Happy New Year!
2015 is already proving to be a significant one for nonprofits. In case you missed the big news that Michigan Nonprofit Association (MNA) announced earlier this month, governments at all levels are now required to reimburse nonprofits for the reasonable indirect costs (sometimes called “overhead” or “administrative” costs) they incur to deliver services.
As you know, entering into a contract for services with a government agency has often meant that we had to accept low limits on the amount of reimbursement for indirect costs. Essentially, government agencies were asking us to lose money in order to do the work.
A recent study by Charity Navigator says that the average American does not understand the indirect costs of the nonprofit sector. In fact, the study says that 62 percent of the people surveyed believe the typical nonprofit spends more than what is reasonable on overhead expenses such as fundraising and administration.
The new federal Office of Management and Budget Uniform Guidance rules are setting a precedent for the way that foundations and other funding sources view the indirect expenses that nonprofits incur. By instituting these new rules and paying their fair share of the costs that we incur in providing services and supports, the federal government is setting an example.
The Uniform Guidance rules now call for more costs to be directly reimbursable. They also raise the threshold for single audits to $750,000. It is estimated that this change alone will reduce the administrative costs for approximately 5,000 nonprofits across the country. Specifically it will help to ease the administrative costs and improve the efficiency and effectiveness of federal and state contract awards.
I urge you and your team to do a deep dive into what these new rules mean to your organization and your current and future contracts. You can start by registering for this free webinar presented by MNA and the National Council of Nonprofits:
Stop Losing Money: New Grant Rules You Need to Know
New OMB Uniform Guidance: Find out how new reforms can save you money
3-4 p.m. Tuesday, Feb. 24
If you receive federal funds, either directly or through pass-through funding, this webinar is a must. Are you unsure if your organization receives federal funding? Check your most recent audit.
MNA will continue to educate Michigan nonprofits, foundations, funders and other donors on our indirect costs and what they support.
We will continue to share information on the OMB rules, as well as how nonprofits can prepare for and take full advantage of the changes.
Learning your rights will help support a successful year for the good work you do throughout 2015!
Filed under: Advocacy, Financial Management, Government Contracting, Public Policy, Uncategorized | Tagged: government contracting, indirect costs, Office of Management and Budget, OMB, overhead, the overhead myth | Leave a comment »