Council of Nonprofits in the News

Government Contracting and Payment Practices: Lingering Problems for Nonprofits

December 6, 2013


When nonprofits find themselves competing for government grants and contracts, sometimes facing off against for-profit bidders, on face value, the playing field looks equal, not favoring one or the other. However, another of the widely known secrets that Delaney shared in the panel discussion is that government grant and contract procedures are increasingly “rigged” to favor for-profits. He reported that he has received calls from nonprofits saying that they are no longer bidding on government grants and contracts because of this. State agency administrators will tell nonprofits that they must have levels of working capital that typically are only available to larger nonprofits or to for-profits. When states make late payments, they will often pay for-profits the money owed plus accrued interest. When governments strike deals with for-profit vendors, they don’t, as Delaney noted, ask Lockheed and other big corporate contractors to engage in cost sharing.

Given the similarity of the 2012 findings to the 2009 statistics, the National Council of Nonprofits shifted the discussion to focus on solutions and distributed a paper outlining a dozen “common sense solutions to government-nonprofit contracting problems”:

  • Government-nonprofit task forces to develop and implement recommendations for reform (citing examples from Connecticut, Texas, Illinois, New Jersey, and New York)
  • Appointment of nonprofit liaisons (Connecticut and, as represented by Barrett, New York)
  • Payment of the full costs of services, including upgrading reimbursement for indirect costs incurred
  • Clear and consistent definitions of administrative costs, indirect costs, and overheads
  • Repeal of arbitrary caps on indirect costs
  • Enactment and implementation of prompt payment laws
  • Similar enactment and implementation of prompt contracting laws (citing New York State’s as the nation’s best)
  • Public disclosure of government accountability (scrutiny of the contracting and payment performance of state agencies)
  • Standardized language for contract and grant documents
  • Institutionalization of mechanisms for government to regularly obtain input from nonprofits on government contracting and grant processes and procedures
  • Creation of document “vaults” for all nonprofit documents relevant to bids for contracts and grants (like New York’s, as well as test efforts in Illinois and Maryland)
  • Standardization of monitoring and reporting procedures across multiple government agencies

These are all logical, administratively feasible responses to the problems outlined in the Urban Institute report. However, they require advocacy from the nonprofit sector, monitoring and reporting on government policies and procedures and taking them to task when necessary. For example, the upcoming shift of contracting in Kansas for services to the developmentally disabled from networks of nonprofit providers to three large, national for-profit health insurers merits close attention, but the same kind of scrutiny should be applied to smaller shifts of state policies that put nonprofits at a disadvantage against better capitalized for-profits. Moreover, nonprofits will have to come to the table with governmental agencies, especially state governments, to develop not only solutions to grant and contract procedures, but to grant and contract financing. Otherwise, nonprofits and governments will find themselves fixing and honing a system that leaves service providers with less support to address critical social problems, leaving more and more people outside the government-nonprofit safety net.

Nonprofit Government Contractors Still Face Late Payments, Says New Study

December 5, 2013

Officials at the National Council of Nonprofits are also pushing for states to regularly post the average length of their delays in paying contracts.

“Everyone says nonprofits need to be accountable,” says Tim Delaney, the association’s president. “Well, why not government?”

In some states, continuing fiscal woes overshadow years of work to improve the contracting process. For the past 18 months, Illinois has agreed to make expedited payments to charities with serious financial problems. The state also has a document vault, which saved 1,400 nonprofit organizations a total of $40,000 in paper, printing, and administrative costs over three months.

But the state’s unfunded pension liabilities—now more than $100-billion—consume a big share of the budget, leaving little cash to pay charities for services the state has hired them to provide. Illinois legislators this week approved an overhaul of the pension system, a move that nonprofit advocates have long sought, but the effort will take 30 years so the state’s budget is expected to remain tight.

Donors Forum“Nonprofits and government are trying to work together to find some solutions to the unpaid-payments issue,” says Delia Coleman, director of public policy at the Donors Forum, a state association of grant makers and charities. “But a large part of that issue is—to put it very bluntly—the availability of cash.”

Report: Government Continues To Stiff Nonprofits

December 5, 2013

Nonprofits were owed more than $200,000, on average, for services provided to state governments during 2012 and nearly a third of nonprofits reported receiving late payments from governments, according to a new survey.

Nearly half of the nonprofits affected reported that late payments were creating problems for their organizations, according to the results of the “Nonprofit-Government Contracts and Grants: Findings of the 2013 Survey,” a collaborative project of The Urban Institute’s Center on Nonprofit and Philanthropy and the National Council of Nonprofits.

