TAKE ACTION: Testimony Needed by Monday to Support Raising Indirect Cost Minimum Rate
By Henry Bogdan, Public Policy Director, Maryland Nonprofits
The Senate Budget and Tax Committee is hearing SB 127 by Senator Kagan “State Government – Grants and Contracts – Reimbursement of Indirect Costs” on next Wednesday Jan. 22. Testimony -live or written- must be filed on the MGA site between 8:00 AM and 6:00 PM, Monday 20. We need your support!
Last year the Office of Management and Budget (OMB) revised the “Uniform Guidance” (2 CFR 200) and increased the de minimis indirect cost rate to 15%. The Final Rule Announcement stated that “in response to feedback from the Federal financial assistance community, OMB proposed to raise the de minimis rate from 10% to 15%. OMB explained that this change would allow for a more reasonable and realistic recovery of indirect costs, particularly for new or inexperienced organizations that may not have the capacity to undergo a formal rate negotiation, but still deserve to be fully compensated for their overhead costs.” It also noted this was supported by over 250 commenters on the initial draft regulation, and that others urged a rate of 20% or more. Many estimates of the actual indirect costs to nonprofit service providers exceed 20%.
Senate Bill 127, and House Bill 300, will raise Maryland’s minimum rate from 10% to “the de minimis rate established in Subpart E of OMB Uniform Guidance”, now 15% and automatically tied to any future OMB increases.
This change should be adopted for several reasons:
One of the reasons Maryland adopted its current minimum indirect rate was to help simply the state grant process by aligning to the same standard agencies were required to follow with most federally funded agreements –so matching the new federal standard is simply a common sense update.
By using the standard ‘as set by’ OMB, from instead of again adopting just the current 15% rate, these bills assure that future changes in federal regulations don’t require continuous legislative actions. In 2020 the Legislature created the MD Efficient Grant Application (MEGA) Council to work on establish a standardized grants process for the state, to be consistent with the OMB Uniform Guidance.
Most importantly, the current 10% rate is widely acknowledged to be not only inadequate but a contributing factor to the “starvation cycle” that destabilizes nonprofit providers. Since the 10% rate was set nonprofits have suffered through the pandemic and many have seen charitable contributions decline in real terms.
Past studies by the U.S. Government Accountability Office found that underfunding providers negatively impacts the quality of their services and financial sustainability. Now the people and communities these organization serve, on behalf of government, face the threat of limitations or cutbacks in both state and federal support –that will only increase demands for their services.
HELP US by testifying or submitting written statements in support of Senate Bill 127 next week. Again, written testimony, and witness sign-up must be done on the MGA website between 8:00 AM and 6:00 PM on this coming Monday 20. We need stories that can show policy-makers how underfunding impacts nonprofits and services to their constituents.
Please, email me at hbogdan@mdnonprofit.org if you have any questions about the bills or the testimony sign-up/ submission process. You need a free MGA account in order to access committee sign-up (takes 5 minutes or less!).