M E M O R A N D U M TO: Southern California Grantmakers ... · M E M O R A N D U M TO: Southern California Grantmakers FROM: California Strategies DATE: June 29, 2017 SUBJECT: Report

M E M O R A N D U M

TO: Southern California Grantmakers FROM: California Strategies DATE: June 29, 2017 SUBJECT: Report on California Approach to Education and Implementation of OMB 2

CFR200

Among the challenges nonprofits face in providing high-quality service and producing strong outcomes to their work, managing the limited overhead allowed by most private and government grant and contracts is one of the toughest. Over the past several years, there have been efforts to explain how the “overhead myth” – that the best nonprofits operated with the least overhead – hampers service delivery, jeopardizes nonprofits’ sustainability and ultimately reduces the impact of public and private funding and to find collaborative solutions that will strengthen nonprofit organizations. In December 2014, the federal Office of Management & Budget released an important document related to this issue: 2 CFR 200, known as the Uniform Grants Guidance. These new grantmaking oversight rules were meant to reduce administrative and fiscal burdens on nonprofits receiving federal grants; clear up conflicting rules and regulations; streamlining auditing practices; improving data processing; and updating reporting guidelines for grant recipients. In January 2015 – immediately after release of the Uniform Grants Guidance – California Strategies began working at the request of the Weingart Foundation and the California Association of Nonprofits (CalNonprofits), as part of the Full Cost Initiative, to ensure that state and local governments in California understood the Uniform Grants Guidance and were implementing it appropriately. The funder partnership for this work included Weingart Foundation, the California Wellness Foundation and the California Community Foundation. Aligned with the work focused on government, another branch of the Full Cost Initiative worked with philanthropy to promote full-cost funding practices among private funders. This work was led by Southern California Grantmakers, Northern California Grantmakers and San Diego Grantmakers. In July 2016, Southern California Grantmakers assumed the role of project manager for several interested foundations in furthering the work with government by California Strategies to conduct its statewide education and outreach. These foundations included the Weingart Foundation, Annenberg Foundation, PIMCO Foundation, California Community Foundation, and the James Irvine Foundation. Below is an account of the collective steps the project partners took in response to the challenges and opportunities specific to California. Accompanying this report as attachments are examples of research, background and communications materials produced to support the effort. Those materials are cited in the report where they are relevant.

INITIAL PHASE: Defining the issue’s importance and assessing degree of understanding California Strategies began its work by identifying the central issues involving the Guidance, both at a national and state level. We first explored other states’ efforts (in particular New York and Illinois) and then interviewed leadership at California State agencies, the Department of Finance and Joint Legislative Audit Committee to understand the level of understanding and extent of state knowledge about the Guidance. We also researched which state agencies distributed the most federal pass-through grants and analyzed the local distribution of State and Federal grants to determine where the Guidance’s impact would be greatest (Attachment A). Additionally, California Strategies researched the non-profit and government communications that served as education outreach to determine how each sector was describing the Guidance, its regulatory changes and recommendations for compliance. Based on this initial research and discussions with Weingart Foundation and CalNonprofits, California Strategies recommended pursuing compliance of state and local governments through the Executive Branch and State Controller, an independently elected office, rather than taking a more unpredictable legislative route. To disseminate information about the Uniform Grants Guidance further, we also suggested working with California Association of Government (CSAC Institute), California League of Cities, California Department of Finance, California State Operations Agency and California Health and Human Services Agency. As an initial step, in spring of 2015 California Strategies produced a white paper to address a gap in the education effort about the Guidance: outreach to the public sector that defined the issues in language written for a public-sector audience. The white paper, “Full Cost Funding Initiative: Aligning Foundations, Government & Nonprofits for Strong Outcomes,” described the Nonprofit Overhead Project’s work (to provide context about what was happening in the nonprofit and philanthropic sector regarding the Guidance and indirect cost issues) and highlighted key information about the Guidance (Attachment B). The paper included: the Guidance’s changes to government regulations; a breakdown of government grants and contracts in the state to demonstrate the impact of government funding on nonprofits; opportunities for alignment among government, nonprofits and foundations; background on work by other states to implement the changes (based on our initial research); details about CalNonprofits’ technical assistance to the non-profit sector through the Nonprofit Overhead Project; and the work by the grantmakers’ associations to educate foundations about the importance of allowing for nonprofit overhead. To set the stage for partnerships and collaborations among the public sector, nonprofits and the philanthropic community, the white paper also outlined five goals for collaboration across all levels of California government: ensuring full compliance of the new regulations; aligning all three sectors to improve service and program outcomes; creating greater stability for nonprofits

that receive government grants; avoiding unnecessary duplication of documentation/reporting to save time and money; and developing best practices for auditing and compliance. In conjunction with the government education outreach by California Strategies, Weingart Foundation worked with Elizabeth Boris at the Urban Institute to recast a national analysis involving the nonprofit sector through a California-specific lens (Attachment C). Findings included: about two-thirds of California nonprofits report limits of 10 percent or less for program and general overhead expenses; 69 percent of nonprofits in California reported that failure of government to cover full program costs is a problem (versus just 54 percent nationally); and in general California nonprofits reported higher levels of problems and issues with government grants and contracts than their national counterparts. Weingart Foundation’s leadership enabled an enriched collaboration that Southern California Grantmakers coordinated. Weingart led one additional and extremely important effort: garnering support for implementing the Guidance’s regulations by the Los Angeles (LA) County Board of Supervisors. During the Fall of 2015, Weingart and other partners engaged with the Board of Supervisors – specifically Board Chair Hilda Solis and her office – to highlight the importance of the Guidance, its potential impact on LA County nonprofits and how providing for reasonable overhead costs can enable nonprofits to operate better and produce stronger outcomes. This engagement included holding a meeting with Supervisor Solis about the Guidance and indirect cost issues, attended by LA County nonprofits and foundations as well as by the Urban Institute’s Boris. It resulted in a motion in November by supervisors Solis and Sheila Kuehl, which was pass unanimously by the full Board, to develop recommendations on implementing the Guidance, in consultation with county nonprofits and philanthropies, and to advocate to State leaders about implementing the Guidance appropriately (Attachment D). The passage of the motion also provided an opportunity to speak about the issue more broadly through a coordinated communications strategy, which included an Op-Ed in the Los Angeles Daily News by Supervisor Solis and Weingart President and CEO Fred Ali (Attachment E); several blog posts by LA thought leaders, including at Huffington Post; and other social media outreach. Finally, this work in LA County informed the State and CSAC efforts and outreach approaches.

SUPPORTING THE STATE: Bringing clarity to statewide directives At the state level, it was critical to educate leaders at the agencies and departments most involved with grantmaking and contracts, notably the Department of Finance, the State Controller and the California State Operations Agency. During the summer and fall 2015, California Strategies, Weingart Foundation and CalNonprofits met and corresponded with leadership in all three agencies. We fostered a strong champion in the Secretary of the State Operations Agency, and she and her staff were able to refine our message further and help reinforce the Guidance’s

importance to the Department of Finance. This led to the Department issuing a Finance Letter in November to State agencies outlining the Guidance’s requirements and encouraging training for relevant employees – a broad and far-reaching way to address all of California’s State government (Attachment F). With State-level agencies largely aware of and beginning to follow the Guidance’s requirements, throughout 2016 California Strategies and other partners shifted our focus to the following statewide offices to ensure full implementation of the Guidance:

• The State Controller’s Office in its capacity as the State’s compliance agency for local governments. We worked with the State Controller to ensure that local governments were complying with the Guidance’s regulatory changes. We also served as a resource to the Controller’s Office as it reworked its aggregation of local data.

• State Administrative Manual (SAM). We worked with the Department of Finance to put indirect cost language in the government manual for all agency use in Requests for Proposals (RFP) and Requests for Qualifications (RFQ), clarifying indirect costs and ensuring federal compliance.

• Health and Human Services Agency. We offered to build a partnership with the agency to bring together a working group of county and state affiliated organizations to ensure awareness, consistency of interpretation and fuller understanding of indirect cost issues.

