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Government Doesn’t Pay

By Mark Hrywna - May 30, 2014

Despite the improving economy since 2009, it’s the same story for nonprofits with government contracts and grants: Governments pay organizations late, do not pay the full cost and impose arbitrary caps on reimbursement and indirect costs.

“Government-nonprofit contracting problems first documented in the Urban Institute’s 2010 landmark study were not an anomaly of the Great Recession,” according to the National Council of Nonprofits, which recently released its own data proposing solutions to address contracting problems. The 56-page report, Toward Common Sense Contracting: What Taxpayers Deserve, was a companion of sorts to The Urban Institute’s release of state profiles of its Nonprofit-Government Contracts and Grants: Findings from the 2013 National Survey.

The National Council suggested more than a dozen “common sense solutions,” including prompt payment and contracting laws; reducing redundancy in the application process through an electronic repository or “document vault;” standardized monitoring and reporting and language, and government-nonprofit task forces.

The Urban Institute’s 192-page report breaks out by state the data presented nationally earlier this year. “These state profiles and state rankings can help nonprofits assess their experiences with government contracts and grants and compare their state with other states,” according to the report. Nonprofit-government contracts and grants reached approximately 56,000 nonprofits and totaled $137 billion, and the effects of the recession were still evident.

Problems reported with government contracts and grants in 2009 are not confined to human services nonprofits, although problems are less pronounced for grants than contracts.

Nonprofits in 2012 were still dealing with many of the same issues as in 2009:

  • Nationally, one in five nonprofits reported that the experience with government contracts and grants was worse in 2012 than in previous years, led by 44 percent in Georgia and 40 percent in Utah; the lowest reported was 10 percent in both Massachusetts and Colorado.
  • More than half of nonprofit officials (54 percent) reported a problem with government not paying the full cost of contracted services. The biggest problems were in New Jersey (75 percent) and Rhode Island (74 percent), while the lows were in Colorado (28 percent) and Alaska (31 percent).
  • Officials at almost three in four organizations reported a problem with the complexity of or time required by the government application processes for contracts and grants. The high was reported in Rhode Island (87 percent) while the low was in Mississippi (49 percent).
  • Approximately 44 percent of nonprofits reported a problem with changes to government contracts or grants midstream, once again led by Rhode Island (67 percent) while the fewest problems were reported in Delaware (24 percent) and Washington, D.C. (23 percent).
  • Rhode Island again led the nation (81 percent) when it came to nonprofits reporting problems with governments making late payments on contracts and grants, compared with 45 percent nationally. New Hampshire reported the lowest percentage (14 percent).
  • Precisely half of nonprofits nationwide reported their government contracts and grants limit program administrative or overhead costs. The highest percentage was found in Hawaii (62 percent) while the lowest was Massachusetts (31 percent).
  • Some 53 percent nationwide reported their government contracts and grants limit general administrative or overhead costs, with Hawaii again the highest (72 percent) but this time Nebraska was lowest (33 percent).
  • More than a quarter of organizations (26 percent) reported that government contracts required them to share costs, led by North Carolina (48 percent) and Georgia (47 percent), compared with the fewest in Louisiana (5 percent) and Alaska (9 percent). NPT
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