack wrote a piece discussing these changes for the Geraldine R. Dodge Foundation blog:
Excerpt from A Social Sector Game Changer:
“Nonprofits that are hired by the government to perform a service and paid through federal dollars are to use at least 10 percent of the direct costs of their grant or contract to pay indirect costs. BOOM! Just as John Madden would say. A mandate for funding that can be used for core operations. Never before has there been such a clear directive and recognition from the federal government.”
To see this change however, industry-wide advocacy is essential to ensure that all nonprofits are aware of this monumental shift and that governments follow the new requirement. Without advocacy, it is very possible that, despite the requirement to add an additional 10 percent or more to pay for indirect costs, legislative bodies at the federal, state and city levels may further reduce project budgets to keep them flat. And this could mean that in order to maintain the same level of services, nonprofits will seek additional resources from the philanthropic sector to make up the difference. Therefore it is imperative that philanthropy remains active in the conversation between nonprofits and government to continue to maintain a balance in the critical services provided by all.
What this means for nonprofits:
- Government contracts are now required to reimburse nonprofits for reasonable indirect costs (administrative, “overhead”) as part of their service-delivery agreement.
- The OMB Uniform Guidance is only a promise of better treatment—nonprofits should know the rules and protect themselves.
What this means for foundations:
- Advocacy is needed! To ensure government partners do not underfund nonprofits due to the new rules, foundations need to help spread awareness and enforce the regulations.
In New Jersey, the New Jersey Center for Nonprofits has been teeing up advocacy, information sessions, and other assistance to help non-profits take advantage of the new rules. For questions and information about the new guidelines, please visit the resources below.
Resources
Federal Register: OMB Uniform Guidance
This PowerPoint presentation developed by Southeastern Council of Foundations provides an excellent overview to the pros and cons of different philanthropic structures for Corporate entities, including Corporate Foundations, Corporate Giving Programs, and working through Community Foundations.
Sample board committee descriptions, including roles and responsibilities of committee members
Strategic asset allocation is arguably one of the most important, yet least advanced, aspects of investing. The Investment Strategy Group (ISG) in the Goldman Sachs Investment Management Division has developed a new approach to strategic asset allocation, which leverages the idea that long-term investment returns derive from multiple distinct sources called “return-generating factors.” This multi-factor approach is designed to help investors better understand the key sources of long-term return across asset classes and to increase the precision of long-term risk and return estimates. It also provides investors with a new way to think about portfolio diversification, allowing them to focus not only on diversification across asset classes but also
on diversification across the underlying sources of return.
This case study of the Council of Michigan Foundations' Peer Action Learning Network (PALN) is one of six examined in a report from New York University's Wagner Research Center for Leadership in Action, commissioned by Grantmakers for Effective Organizations. The PALN case study, along with the other five, explores the power of learning communities to build connections and knowledge to increase organizations’ community impact. It explains ways grantmakers can strategically support these efforts as well as key elements for designing learning communities, executing for success and extending the learning.