Cal Nonprofits added an important informational element during this time frame that focused on how nonprofits manage their overhead rates. Their survey of California nonprofit executives examined experiences with indirect costs and the Guidance; experiences with overhead included in foundation grants; how they discuss the need for overhead with funders; and how indirect cost rates influence their management decisions. Their findings provided California-specific data to bolster arguments about the need to address the indirect cost issue and the Guidance’s regulatory changes. It was first presented at a conference in November 2016 and published by the Association for Research on Nonprofits and Voluntary Action in March 2017. In addition, for the nonprofit community, CalNonprofits has held numerous webinars and in-person workshops across the state on the issue, training nonprofits on understanding and calculating the full cost of their services, as well as how to more effectively get these costs funded. By February 2017, the outreach and education effort led to another important milestone: The State Controller issued a letter to all local agencies, both county and city, to ensure they were complying with the Guidance’s requirements (Attachment G). It also provided examples of how compliance could be achieved. Through this letter and the Budget Letter from a year earlier, the vast majority of agencies overseeing public dollars received information clarifying Guidance rules. The main issues remaining to be addressed were personnel training and interpretation. In March 2017, a coalition working on the Guidance issue traveled to Sacramento for a series of meetings with key leaders. Members traveling included Chris Essel, President of Southern

California Grantmakers; Fred Ali and Vy Nguyen of Weingart Foundation; Sarah Middleton from PIMCO; Russ Gould and Joanne Kozberg from California Strategies; and Jan Masaoka of CalNonprofits. This team met with the State Controller, the Governor’s Cabinet Secretary, the California State Association of Counties and the League of California Cities.

TRAINING THE COUNTIES: Fostering key partnerships To balance the “top down” approach at the State level and address the interpretation and training issues, we also determined it would be critical to meet with and educate staff members who are involved regularly with public grant dollars, especially since most pass-through grants are ultimately distributed at the county level. California Strategies identified the California State Association of Counties (CSAC) as the most viable and effective partner for this work through it training institute, CSAC Institute. (Both CSAC and the League of California Cities informed their member about the Guidance via their newsletters, following our engagement with them.) CSAC was training its county members to comply with the Guidance, but we identified gaps: its emphasis was on compliance, indirect overhead was only a small part of the curriculum and the attendees in the audience were largely Northern California-based. Through our partnership with CSAC, CSAC’s faculty built a curriculum with Kay Sohl, Cal Nonprofits consultant. The training for county staff will take place at a convening in Southern California in summer 2017 and while focusing on the Guidance, it will emphasize building stronger relationships between government and the nonprofits that deliver its public services. Given the size, number of nonprofits and amount of services provide in Los Angeles County, our efforts also continue to focus on ensuring the fullest implementation of the Uniform Guidance and on improving the partnerships between County government and nonprofits – a critical element to moving past overly restrictive overhead rates and burdensome accountability requirements. Included among this work has been:

• The stakeholder group has been working with the County’s leadership and departments to seriously consider the concept of allowing nonprofits to negotiate a County-wide indirect cost rate specific to each organization’s needs, as allowed under the Guidance. This process, while promising, is still in an initial exploratory phase and would need ultimate approval from the Board of Supervisors. Should Los Angeles County allow nonprofits the option of a countywide indirect cost rate, it would be the first of its kind in the nation and serve as an important model.

• Because of the stakeholder group’s involvement, the County’s Internal Services Department (ISD) held a half-day training on August 24, 2016 for nonprofits on the contracting process. The training provided the County an opportunity to reach out to nearly 1,500 nonprofits that currently hold a County contract or have expressed interest in responding to an RFP. This group also received a survey from the County to inform

crucial next steps for implementation of indirect costs negotiation. This survey revealed that 89 percent of nonprofit respondents expressed interest in negotiating an indirect cost presentation from the County and 67 percent indicated interest in negotiating a local single indirect cost rate. This survey provided crucial feedback for County staff to inform possible implementation.

RECOMMENDED FUTURE ACTION AT STATE LEVEL: Ensuring clarity of interpretation, professional training and educational outreach

California Strategies recommends exploring the following strategies to move the agenda forward:

• Continue dialogue with Controller Betty Yee. (Controller has the responsibility to audit local government compliance.)

• Through the newly created Assembly Select Committee on Nonprofits, request a hearing on the issue of non-profit delivery of government services. This would broaden the issue to bring in the findings from the Urban Institute report (and have the author as a third-party source of information), capture partnership impediments, and compliance with OMB Guidance.

• Health and Human Services Agency agreed to bring together a working group of county and state affiliated organizations to ensure awareness, consistency of interpretation and fuller understanding of indirect cost issues. CSAC was to bring together its affiliated organization as a prelude to the meeting with HHS. This remains a valuable step that should be pursued. Limitations of bringing the HHS offer to fruition: capacity of CSAC to organize pre-meeting and HHS responsibility for future of MediCal.

• Continue to periodically meet with key state contacts to remind all parties that services to public would be better leveraged if government, foundations and non-profits worked cohesively.

• In 2018, explore request to Joint Legislative Audit Committee to audit OMB Guidance compliance at the state. This could be done through the Assembly Select Committee or through a member of the Joint Legislative Audit Committee member.

• Maintain relationship with CSAC on different issues. California League of Cities will follow CSAC’s lead on these issues.

• Look to working with the national organizations of counties, cities, and state finance directors.

• Invite Gubernatorial candidates early to speak at Southern California Grantmakers about the roles of foundations and nonprofits in providing services in the state.

November 2015

Federal Grants to State Agencies in 2014

Prepared by:

Attachment A

2 The top 4 agencies received 98% of all grant money awarded to state agencies in

2014

Grant Recipient State Agencies (2014)

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

Dept of

Health C

are

Serv

ices

Dept of

Socia

l S

erv

ices

Dept of

Educatio

n

Dept of

Tra

nsport

ation

Dept of

Rehabili

tation

Dept of

Com

mu

nity S

erv

ice

s a

nd D

evelo

pm

ent

Wate

r R

esourc

es C

ontr

ol B

oard

Dept of

Agin

g

Dept of

Housin

g a

nd C

om

mu

nity D

evelo

pm

ent

Dept of

Mili

tary

Dept of

Develo

pm

enta

l S

erv

ices

Dept of

Fis

h a

nd W

ildlif

e

Dept of

Justice

Dept of

Industr

ial R

ela

tio

ns

Bo

ard

of S

tate

and C

om

mu

nity C

orr

ectio

ns

Dept of

Fis

h a

nd G

am

e

Vic

tim

Com

pensatio

n &

Govern

me

nt C

laim

s B

oard

Dept of

Food

and A

griculture

Sta

te L

ibra

ry

Stu

dent A

id C

om

mis

sio

n

Dept of

Park

s a

nd R

ecre

atio

n

Dept of

Public

Health

Calif

orn

ia S

tate

Univ

ers

ity

Dept of

Wa

ter

Reso

urc

es

Dept of

Toxic

Substa

nces C

ontr

ol

CA

LS

TA

RT

Air R

esourc

es B

oard

En

erg

y C

om

mis

sio

n

Dept of

Vete

rans A

ffairs

Dept of

Boatin

g a

nd W

ate

rways

Dept C

om

mu

nity S

erv

ices &

Develo

pm

en

t

Coasta

l C

onserv

ancy

Pu

blic

Utilit

ies C

om

mis

sio

n

Com

munity C

olle

ges C

hancello

rs O

ffic

e

CA

L F

IRE

Dept of

Fair E

mp

loym

ent &

HG

S

Sta

te P

ark

s

Sta

te J

udic

ial C

ouncil

Associa

tio

n o

f B

ay A

rea G

overn

me

nts

Dept of

Pesticid

e R

egula

tio

ns

Dept of

Moto

r V

ehic

les

Univ

ers

ity o

f C

alif

orn

ia

Fire M

ars

hal

Dept of

Develo

pm

enta

l S

erv

ices

Calif

orn

ia A

rts C

ou

ncil

Sa

cra

me

nto

-San J

oaqu

in D

elta C

onserv

an

cy

Conserv

atio

n C

orp

s

Dept of

Insura

nce

Delta S

tew

ard

ship

Council

Dept of

Corr

ectio

ns &

Rehabili

tatio

n

Calforn

ia T

ahoe C

onserv

ancy

Govern

or's O

ffic

e o

f P

lannin

g &

Researc

h

Mil

lio

ns

Source: USA Spending.gov, Accessed October 30, 2015, https://www.usaspending.gov/DownloadCenter/Pages/DataDownload.aspx.

