Own Your Own Costs: New OMB guidance takes effect

Through our active membership in the National Council of Nonprofits, the West Virginia Nonprofit Association has helped bring about a major change in Federal law that promises to help nonprofits – both by promoting the sustainability of nonprofit grantees and by ending the need for grantmakers to subsidize governments that have systematically underfunded the work nonprofits perform on the government’s behalf.

This major change is discussed in the following three recent articles regarding the new OMB Uniform Guidance, which requires governments that hire nonprofits (for example, to deliver human services such as food and shelter) to pay their indirect costs (sometimes called “overhead” or administrative costs) if the grants and contracts are funded in whole or in part by the federal government. In the past, those real costs have not always been paid, forcing the financial burden onto nonprofits and private grantmakers. As these articles demonstrate, the policy change has enormous significance for frontline nonprofits and the foundations that support them.

• “The Word for Today is “Overhead”: OMB Uniform Guidance Takes Effect,” by Rick Cohen, National Correspondent (Nonprofit Quarterly,Jan. 13, 2015). This is the best article we’ve seen that explains the significance of new grantmaking rules affecting governments at all levels – local, state, and federal. Cohen, an informed journalist who used to run a nonprofit, makes the point that governments receiving federal money are likely to avoid following the new requirement to pay nonprofits for their indirect costs without training and advocacy. He concludes by making the call for the work that the West Virginia Nonprofit Association was formed to perform: “sector-wide advocacy.”
• “Nonprofits Win Key Victory in Overhead Battles With Government,” by Tim Delaney, (Chronicle of Philanthropy, Jan. 13, 2015). Our colleague Tim Delaney, CEO of the National Council of Nonprofits, makes the case that the new grantmaking rules “can reduce the hidden subsidies that grant makers are effectively forced to pay when governments fail to reimburse nonprofits for the costs they incur working on government grants and contracts.” Delaney urges grantmakers to spread the word to their grantees and fund “sustained campaigns in every state so organizations become aware of their new responsibilities and rights and then advocate for system-wide changes so state and local laws comply with the federal requirements.”
• “New Regulations Spotlight Nonprofit Overhead, by Henry Berman, CEO of Exponent Philanthropy (formerly known as Association of Small Foundations) (PhilanthroFiles, Jan. 14, 2015). Berman calls on his fellow grantmakers to see “the new rules as a catalyst for embracing overhead funding,” ”incorporate overhead funding into our grantmaking,” and accept the “reality of overhead: Recognize it. Understand it. Fund it.”

Each of the articles acknowledges that the progress for nonprofits in the new federal grantmaking rules would not have occurred without the ongoing advocacy work of the network of state associations of nonprofits that make up the National Council of Nonprofits. And of course, the engagement of The West Virginia Nonprofit Association would not have been possible without the generous support of our members, our friends at Philanthropy West Virginia, and of the Claude Worthington Benedum Foundation. Thank you.

The OMB Uniform Guidance is now the law of the land, but turning its promise of better treatment of charitable nonprofits into reality will take even more work going forward. Nonprofits in particular will need to take action to own their own costs, learn their rights under the new rules, and protect those rights through advocacy, both on their own behalf with each grant and contract, as well as by working with the West Virginia Nonprofit Association to engage with the broader nonprofit community.

Consider helping advance the progress described in the recent articles by alerting fellow nonprofits to their rights under the new federal grantmaking rules and encourage them to take advantage of those rights through educational programming and advocacy. Here are three items we feel are most helpful in getting nonprofits the tools they need to get started:

• “The Word for Today is “Overhead”: OMB Uniform Guidance Takes Effect,” by Rick Cohen, National Correspondent (Nonprofit Quarterly,Jan. 13, 2015).
• Know Your Rights … and How to Protect Them, an overview of the rights nonprofits now enjoy (when governments fully comply) and answers/solutions to anticipated challenges that may arise.
• Uniform Guidance Implementation Report Form, designed to generate information from nonprofits in the field about compliance with the Uniform Guidance – whether positive or negative – that will help in monitoring compliance, compiling data and observing patterns that can be addressed at a government-wide level, as well as identifying good processes and solutions that can be used elsewhere to help nonprofits across the country meet their missions.

The West Virginia Nonprofit Association is grateful to its members and partners, and we look forward to working together to ensure that these promises for change transform into reality for West Virginia’s nonprofits.