Positive Signs For Reimbursement Of Overhead Costs

You may remember back in January that I wrote about the new rules promulgated by Office of Management and Budget (OMB) requiring that any entity receiving federal funds much cover at least 10% of a non-profit’s overhead costs.

Don’t worry, its okay if you don’t remember. But this is relatively important and bears repeating.

One of the concerns at the time was that state and local governments and other funders might pressure non-profits with whom they contract or provide grants to waive a their right to receive overhead costs. The OMB rules prohibit this, but if a non-profit isn’t aware of the rules or are afraid to advocate for themselves, the problem may continue.

Given this context, it was a positive sign when the L.A. County Board of Supervisors voted to adopt the OMB guidelines and to write a letter to the state government to do the same.

It may not seem significant for a governing body to agree to adhere to the conditions under which federal funding was allocated, but as Non-Profit Quarterly notes there are “rob Peter to pay Paul” concerns about how funding may be manipulated.

Rules do not implement themselves without strong nonprofit monitoring and oversight—hopefully, as in this case, in partnership with government authorities. In this case, not only are the supervisors talking to state officials, but they will also be developing an implementation strategy in consultation with Los Angeles nonprofits, which we presume, based on what we have seen as policy statements from CalNonprofits, ought to address how to ensure that higher indirect cost reimbursements do not occur at the cost of lessening service delivery.

As I had noted in my earlier post, the National Council of Non Profits created a guide to educate organizations about the rules and provide responses to assertions from funding entities that the rules don’t apply.

One thing I had mentioned was that arts organizations should note that these rules likely apply to the funding you receive through your state or regional arts organization:

One- it doesn’t matter whether it is called a contract or grant or any other term, the rules are based on the substance of the transaction.

Two – Sub-recipient non-profits who are required to acknowledge part of the funding is received from the federal government are covered under these rules.