$60,000

$50,000

3

State Agencies Receiving Federal Grants in 2014 (Page 1 of 19)

State Agency Award(s) Amount

Dept of Health Care Services

Children's Health Insurance Program $1,477,293,364

Medical Assistance Program $45,247,470,580

Refugee and Entrant Assistance_State Administered Programs $9,900,000

Special Supplemental Nutrition Program for Women, Infants, and Children $1,252,195,679

The Affordable Care Act Medicaid Incentives for Prevention of Chronic Disease Demonstration Project $2,705,199

WIC Farmers' Market Nutrition Program (FMNP) $2,063,983

Total $47,991,628,805

Dept of Social Services

Adoption Assistance $337,774,126

Chafee Education and Training Vouchers Program (ETV) $5,825,141

Chafee Foster Care Independence Program $18,101,906

Child Abuse and Neglect State Grants $2,842,348

Child Support Enforcement $341,798,964

Community-Based Child Abuse Prevention Grants $3,346,642

Developmental Disabilities Basic Support and Advocacy Grants $6,508,782

Emergency Food Assistance Program (Administrative Costs) $10,157,915

Foster Care_Title IV-E $901,543,361

Guardianship Assistance $26,488,646

4



Promoting Safe and Stable Families $33,081,213

Refugee and Entrant Assistance_State Administered Programs $19,480,488

Refugee and Entrant Assistance_Targeted Assistance Grants $3,822,016

Social Services Block Grant $190,112,095

State Administrative Matching Grants for the Supplemental Nutrition Assistance Program $1,004,169,828

Stephanie Tubbs Jones Child Welfare Services Program $30,793,211

Supplemental Nutrition Assistance Program, Process and Technology Improvement Grants $3,036

Temporary Assistance for Needy Families $3,656,123,281

Total $6,591,972,999

Dept of Education

Adult Education - Basic Grants to States $86,696,471

Advanced Placement Program (Advanced Placement Test Fee; Advanced Placement Incentive Program Grants) $10,736,965

Career and Technical Education -- Basic Grants to States $120,219,370

Charter Schools $41,047,443

Child and Adult Care Food Program $30,216,565

Child Nutrition Discretionary Grants Limited Availability $4,545,334

Commodity Supplemental Food Program $5,521,361

Education for Homeless Children and Youth, Recovery Act $7,623,234

English Language Acquisition State Grants $150,816,972

5



Fresh Fruit and Vegetable Program $11,545,198

Grants for State Assessments and Related Activities $28,691,451

Improving Teacher Quality State Grants $443,967,503

Mathematics and Science Partnerships $18,410,701

Migrant Education_State Grant Program $129,664,795

National School Lunch Program $2,276,378,332

Rural Education $1,333,495

School Improvement Grants $114,184,985

Special Education - State Personnel Development $2,200,000

Special Education_Grants to States $1,212,652,802

Special Education_Preschool Grants $35,217,658

State Administrative Expenses for Child Nutrition $28,052,989

Title I Grants to Local Educational Agencies $1,631,052,887

Title I State Agency Program for Neglected and Delinquent Children and Youth $1,257,682

Twenty-First Century Community Learning Centers $125,257,755

Total $6,517,291,948

Dept of Transportation

Bus and Bus Facilities Formula Program $3,324,214

Formula Grants for Rural Areas $27,985,806

6



Highway Planning and Construction $2,506,932,530

Job Access And Reverse Commute Program $1,170,122

Metropolitan Transportation Planning $66,431,071

Recreational Trails Program $1,951,923

Total $2,607,795,666

Dept of Rehabilitation

Assistive Technology $1,032,717

Independent Living_State Grants $2,044,576

Promoting Readiness of Minors in Supplemental Security Income $29,490,720

Rehabilitation Services_Independent Living Services for Older Individuals Who are Blind $3,350,574

Rehabilitation Services_Vocational Rehabilitation Grants to States $298,623,867

Rehabilitation Training_State Vocational Rehabilitation Unit In-Service Training $371,790

Supported Employment Services for Individuals with the Most Significant Disabilities $2,758,952

Total $337,673,196

Dept of Community Services and Development

Community Services Block Grant $59,270,847

Low-Income Home Energy Assistance $152,764,309

Total $212,035,156

7



Water Resources Control Board

Beach Monitoring and Notification Program Implementation Grants $501,807

Capitalization Grants for Clean Water State Revolving Funds $100,277,000

Capitalization Grants for Drinking Water State Revolving Funds $83,221,000

Leaking Underground Storage Tank Trust Fund Corrective Action Program $2,562,217

Nonpoint Source Implementation Grants $8,107,000

Regional Wetland Program Development Grants $300,000

Underground Storage Tank Prevention, Detection and Compliance Program $180,000

Water Pollution Control State, Interstate, and Tribal Program Support $9,925,913

Water Quality Management Planning $854,000

Total $205,928,937

Dept of Aging

Medicare Enrollment Assistance Program $915,145

National Family Caregiver Support, Title III, Part E $14,764,434

Nutrition Services Incentive Program $12,480,105

Senior Community Service Employment Program $7,405,577

Special Programs for the Aging_Title III, Part B_Grants for Supportive Services and Senior Centers $36,636,577

Special Programs for the Aging_Title III, Part C_Nutrition Services $71,682,785

Special Programs for the Aging_Title III, Part D_Disease Prevention and Health Promotion Services $2,000,831

8



Special Programs for the Aging_Title IV_and Title II_Discretionary Projects $178,500

Special Programs for the Aging_Title VII, Chapter 2_Long Term Care Ombudsman Services for Older Individuals $1,632,620

Special Programs for the Aging Title VII, Chapter 3_Programs for Prevention of Elder Abuse, Neglect, & Exploitation $471,073

Total $148,167,647

Dept of Housing and Community Development

Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii $29,529,712

Emergency Solutions Grant Program $10,627,068

Home Investment Partnerships Program $31,954,214

Housing Opportunities for Persons with AIDS $3,757,347

Manufactured Home Dispute Resolution $26,941

Total $75,895,282

Dept of Military

National Guard Challenge Program $18,218,954

National Guard Military Operations and Maintenance (O&M) Projects $54,984,005

Total $73,202,959

Dept of Developmental Services

Special Education-Grants for Infants and Families $53,043,814

Total $53,043,814

9



Dept of Fish and Wildlife

California Water Security and Environmental Enhancement $57,422

Central Valley Project Improvement (CVPI) Anadromous Fish Restoration Program (AFRP) $76,000

Central Valley Project Improvement Act, Title XXXIV $2,356,627

Cooperative Endangered Species Conservation Fund $4,260,458

Enhanced Hunter Education and Safety Program $115,791

Natural Resource Stewardship $100,000

Recovery Act Funds - Habitat Enhancement, Restoration and Improvement. $60,000

San Joaquin River Restoration Program $571,501

San Luis Unit, Central Valley Project $84,400

Sport Fish Restoration Program $18,076,779

State Wildlife Grants $3,372,710

Superfund State, Political Subdivision, and Indian Tribe Site-Specific Cooperative Agreements $185,548

Wildlife Restoration and Basic Hunter Education $20,180,904

Total $49,498,140

Dept of Justice

DNA Backlog Reduction Program $2,416,870

Edward Byrne Memorial Justice Assistance Grant Program $827,050

National Criminal History Improvement Program (NCHIP) $1,672,262

10



Second Chance Act Reentry Initiative $748,221

State Medicaid Fraud Control Units $27,661,524

Support for Adam Walsh Act Implementation Grant Program $200,000

Total $33,525,927

Dept of Industrial Relations

Consultation Agreements $5,496,400

Mine Health and Safety Grants $342,378

Occupational Safety and Health_State Program $26,625,400

Total $32,464,178

Board of State and Community Corrections

Edward Byrne Memorial Justice Assistance Grant Program $19,714,559

Juvenile Justice and Delinquency Prevention_Allocation to States $4,121,285

Residential Substance Abuse Treatment for State Prisoners $719,062

Total $24,554,906

Dept of Fish and Game

Cooperative Endangered Species Conservation Fund $10,260,598

Fish and Wildlife Management Assistance $24,875

Interjurisdictional Fisheries Act of 1986 $134,467

Pacific Coast Salmon Recovery_Pacific Salmon Treaty Program $13,500,000

11



Sport Fish Restoration Program $610,953

Total $24,530,893

Victim Compensation & Government Claims Board

Crime Victim Assistance/Discretionary Grants $400,000

Crime Victim Compensation $23,651,000

Total $24,051,000

Dept of Food and Agriculture

Forest Health Protection $618,000

Market Protection and Promotion $1,000,000

Plant and Animal Disease, Pest Control, and Animal Care $18,366,041

Senior Farmers Market Nutrition Program $761,250

Wildlife Services $524,540

Other $120,000

Total $21,389,831

State Library

Grants to States $15,030,377

Total $15,030,377

12



Student Aid Commission

College Access Challenge Grant Program $14,746,800

Total $14,746,800

Dept of Parks and Recreation

Central Valley Project Improvement Act, Title XXXIV $280,901

Cultural Resources Management $10,000

Fish and Wildlife Coordination and Assistance Programs $15,000

National Park Service Conservation, Protection, Outreach, and Education $66,000


Outdoor Recreation_Acquisition, Development and Planning $11,139,530

Recreation Resource Management $2,489,414

Redwood National Park Cooperative Management with the State of California $62,098

