Government Contracts & Grants

An increasing number of 501(c)(3) organizations with federal, state, and local contracts are reporting that their government partners are failing to make payments for services performed under contracts, forcing the nonprofits to make painful cuts to programs, services and staff. Many government agencies are withholding reimbursements, reneging on agreements altogether, or imposing other burdens that harm nonprofits. Making matters worse, many government contracts simply don’t cover the full cost of providing services. Among other recent developments:

• The Government Accountability Office (GAO) reported that federal grants often fail to provide nonprofits with enough funds to cover the full costs associated with delivering services, making it harder for nonprofits “to continue to effectively partner with the federal government to provide services to vulnerable populations.” A summary and excerpts of the report are available.
• President Obama’s Advisory Council on Faith-Based and Neighborhood Partnerships called for simpler reporting requirements and prompt payments to nonprofits, saying “state and local municipalities are not paying current or recently ended contracts…resulting in many nonprofits being owed substantial funds for services provided.”
• New York State Comptroller Thomas DiNapoli recommended several key changes to state contracting practices and found that late payments, largely caused by late approval of contracts, are forcing nonprofits “into situations where it is difficult to make payroll, pay bills to maintain offices and continue to provide services effectively.” In the report, the comptroller said nonprofit contracts with government agencies were approved late 82% of the time in 2009, up from 63% in 2008.
• The National Council of Nonprofits released a special report, State Budget Crises: Ripping the Safety Net Held by Nonprofits, documenting how states are delaying contract payments to their nonprofit partners, slashing funds for essential programs, and imposing new fees.
• The Urban Institute’s Center on Nonprofits and Philanthropy and the National Council of Nonprofits are conducting the first comprehensive national survey of nonprofits to assess the severity of the problem. Through this survey and related research, the National Council is working to identify problematic contracting practices, analyze policy differences that impact payment issues, and recommend changes to strengthen the partnership between nonprofits and government.

What Nonprofits Can Do

• Tell us your story! Nonprofits experiencing problems with government contracts or grants are encouraged to reach out to the National Council or call us directly at (202) 962-0322. We invite organizations to share your experiences - not only negative stories about problems, but also any stories that demonstrate success in solving them. As the nation’s largest network of small and midsized nonprofits with over 24,000 member organizations, the National Council can raise awareness and impact debates around the country through reports, letters and other advocacy efforts.
• Find your state association and get involved to address these and other developing issues in your state. Individual nonprofit organizations can amplify their voices by working together through their state nonprofit associations. State associations in Arizona, Connecticut, Massachusetts and many other states have successfully altered contracting policies via new legislation, guidelines and regulation.
• Take advantage of the August Recess to introduce, impress, and influence your Senators and Representatives.