Government Giving Nonprofits Angst

November 7, 2013

“Every dollar that government cuts from contracted services is a dollar that charities must raise elsewhere,” said the National Council of Nonprofits, detailing the strain that sequestration put on nonprofits. “When cutting funding without eliminating needs, politicians are effectively walking into foundation boardrooms to divert foundation giving away from the arts, civil rights, the environment and other causes that the foundations support and reallocate those private dollars to fund public obligations for basic human services that the politicians abandoned. Philanthropy alone cannot fill the vast and growing gaps.”

That same year, Hawaii capped itemized deductions, including those for charitable donations, for higher-income families. The tax overhaul cost local charities about $50 million in donations, the National Council of Nonprofits has estimated. After an outcry, legislators lifted the cap.

But New York and other states have imposed or considered similar restrictions. As a result, nonprofit experts said, there will simply be lower revenue and higher demand for years to come — even as the economy comes back.

Guidelines Are Now Available For ACA’s Impact On Nonprofits

November 1, 2013

The big change for those organizations with 25 or fewer employees is Small Business Health Care Tax Credits. Currently, small organizations that pay average annual wages less than $50,000, and that contribute 50 percent or more toward employees’ self-only health insurance premiums may qualify for a small business tax credit of up to 35 percent to help offset the costs of insurance. In 2014, this tax credit goes up to 50 percent and will be available to qualified small employers that participate in the SHOP program.

As Chandler explained, this was a provision nonprofits were lobbying for when health care reform was first being discussed. “This was a tremendous victory for the nonprofit community but there hasn’t been much messaging about it,” she said. Many organizations are unaware of how the tax credit worked and if they were even eligible for it.

There are a multitude of reasons why there has been confusion, but Chandler believes it has to do with the way the government is wording their message. “We noticed that the official messaging about the Affordable Care Act was all about how health care reform affects individuals and ‘businesses’ — when in fact any employer, whether nonprofit or for-profit, is going to be affected,” explained Chandler. “After [NCN] pointed this out, to their credit the IRS, and the Small Business Administration, and even HHS/Office of Faith Based and Community Partnerships made changes in the language used on some web pages to refer to ‘nonprofits’ in addition to businesses.”

Washington Post Diversions Piece: What it Really Means

October 31, 2013

In Tim Delaney’s view, the Washington Post leaves readers with “the misimpression that the nonprofit world is rife with ‘financial skullduggery.’” Critics might suggest that Delaney is expected to say that, because he runs the National Council of Nonprofits, a trade association—actually a national trade association of state nonprofit associations—that automatically defends and bolsters nonprofits against critical press coverage. But he makes an important point. Nonprofits file publicly accessible Form 990s, available and searchable at GuideStar, the same source that the Washington Post used for its research. Try to find comparable information about corporate fraud and diversions. It is immensely difficult to access for publicly traded companies, and just about impossible for privately owned corporations.

Legislators Need to Get the Message That Government Shutdowns Hurt Nonprofits

October 21, 2013

In an insightful post to the Philantopic blog early on in the shutdown, Tim Delaney, President and CEO of the National Council of Nonprofits, a leading national network of nonprofits, wrote about the impact the shutdown would likely have on charities:

Community and human needs do not stop just because the federal government has stopped functioning. Indeed, the shutdown has actually increased the needs of millions of Americans. That's why when politicians shut the doors of government, charitable nonprofits struggle even more than usual to meet the needs of their constituents.

It's worth noting a lot of the federal funding for nonprofits is funneled through the states. The state of Illinois already has the poorest record in the country of paying nonprofits on time for contracted work, so charities here are particularly vulnerable to a cutoff of federal dollars.

Donors ForumEarlier this week we took a snap online poll of Donors Forum's nonprofit members about how they're being affected by the shutdown. Although not scientific, we found that nearly 40 percent of our members are being negatively impacted by the shutdown. More than ten percent had furloughed or laid off staff, and an equal number had closed programs. Nearly 17 percent had scaled back programs while at the same time 13 percent were seeing an increased need for their services. All of this in a poll in which just over half of the respondents told us they receive federal funding.

VAWA and the Government Shutdown

October 18, 2013

Even now, with the government funding pipeline open again, caregivers worry that the shutdown itself will increase their caseload.

“Government shutdowns—just like arbitrary sequestration cuts—may stop funding, but they do not stop human needs,” Tim Delaney, president and CEO of the National Network of Nonprofits, wrote in an opinion piece for PhilanTopic. “Indeed, they actually increase needs.”

Syndicate content