Total $14,194,750

Dept of Public Health

Affordable Care Act (ACA) Personal Responsibility Education Program $5,916,812

Capitalization Grants for Drinking Water State Revolving Funds $73,133

Refugee and Entrant Assistance_Discretionary Grants $195,000

State Indoor Radon Grants $192,000

State Public Water System Supervision $6,098,000

13



Strengthening Public Health Services at the Outreach Offices of the U.S.-Mexico Border Health Commission $279,420

TSCA Title IV State Lead Grants Certification of Lead-Based Paint Professionals $393,000

Total $13,147,365

California State University

Biological Sciences $43,808

Cultural Resources Management $18,000

Education $182,282

Education and Human Resources $195,517

English Language Acquisition State Grants $239,482

Forestry Research $30,000

Geosciences $85,127

Investing in Innovation (i3) Fund $2,930,459

Mathematical and Physical Sciences $310,000

National Park Service Conservation, Protection, Outreach, and Education $142,000


Science $180,895

Trade Adjustment Assistance Community College and Career Training (TAACCCT) Grants $4,994,501

TRIO Staff Training Program $575,000

TRIO_McNair Post-Baccalaureate Achievement $440,000

14



TRIO_Student Support Services $644,189

TRIO_Talent Search $459,264

TRIO_Upward Bound $1,508,244

Total $13,016,768

Dept of Water Resources

Central Valley Project Improvement Act, Title XXXIV $2,431,990

Fish and Wildlife Coordination Act $8,374,000

Fish and Wildlife Management Assistance $62,305

Flood Mitigation Assistance $490,105

National Dam Safety Program $143,144

U.S. Geological Survey_ Research and Data Collection $10,000

Total $11,511,544

Dept of Toxic Substances Control

Brownfields Assessment and Cleanup Cooperative Agreements $2,400,000

Hazardous Waste Management State Program Support $5,589,166

Pollution Prevention Grants Program $62,000

State and Tribal Response Program Grants $1,000,000

Superfund State, Political Subdivision, and Indian Tribe Site-Specific Cooperative Agreements $873,700

Total $9,924,866

15



CALSTART

Federal Transit_Capital Investment Grants $7,727,769

Total $7,727,769

Air Resources Board

Air Pollution Control Program Support $6,561,020

Pollution Prevention Grants Program $180,000

State Clean Diesel Grant Program $249,792

Surveys, Studies, Research, Investigations, Demonstrations, and Special Purpose Activities Relating to the Clean Air

Act $732,020

Total $7,722,832

Energy Commission

Fish, Wildlife and Plant Conservation Resource Management $1,900,000

State Energy Program $5,157,620

Total $7,057,620

Dept of Veterans Affairs

State Cemetery Grants $6,797,000

Total $6,797,000

16



Dept of Boating and Waterways

Agricultural Research_Basic and Applied Research $150,000

Boating Safety Financial Assistance $5,537,968

Total $5,687,968

Dept Community Services & Development

Weatherization Assistance for Low-Income Persons $4,907,878

Total $4,907,878

Coastal Conservancy

Coastal Wetlands Planning, Protection and Restoration Act $1,510,222

Coastal Zone Management Estuarine Research Reserves $593,000

Cooperating Technical Partners $100,000

Cooperative Landscape Conservation $157,622

North American Wetlands Conservation Fund $1,115,000


The San Francisco Bay Water Quality Improvement Fund $866,021

Total $4,666,753

Public Utilities Commission

Pipeline Safety Program State Base Grant $4,091,053

Total $4,091,053

17



Community Colleges Chancellors Office

Renewable Energy Research and Development $280,000

Small Business Development Centers $3,675,363

Total $3,955,363

CAL FIRE


Forest Legacy Program $2,030,000

Forest Stewardship Program $200,000

Urban and Community Forestry Program $890,000

Total $3,270,000

Dept of Fair Employment & HGS

Fair Housing Assistance Program_State and Local $3,113,277

Total $3,113,277

State Parks

Coastal Zone Management Estuarine Research Reserves $320,000

Habitat Conservation $2,287,704

Total $2,607,704

18



State Judicial Council

State Court Improvement Program $2,193,819

Total $2,193,819

Association of Bay Area Governments

Cooperating Technical Partners $300,000

Earthquake Hazards Reduction Program $90,816

National Estuary Program $568,000

The San Francisco Bay Water Quality Improvement Fund $800,000


Total $1,858,816

Dept of Pesticide Regulations

Market Protection and Promotion $160,000

Performance Partnership Grants $1,530,637

Total $1,690,637

Dept of Motor Vehicles

Commercial Driver's License Program Improvement Grant $1,459,732

Performance and Registration Information Systems Management $100,000

Total $1,559,732

19



University of California

Agricultural Research_Basic and Applied Research $586,811


Forestry Research $56,478

Plant and Animal Disease, Pest Control, and Animal Care $75,000


University Centers for Excellence in Developmental Disabilities Education, Research, and Service $535,215

Wood Utilization Assistance $75,534

Total $1,486,590

Fire Marshal

Pipeline Safety Program State Base Grant $1,370,022

Total $1,370,022

Dept of Developmental Services

Foster Grandparent Program $1,174,320

Total $1,174,320

California Arts Council

Promotion of the Arts_Partnership Agreements $1,081,400

Total $1,081,400

20



Sacramento-San Joaquin Delta Conservancy

California Water Security and Environmental Enhancement $463,940

Environmental Information Exchange Network Grant Program and Related Assistance $300,000


Total $1,013,940

Conservation Corps

Conservation Activities by Youth Service Organizations $406,957

Fish, Wildlife and Plant Conservation Resource Management $198,250

Habitat Conservation $205,000

Recreation Resource Management $96,000

Total $906,207

Dept of Insurance

Affordable Care Act (ACA) Grants to States for Health Insurance Premium Review $589,500

Total $589,500

Delta Stewardship Council

Central Valley Project Improvement Act, Title XXXIV $94,076

Fish and Wildlife Coordination Act $407,497

Total $501,573

21



Dept of Corrections & Rehabilitation

Foster Grandparent Program $231,368

Total $231,368

Calfornia Tahoe Conservancy

Southern Nevada Public Land Management $176,002

Total $176,002

Governor's Office of Planning & Research

Community Economic Adjustment Assistance for Compatible Use and Joint Land Use Studies $9,600

Total $9,600

Grand Total $65,193,672,497

Andrew Chang & Company, LLC

1107 9th Street #501

Sacramento, CA 95814

Phone: 916-538-6091

22

Contact Information

1

Attachment B

OMB Uniform Guidance and Value in Improving Alignment of Government, Nonprofit and Philanthropic Sectors

Background Information

What is the OMB Uniform Guidance

The federal government last December issued the Office of Management & Budget’s Uniform Guidance covering federal grant making. The promulgation of these significant reforms to federal grantmaking and contracting with nonprofit organizations concluded a three-year process to streamline eight federal circulars into one set of rules within in the Code of Federal Regulations and to reduce the volume of regulations by 75%, along with the potential for waste, fraud and abuse for the approximately $600 billion in federal grants each year. If properly implemented, the Guidance will provide for better treatment for nonprofit organizations providing services funded in whole or part by the federal government.

The Guidance’s origin is in a November 2009 Presidential Executive Order (No. 13520) calling for the reduction in payment errors and elimination of waste, fraud and abuse in federal contracting and grant programs; further mandates for reform by OMB of Federal grants programs came in a Presidential Memorandum in February 2011. A new council was formed by OMB, the cross-departmental Council on Financial Assistance Reform (COFAR), to oversee the development and implementation of the Uniform Guidance.

