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National Council of Nonprofits



OVERTIME and OVERHEAD Rules Changing Soon

Action Requested by Nonprofits with Government Grants and Contracts


Policy changes coming out of Washington, DC, this spring and summer have the potential to affect the costs and operations of nonprofit organizations that have grants and contracts to provide services on behalf of governments at all levels. The policy changes involve the expected publication of the Labor Department’s revised overtime regulations and potential revisions to the OMB Uniform Guidance affecting how nonprofits spend grant funds.


This Special Edition of Nonprofit Advocacy Matters is dedicated to raising awareness about these two federal regulatory issues and seeking insights from front-line nonprofits in a National Survey designed to gather data that can be used to support better policies and solutions to potential adverse consequences of the pending two sets of policy changes.



The Issues In Play


OVERTIME Regulations

The U.S. Department of Labor is expected soon to put in place new overtime regulations that will require most employers, including nonprofits, to pay overtime to all employees earning less than approximately $50,000. (The current threshold is $23,660.) The new salary level threshold will apply regardless of whether individual employees are considered salaried (exempt) or hourly (nonexempt). The new rules will likely go into effect sometime this summer or fall. Employers will have various options to comply with the change in overtime rules, ranging from increasing exempt employees’ salaries to the new level, converting them to hourly employees and paying overtime, or making other changes to benefits or operations.


Nonprofits with government grants and contracts will be put in the position of having to comply with significant new federal requirements imposing new costs that were not known when those grants and contracts were signed. Unlike businesses that can raise prices, or governments that can raise taxes or curtail public services, nonprofits with government grants and contracts may find themselves contractually bound to maintain services at increased costs that may not be expressly covered by existing written agreements. What impact do you anticipate the new overtime regulations will have on the ability of your organization to perform under its existing government grants and contracts? Do your government agreements contain a way to reopen existing government grants and contracts to address such unanticipated changes in the law? Through the National Survey, nonprofits have the opportunity to share concerns, approaches, and solutions.


OVERHEAD and the OMB Uniform Guidance

The grants reforms of the federal Office of Management and Budget, expressed in the OMB Uniform Guidance, include new procurement procedures. The procurement reforms dictate the steps that states, tribes, localities, and nonprofits must take when using federal grant funds to purchase goods and services (e.g., buying printers or laptops). Starting in 2017, the Uniform Guidance requires that whenever a nonprofit or other entity uses federal funds that passed through any level (local, state, tribal, or nonprofit) to make an aggregate purchase over $3,500, then that entity will be required to obtain and document multiple price quotes before making a purchase


Nonprofits that already have internal procurement systems in place may have to update them as a result of this requirement. Nonprofits currently without a formal procurement process will need to adopt one, adjust their purchasing practices, and carefully document their adherence to the new policy.


The good news is that the Office of Management and Budget is open to considering whether the $3,500 threshold for aggregate purchase from individual suppliers should be adjusted and has requested that nonprofits provide information about current nonprofit policies and practices. Does your organization have an internal procurement policy that includes an amount at which price quotes or cost comparisons must be completed before making a purchase? Your responses to the National Survey can influence whether and how the federal regulators take action to lessen bureaucratic burdens.



WHY take the survey?

To improve policies and/or develop solutions to avoid potential adverse impacts, nonprofits need to produce data. Greater input from a broad cross-section of the nonprofit community will produce better policies and solutions.


WHICH organizations?

Nonprofits with grants and contracts with governments at any level (local, state, tribal, federal).


WHO should fill out the survey?

Individuals with knowledge of your organization’s finances will best be able to compete the survey.


HOW will responses be used?

Survey responses from individual nonprofits will be kept confidential. The responses will only be reported in the aggregate, or used anonymously to illustrate unique challenges that nonprofits with government grants and contracts may experience due to the two federal policies. In these ways, the responses will be used to develop policy alternatives or operational solutions and best practices.


WHEN are responses due?

By Monday, May 23, 2016. And the sooner responses come in, the sooner solutions can start to take shape. So please complete the survey as soon as possible.