The Uniform Guidance is designed to do the following:

• Clarify that indirect cost requirements apply to not only federal agencies but also to “pass-through entities” that use federal dollars, including state and local governments

• Allow nonprofits and other organizations that have never negotiated an indirect cost ratewith the federal government to be reimbursed a standard minimum rate no less than 10%of their modified total direct costs to support the fundamental operations of theorganization. Nonprofits that have already negotiated a federal indirect cost must be paidthat amount;

• Simplify reporting requirements while strengthening internal control mechanisms;• Integrate rules and regulations from eight different OMB circulars into one set of

regulations in the Code of Federal Regulations;• Publish single audit reports online in machine readable formats, eliminating a burdensome

paper-chase for reporting and providing the public with key information to strengthenoversight of federal tax dollars;

• Raise the threshold for required single audits from $500,000 to $750,000 in federal awardsexpended per year, maintaining oversight for 99% of dollars audited now, but focusing theresources to reduce risk of waste, fraud, and abuse;

• Emphasize the long-standing requirement for non-federal entities to have strong internalcontrols that are appropriate to the organization, while relaxing overly prescriptive andobsolete procedural requirements;

https://www.whitehouse.gov/the-press-office/executive-order-reducing-improper-payments

https://www.whitehouse.gov/the-press-office/2011/02/28/presidential-memorandum-administrative-flexibility

https://www.whitehouse.gov/the-press-office/2011/02/28/presidential-memorandum-administrative-flexibility

https://cfo.gov/cofar/

2

• Require that sub-recipients of federal awards follow federal procurement standards (effective in 2016);

• Require pass-through entities to evaluate sub-recipients for their level of risk with regard to managing federal dollars;

• Mandate that applications for funding be decided based on merit. The full Uniform Guidance can be found online at 2 CFR 200. A description of the importance of this guidance to nonprofit organizations can be found at the website of the National Council of Nonprofits.

Government Grants & Contracts to Nonprofits in California Nationwide, reliance on nonprofits to provide services on behalf of governments has increased significantly since the 1960s. Statistics from the Urban Institute covering 2012 highlight the critical role that nonprofits play in California and the importance of their relationships with state, county and local governments:

• 5,172 nonprofits received an estimated $14 billion in government contracts and grants with almost 60 percent of those funds going to human services organizations;

• 47% of California nonprofits with budgets less than $1 million had a government contract or grant;

• 53% of those with operating budgets greater than $1 million had a government contract of grant;

• Contracts and grants from government constituted one-third of the revenue of California nonprofits, compared to 13% from private donations and 47% from fees from private sources;

• Of nonprofits contracted or working with government, 48% had operating budgets of $1 million or more; 36% had budgets between $250,000 and $1 million; the remaining 17% had operating budgets between $100,000 and $250,000;

• 79% of California nonprofits report difficulty with multiple/different government reporting formats and 78% cite issues with different allowances for administrative expenses and overhead.

Opportunity for Government, Nonprofits and Foundations to Better Align for Service Delivery An outgrowth of the release of the OMB Uniform Guidance has been an increase in conversations, both formal and informal, among government, foundations and nonprofits to discuss best practices, challenges and workable solutions to issues of common concern regarding grants and contracts and reporting processes. The overriding goal of these conversations is to improve grant and contracting relationships so that better outcomes can be achieved. A number of states have updated their processes and greatly increased the level of partnership and collaboration between government and nonprofits (for more on other states’ efforts, see below).

https://www.councilofnonprofits.org/advanced-search?search_api_views_fulltext=OMB+Uniform+Guidance&sort_by=search_api_relevance

3

A report by the Urban Institute looking at the nonprofit-government funding relationships in California finds that about 33% of California nonprofits engaged government officials via formal channels while 60% do so via more informal interactions. The report also finds that nonprofits report their relationships are much better with government if they are seen as a partnership rather than a contractor/vendor arrangement. In California, findings from the Urban Institute report show that the issue of full cost recovery is significant – 47% of nonprofits said it is a big problem; 23% said it is a small problem. Additional important issues that nonprofits/foundations are looking to address in close partnership with government include:

• Late payments for services rendered — 30% said it is a big problem; 30% said it is a small problem;

• Government changes to already approved contracts and grants — 28% said it is a big problem; 23% said it is a small problem;

• Time consuming reporting requirements — 42% said it is a big problem; 39% said it is a small problem;

• Complex application requirements — 49% said it is a big problem; 33% said it is a small problem.

What’s Being Done: The Full Cost Initiative – Closing the Nonprofit Overhead Gap In California, a multi-faceted initiative is working with nonprofits, government, and private philanthropy to improve full-cost recovery so that nonprofits can build the infrastructure and capacity needed to sustain great services and programs for communities. The Full Cost Initiative – Closing the Nonprofit Overhead Gap, has two branches: Overhead Project Launched by CalNonprofits, this project has the following goals:

• Engaging foundations and nonprofits in discussions of restricted and overhead funding; • Giving nonprofits a Nonprofit Overhead Toolkit for accounting for overhead, managing indirect

cost rates, and business model analysis; • Equipping nonprofits to be effective advocates on overhead; • Developing a forum for provocative new thought leadership to emerge.

Partners on the Nonprofit Overhead Project include the Weingart Foundation, the California Wellness Foundation, California Strategies, the National Council of Nonprofits, CalNonprofits and others. Key

4

partners in working with philanthropy are Northern California Grantmakers, San Diego Grantmakers, and Southern California Grantmakers. Real Cost Project Funded by a number of prominent foundations, the Northern California Grantmakers, San Diego Grantmakers and Southern California Grantmakers launched a joint statewide initiative to increase the impact of philanthropy across California. The Real Cost Project is exploring what it takes for funders to develop new grantmaking practices based on what it really costs to deliver outcomes. It also is investigating how nonprofits collectively can adopt more consistent, transparent auditing and budgeting standards and practices. To date, forums have been held throughout the State with a number of funders committing to explore the adoption of full cost practices. Goals and Outcomes As nonprofits and foundations begin to meet with all levels of California government, there are five key elements they are hoping to collaboratively address:

1. Ensuring full compliance with the Uniform Guidance in California; 2. Placing a high value on getting government, nonprofits and foundations in alignment and

improving communications to enable better service delivery and program outcomes; 3. Creating greater stability among nonprofits that are providing government services and greater

outcomes for the clients they serve; 4. Avoiding unnecessary duplication in documentation to save costs and time for all involved, e.g.

more consistency in reporting and data requirements to greatest extent possible; 5. Developing agreed-upon, consistent “best practice” budget compliance and auditing standards in

alignment with the Uniform Guidance.

AtAttachment C

Brice McKeever, Marcus Gaddy, and Elizabeth T. Boris, with Shatao Arya

September 2015

Despite some signs of recovery, California nonprofits continue to face post–Great Recession

challenges. Though decreased revenues may reflect broad trends facing the nonprofit sector, many

challenges are rooted in nonprofit–government contract and grant administration processes. Drawing

on a national survey of public charity nonprofits, this study finds that California nonprofits widely

reported dissatisfaction with the complexity of reporting and application requirements, the limits on

program and organizational overhead expenses that restrict the recovery of the full costs of services,

and late reimbursements for services rendered.

Financial Health of Nonprofits with Government Funding

Though California nonprofits receive revenue from many sources, funding trends were negative or

static in 2012. More than four-fifths of California nonprofits (84 percent) reported that at least one

source of revenue decreased in that year. For 6 of 10 revenue sources, more nonprofits reported

decreases in revenue than increases (figure 1). Government funding was particularly affected: nearly

half of California nonprofits reported decreased funding from federal, state, and local government

agencies. Among nonprofits with increased revenues, individual donations ranked first, followed by

commercial income and participant fees.

C E N T E R O N N O N P R O F I T S A N D P H I L A N T H R O P Y

Nonprofit-Government Contracts

and Grants California Findings

2 N O N P R O F I T - G O V E R N M E N T C O N T R A C T S A N D G R A N T S : C A L I F O R N I A F I N D I N G S

FIGURE 1

Changes in Nonprofit Revenues in California, 2012

Source: Urban Institute, National Survey of Nonprofit-Government Contracting and Grants (2013).

Nevertheless, conditions for California nonprofits were generally stable in 2012: the majority of

nonprofits maintained the same level of credit, sites, services, and operations. The majority of California

nonprofits also reported increasing staff benefits and the number of people served, suggesting at least a

few signs of postrecession recovery. But California nonprofits also drew on their reserves instead of

decreasing operational capacity: 44 percent of respondents reported decreased reserves in 2012.

California organizations were more likely to have multiple government contracts and grants than

nonprofits nationally. In 2012, 26 percent of California nonprofits held contracts or grants with five or

more agencies, compared with 20 percent of nonprofits nationwide. Similarly, 80 percent of California

nonprofits held contracts or grants with at least two agencies, compared with 70 percent of nonprofits

nationwide. One-quarter of California nonprofits relied on government funding for 60 percent or more

of their budgets, mirroring national trends (figure 2). With such strong ties to government for financing,

problems with contract and grant administration can be a source of intense pressure on nonprofits.

23%

23%

26%

28%

29%

39%

42%

48%

48%

49%

46%

42%

45%

33%

62%

38%

29%

28%

35%

32%

31%

34%

29%

39%

9%

23%

29%

25%

17%

20%

Participant fees

Commercial income

Investment income

Individual donations

Federated giving

Corporate donations andsupport

Private and communityfoundations

Local government agencies

Federal government agencies

State government agencies

Decreased Stayed the same Increased

N O N P R O F I T - G O V E R N M E N T C O N T R A C T S A N D G R A N T S : C A L I F O R N I A F I N D I N G S 3

FIGURE 2

Percent of Total Revenue from Government Sources


Challenges with Government Contracts and Grants

Based on previous research, we identified five major issues that nonprofits face with government

funding: government payments that do not cover the full cost of providing agreed-upon services;

complex application requirements; time-consuming reporting requirements; changes to already-

approved contracts and grants; and late payments for services rendered. We asked nonprofits to rate

their experiences with these issues as “not a problem,” a “small problem,” a “big problem”, or “not

applicable.” The results point to systemic flaws in government administrative procedures that introduce

inefficiencies and intensify the effects of the recession and postrecession period (Boris et al. 2010a).

When compared with the national average, California nonprofits generally reported higher levels of

dissatisfaction across all five issues associated with government contracts and grants. California

nonprofits reported that issues with payments not covering the full cost of contracted services and the

time and complexity of the application process were particularly problematic; nearly half of

respondents called these “big problems” (figure 3).

28%

25%

22%

26%

26%

22%

25%

27%

California

National

<10% 10%–34% 35%–60% >60%


FIGURE 3

Problems with Government Contracts and Grants


California nonprofits’ noticeably higher levels of problems with government funding processes

persist even when organizational size is considered. The one exception is that large organizations

nationally and in California reported similar levels of problems with government changes to contracts

or grants midstream (table 1).

41%

55% 49%

57%

20% 29%

19% 29% 31%

46%

30%

26%

23%

23%

39%

40%

32%

39%

22%

22%

29% 19%

28% 20%

41% 31%

49%

32%

47%

32%

California National California National California National California National California National

Late payments (beyondcontract specifications)

Government changes tocontracts or grants

midstream

Complexity of or timerequired of reporting

process

Complexity of or timerequired of application

process

Payments not coveringfull cost of contracted

services

Big problem Small problem Not a problem


TABLE 1

Nonprofits Reporting Problems with Government Funding in California, by Size

$100,000 to $999,999 $1 million or more

Problem with funding CA National CA National Complexity of or time required by application process 82% 69% 81% 75% Complexity of or time required for reporting 74% 66% 85% 77% Payments not covering full cost of contracted services 65% 48% 73% 59% Government changes to contracts or grants midstream 58% 39% 47% 48% Late payments (beyond contract specifications) 56% 42% 62% 48%


Specific problems identified in the national survey were diverse; Pettijohn and Boris’s (2013)

national report cited “frustration with software and unresponsive government agencies to resignation

about decreased funding levels and delays in payments that reflect the ongoing financial constraints of

governments at every level.” As one respondent summarized, “Less funding available, increased

(double) cost share, and late payments caused crews to be laid off and put on unemployment, hinder[ed]

budgeting, cash flow, and planning work.”

Nevertheless, that report also noted that respondents “acknowledged that potential improvements

are underway and that some of the problems may have been with systems that were not ready to use

when they were implemented” (Pettijohn and Boris 2013). Respondents also provided comments that

marked a path forward on several issues. Some national survey respondents remarked that some

government agencies were providing training to prospective grantees and liaisons to help navigate the

government systems, thus improving processes. As one respondent stated, “Government agencies

provided recipient trainings and created resources that made the process easier. Agencies also

dedicated staff to support the grant process steps, created grant documentation, and provided

assistance by phone.”


Failure to Cover Full Program Costs

In 2012, 54 percent of nonprofits nationwide reported that failure of government payments to cover

full program costs was a problem. This proportion was even higher in California, where 69 percent of

organizations reported experiencing this problem. Inadequate reimbursements are problematic

because organizations must somehow cover the costs of the services they provide. Additionally,

government contracts and grants often require nonprofits to match or share a portion of funding.

Inadequate reimbursement and matching and sharing requirements impose additional costs on

organizations, requiring them to dip into reserves, fundraise, or divert fee income or operating

resources to cover the gap (National Council of Nonprofits 2013).

About half of nonprofits reported at least one government grant with a matching requirement and

one-quarter had a government contract that required cost-sharing. This suggests that government

agencies expect nonprofits to leverage grants more than contracts. In either case, governments are not

providing for the full costs of programs they are funding.

Nonprofits that reported problems with insufficient funding were more likely to draw down

reserves, nationally and even more so in California. Over half of those reporting insufficient payments

as a problem also indicated decreased reserves, in contrast to less than two-fifths of those that did not

report problems (figure 4).

Nationwide, except in California, organizations experiencing problems with insufficient payments

were more likely to reduce staff.

FIGURE 4

Reductions in Nonprofit Reserves and Employees in California


53%

17%

38%

19%

Draw on reserves Reduce number of employees

Insufficient payments a problem Insufficient payments not a problem


Limits on Program and Organizational Administrative Expense Reimbursements

California nonprofits are often subject to limits on reimbursement for program and organizational

overhead or administrative expenses: 6 percent report no program overhead allowance and 13 percent

report no general overhead reimbursement. Approximately two-thirds of California organizations

report limits of 10 percent or less for program and general overhead expenses; approximately three-

quarters of organizations nationwide report the same (figure 5).

FIGURE 5

Organizations Reporting Overhead Limits, by Limit Amount and Type


Lack of reimbursement for overhead costs might lead nonprofits to offer low pay for staff,

particularly for administrative positions, making it difficult to recruit and retain skilled and experienced

staff. Or they may sacrifice investments in technology, reducing productivity and effectiveness (Wing et

al. 2005). The US Government Accountability Office acknowledged the detrimental effects of failing to

cover administrative overhead costs in a recent report. To cover indirect or overhead costs that are not

reimbursed, the Government Accountability Office says nonprofits may serve fewer people, cut back on

services offered, or forgo or delay capacity-building and staffing needs. According to the report,

underfunding nonprofit indirect costs “potentially limit[s] the sector’s ability to effectively partner with

the federal government, can lead to nonprofits providing fewer or lower-quality federal services, and,

over the long term, could risk the viability of the sector” (US Government Accountability Office 2010;

Pettijohn and Boris 2013).

6% 6%

34%

24%

11%

13%

5%

20%

27% 26%

10%

18%

9%

18%

28%

17%

24%

10%

15% 14%

0% 1–3% 4–7% 8–10% 11–15% 15%+ 0% 1–3% 4–7% 8–10% 11–15% 15%+

Limits

California National

Program overhead General overhead


Application and Reporting Requirements

Previous research has found that nonprofits with different funding sources often have multiple

reporting requirements. Pettijohn and Boris’s 2013 national report found that “there is little to no

consistency in format, and some reports are redundant and time consuming. Because these reporting

requirements may be tied to funding, they can be a drain on already limited resources. Numerous

reporting requirements and formats can lead nonprofits to develop and implement multiple reporting

processes, which can be an added expense for some organizations.” As one nonprofit in the national

survey reported, “Though I understand the need for increased accountability, duplication of reporting

requirements and lack of human communication is confusing and alienating.”

For all but the smallest California organizations, quarterly reporting was most common (figure 6).

However, regardless of size, California nonprofits widely reported problems with reporting. Nearly 80

percent of California respondents reported problems with different reporting formats and different

allowances for administrative expenses and overhead. Organizations that only received grants reported

less intense problems with reporting requirements than those receiving only contracts or both

contracts and grants.

FIGURE 6

Reporting Frequency Requirements, by Size of Organization


16% 19%

8%

57%

22%

49%

13% 16%

9%

64%

4%

23%

Monthly Quarterly Biannually Annually

$100,000–$249,999 $250,000–$999,999 $1 million or more


Late Payments

Almost 60 percent of California nonprofits reported problems with the government paying for services

rendered beyond the contract specification. Governments at all levels owed considerable sums, but

state governments were noticeably more indebted and owed more on average than federal and local

governments combined. Across California nonprofits, such debt appears associated with an expansion

in lines of credit: more than one-third of organizations that reported late payments as a problem had

increased their lines of credit while less than one-quarter of organizations that did not experience

problems had expanded their lines of credit.

Changes to Government Contracts and Grants Midstream

Approximately half of California respondents reported no problems with changes to government

contracts and grants midstream. Of those that reported problems, the most common were increased

reporting requirements, decreased payments for services, and increased service requirements.

Changes in contracts were generally associated with a greater likelihood of adverse effects on

nonprofits, including tapping reserves, reducing staff, or decreasing the number of offices or program

sites (figure 7).

FIGURE 7

Reductions in Operational Capacity in California


44%

18%

14%

4%

57%

23%

13%

9%

Reserves

Number of employees

Number of programs orservices

Number of offices or programsites

Changes a problem Changes not a problem

1 0 N O N P R O F I T - G O V E R N M E N T C O N T R A C T S A N D G R A N T S : C A L I F O R N I A F I N D I N G S

Conclusions

Before this research, the extent of the resources and complexity of the government administrative

processes had not been probed from the vantage point of nonprofits that carry out government-funded

work at the national, state, and local levels. In California as well as nationally, the problems encountered

by nonprofits in our 2009 study persisted into 2012, suggesting systemic shortcomings in government

administration and funding of nonprofit organizations. Consequently, many nonprofits faced financial

and administrative burdens that continued to hamper their financial well-being and attainment of their

missions. Extensive and diverse reporting requirements, late government payments, and government

contracts not covering the full costs of services were particularly burdensome.

Addressing the administrative burdens by developing streamlined reporting and application

processes and paying nonprofits the full cost of services on time would allow nonprofits to focus more

time and effort on achieving the public-service missions that government and nonprofits share.

Methods

In this report we focus on nonprofit–government funding relationships for most types of California

nonprofit organizations in 2012, expanding the analysis of California nonprofits reported by Pettijohn,

Boris, and Farrell (2013). The survey and findings are based on a national, stratified, random survey of

charitable nonprofits that reported $100,000 or more in expenses on Internal Revenue Service Forms

990. We include the following types of nonprofit organizations: arts, culture, and humanities; education;

environment and animals; health; human services; international and foreign affairs; public and societal

benefit; science and social science; and religion (excluding hospitals and higher education). We explore

these funding relationships by program area, organizational size, geography, and level of government

(federal, state, and local). Results are weighted to provide both a representative national sample and a

representative California sample. The sample for California, though statistically representative, is

limited, so the results should be viewed as indicative of trends.

References

Boris, Elizabeth T., Erwin de Leon, Katie L. Roeger, and Milena Nikolova. 2010a. Human Service Nonprofits and Government Collaboration: Findings from the 2010 National Survey of Nonprofit Government Contracts and Grants. Washington, DC: Urban Institute. http://www.urban.org/research/publication/human-service-nonprofits-and-government-collaboration-findings-2010-national-survey-nonprofit-government-contracting-and-grants.

———. 2010b. National Study of Nonprofit-Government Contracting: State Profiles. Washington, DC: Urban Institute. http://www.urban.org/research/publication/national-study-nonprofit-government-contracting-state-profiles.

National Council of Nonprofits. 2013. Investing for Impact: Indirect Costs Are Essential for Success. Washington, DC: National Council of Nonprofits. https://www.councilofnonprofits.org/sites/default/files/documents/investing-for-impact.pdf.

Pettijohn, Sarah L., and Elizabeth T. Boris, with Carol J. DeVita and Saunji D. Fyffe. 2013. Nonprofit-Government Contracts and Grants: Findings from the 2013 National Survey. Washington, DC: Urban Institute.

http://www.urban.org/research/publication/human-service-nonprofits-and-government-collaboration-findings-2010-national-survey-nonprofit-government-contracting-and-grants

http://www.urban.org/research/publication/human-service-nonprofits-and-government-collaboration-findings-2010-national-survey-nonprofit-government-contracting-and-grants

N O N P R O F I T - G O V E R N M E N T C O N T R A C T S A N D G R A N T S : C A L I F O R N I A F I N D I N G S 1 1

http://www.urban.org/research/publication/nonprofit-government-contracts-and-grants-findings-2013-national-survey.

Pettijohn, Sarah L., Elizabeth T. Boris, and Maura R. Farrell. 2013. National Study of Nonprofit-Government Contracts and Grants 2013: State Profiles. Washington, DC: Urban Institute. http://www.urban.org/research/publication/national-study-nonprofit-government-contracts-and-grants-2013-state-profiles.

US Government Accountability Office. 2010. Nonprofit Sector: Treatment and Reimbursement of Indirect Costs Vary among Grants, and Depend Significantly on Federal, State, and Local Government Practices. GAO-10-477. Washington, DC: US Government Accountability Office. http://www.gao.gov/new.items/d10477.pdf.

Wing, Kennard, Mark Hager, Patrick Rooney, and Thomas Pollak. 2005. “Paying for Not Paying for Overhead.” Foundation News and Commentary 46 (3). nccsdataweb.urban.org/kbfiles/634/Paying%20for%20Not%20Paying%20for%20Overhead.htm.

About the Authors

Brice McKeever is a research associate in the Center on Nonprofits and Philanthropy at the Urban

Institute, where he primarily performs quantitative research for the center’s National Center for

Charitable Statistics. Among other projects, his work has included a series of briefs on how the Great

Recession affected the nonprofit sector; a study on potential predictors of future nonprofit failure; and

a longitudinal analysis of arts organizations in six major metropolitan areas as part of a study funded by

the National Endowment for the Arts. Concurrent with his work at Urban, McKeever is pursuing a PhD

in sociology at the University of Virginia, with concentrations in political and historical comparative

sociology.

Marcus Gaddy is a research associate in the Center on Nonprofits and Philanthropy at the Urban

Institute. He works with various teams focused on the hybrid space between nonprofits and for-profit

business, nonprofit program evaluation, and performance measures. Gaddy holds a BS in economics

from Ohio State University and an MPP from the University of Maryland.

Elizabeth T. Boris became the founding director of the Center on Nonprofits and Philanthropy at the

Urban Institute in 1996. The center conducts research on the role and impact of nonprofit organizations

and the policy issues that affect them. The center also hosts the National Center for Charitable

Statistics, which builds and maintains the nation’s largest research database on nonprofit organizations.

She holds a BA from Douglass College, Rutgers University, with honors and Phi Beta Kappa, and an MA

and PhD in political science from Rutgers University.

http://www.gao.gov/new.items/d10477.pdf

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Acknowledgments

This brief was funded by the Weingart Foundation. We are grateful to them and to all our funders, who

make it possible for Urban to advance its mission. Funders do not, however, determine our research

findings or the insights and recommendations of our experts. The views expressed are those of the

authors and should not be attributed to the Urban Institute, its trustees, or its funders.

The Urban Institute's Center on Nonprofits and Philanthropy conducts and disseminates research

on the intersection between nonprofit organizations, philanthropy, government and community to

inform decisionmaking. Through the National Center for Charitable Statistics, we create and maintain

research-quality data sources on the sector, translating data on size, scope, and financial trends.

This study is made possible by a previous collaborative project between the Urban Institute’s

Center on Nonprofits and Philanthropy and the National Council of Nonprofits. The original data used

for this report was funded by the Bill & Melinda Gates Foundation.

The authors also thank Sarah Pettijohn, Carol J. DeVita, Saunji Fyffe, and Maura Farrell for their

work on previous reports using the aforementioned data that formed the foundation for the current

study. Thanks also to Tim Triplett for assistance with the survey, weighting, and other methodological

support.

ABOUT THE URBAN INST ITUTE The nonprofit Urban Institute is dedicated to elevating the debate on social and

economic policy. For nearly five decades, Urban scholars have conducted research

and offered evidence-based solutions that improve lives and strengthen

communities across a rapidly urbanizing world. Their objective research helps

expand opportunities for all, reduce hardship among the most vulnerable, and

strengthen the effectiveness of the public sector.

Copyright © September 2015. Urban Institute. Permission is granted for

reproduction of this file, with attribution to the Urban Institute.

2100 M Street NW

Washington, DC 20037

www.urban.org

Attachment D

MOTION SOLIS ___________________________

RIDLEY-THOMAS ___________________________

KUEHL ___________________________

KNABE ___________________________

ANTONOVICH ___________________________

AGN. NO.

MOTION BY SUPERVISOR HILDA L. SOLIS AND SUPERVISOR KUEHL November 3, 2015 Request the CEO to make recommendations for implementing Office of Management and Budget Uniform Guidance related to indirect cost reimbursement by government to nonprofits.

The County and charitable nonprofit organizations share a mutual commitment to

improving lives and communities. Nonprofits, which make up 6.6% of the County

workforce, are key partners with County government in implementing programs that

provide critical services to the public, such as health care, human services, and housing-

related services.

At the same time, research demonstrates that nonprofits providing services on

behalf of governments often are not paid the full costs of services performed. In particular,

nonprofits are not sufficiently reimbursed for indirect costs necessary to operate.

Sometimes called “overhead,” these costs include administrative expenses, facilities

costs, utilities, and other ongoing operational expenses not directly associated with a

specific project.

A recent study by the Urban Institute entitled “Nonprofit-Government Contracts and

Grants/California Findings” found:

• Over 5,000 nonprofit organizations receive an estimated $14 billion in government

contracts and grants in California alone.

• One-quarter of California nonprofits rely on government funding for 60% or more

of their funding.

• Approximately 7 in 10 nonprofits in California report that the government funding

they receive fails to cover the full cost of their services.

Recognizing this deficiency and the unfair burden that it places on nonprofits receiving

government funding, the Federal Office of Management and Budget (OMB), on December

26, 2014, promulgated the Uniform Administrative Requirements, Cost Principles, and

Audit Requirements for Federal Awards, commonly known as the OMB Uniform

Guidance, which merges eight separate OMB circulars and codifies them in the Code of

Federal Regulations. The OMB Uniform Guidance expressly mandates that government

agencies (local, state, and federal) that hire nonprofits to deliver services using federal

funds must now reimburse those nonprofits for their reasonable indirect costs. It requires

that nonprofits be reimbursed at a standard minimum rate of no less than 10% of their

total direct costs to support the fundamental operations of the organization. Nonprofits

that have negotiated a federal indirect cost rate must be paid that negotiated rate. This

requirement to reimburse indirect costs represents the federal government’s official

recognition that all governments entering into written agreements with nonprofits to

deliver services to the public have an affirmative duty to pay their fair share of the costs

that those nonprofits incur.

The County has a strong interest in the successful implementation of the OMB Uniform

Guidance related to nonprofit overhead to strengthen further nonprofit services within its

jurisdiction. Further, it is required to be in compliance with this federal mandate when it

distributes federal funds.

WE, THEREFORE, MOVE THAT THE BOARD OF SUPERVISORS direct the CEO to:

1. Report back to the Board within 120 days with recommendations on

implementation of the OMB Guidance related to paying the reasonable indirect

costs of nonprofit services with federal funds in Los Angeles County.

2. In developing these recommendations, consult with County nonprofit and

philanthropic leaders for their input and advice.

3. Send a five-signature letter urging State leadership in implementation of the OMB

Guidance related to nonprofits.

# # #

HLS:aa SK:to

Attachment E

New guidelines will make L.A. County’s nonprofit sector more robust: Hilda Solis and Fred Ali By Hilda L. Solis and Fred Ali

Posted: 11/12/15, 10:37 AM PST

Each day, more than 30 survivors of domestic and sexual violence from all over Los Angeles County reach out to Center for the Pacific Asian Family (CPAF) seeking shelter, health care, legal aid and help with English-language skills and job training. In short, members of this 30-person staff — who speak 15 languages — offer hope when hope is needed most.

CPAF does its work while weaving together more than 20 government grants, some as small as $9,000, as well a dozen grants from private foundations. An individual counselor, CPAF’s heart and soul, can be funded by as many as eight different sources during any one year. Almost inevitably, these contracts cover different costs, provide varying “overhead” rates (including zero). The accounting and compliance issues are so complex that CPAF’s executive director, Debra Suh, estimates that 20 percent of staff time — the equivalent of one day a week — is spent managing the contracts and collecting the information needed to report on them.

CPAF is not alone in reporting such a burden. According to a new study by the Urban Institute, about 70 percent of nonprofits in California face trouble due to payments not covering the full cost of services. In addition, more than 80 percent of nonprofits find the complexity of and time required by application processes to be a challenge. About 50 percent report problems with governments making changes “midstream.” And about 60 percent report problems with late payments from government funders.

During the past year, the federal government has begun taking important steps to address these issues. It is updating its rules governing its grantmaking, which includes dollars that come from Washington to local government agencies including Los Angeles County. These rules streamline federal oversight, simplify reporting requirements, clarify auditing procedures and mandate coverage of a nonprofit’s indirect cost of providing services, such as administrative positions and auditing or human resources expenses. As with any major change, this one is taking time, involving significant adjustments to longstanding practices by government, philanthropies and nonprofits, alike. But progress is being made.

This month, the Los Angeles County Board of Supervisors approved a motion to ensure that our county effectively implements these new guidelines, focusing particularly on how to cover the full cost of nonprofit work being done on behalf of government. This step by the Board of Supervisors is the first by a county in the nation. Because the issue involves the partnership between government and nonprofits, the county will be working closely with leaders from philanthropies and nonprofits to assess the issue and provide meaningful solutions. A report with concrete recommendations is due early next year, and it promises to serve as a model to others. Given the number of nonprofits in Los Angeles — more than 18,000, according to UCLA Center for Civil Society — other government agencies from across the country are watching to see what we accomplish.

Attachment E

This effort will result in a more robust and sustainable nonprofit sector, which is a win for us all. The impact of public dollars invested in our county’s service network will be maximized. And those in need across all of our communities will be better cared for and served.

Los Angeles County Supervisor Hilda L. Solis represents the First District. Fred Ali is president and CEO of Weingart Foundation.

http://www.dailynews.com/opinion/20151112/new-guidelines-will-make-la-countys-nonprofit-sector-more-robust-hilda-solis-and-fred-ali



STATE OF CALIFORNIA

BUDGET LETTERNUMBER:

15-26

SUBJECT: U.S. OFFICE OF MANAGEMENT AND BUDGET’S (OMB)GUIDANCE FOR FEDERAL AWARDS

DATE ISSUED: November 6, 2015

REFERENCES: TITLE 2 OF THE CODE OF FEDERAL REGULATIONS (CFR) PART 200

SUPERSEDES:

MACRO USED: H:\Prod\Template\Bgt-Ltr.macm

TO: Agency Secretaries Department Directors Departmental Budget and Accounting Officers Department of Finance Budget Staff

FROM: DEPARTMENT OF FINANCE

Note: Departments are requested to forward a copy of this Budget Letter (BL) to other personnel dealing with federal awards.

This BL is to ensure state departments are aware of the new federal uniform guidance, titled, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” issued by the U.S. Office of Management and Budget (OMB). This guidance supersedes and streamlines requirements from the following eight OMB Circulars: A-21, A-50, A-87, A-89, A-102, A-110, A- 122, and A-133. The guidance is located in Title 2 of the CFR Part 200 and the full text isavailable at: http://www.ecfr.gov

For state departments, the administrative requirements and cost principles apply to new federal awards and to additional federal funding of existing awards made after December 26, 2014. Existing federal awards made prior to December 26, 2014, will continue to be governed by the terms and conditions of the federal award. For questions regarding the application of the new uniform guidance to your department’s grants, contact the federal awarding agency to ensure compliance and to clarify any issues.

Additional resources that may be helpful:

OMB Circular Guidance FAQs https://cfo.gov/wp-content/uploads/2015/09/9.9.15-Frequently-Asked-Questions.pdf

Department of Finance’s (Finance) webpage for Pro Rata and SWCAP resources and Power Point presentations (Developing an Indirect Cost Rate Proposal) http://www.dof.ca.gov/accounting/fscu/pro_rata-swcap/

For questions regarding this BL, please contact Finance, Fiscal Systems and Consulting Unit at (916) 324-0385 or by e-mail at [email protected].

/s/Veronica Chung-Ng

Veronica Chung-Ng Program Budget Manager

Attachment F

http://www.ecfr.gov/

https://cfo.gov/wp-content/uploads/2015/09/9.9.15-Frequently-Asked-Questions.pdf

http://www.dof.ca.gov/accounting/fscu/pro_rata-swcap/

mailto:[email protected]

Attachment G

Documents

M E M O R A N D U M TO: Southern California Grantmakers ... · M E M O R A N D U M TO: Southern California Grantmakers FROM: California Strategies DATE: June 29, 2017 SUBJECT: Report