Report Outlines Problems With Government Contracts for Nonprofits

Nonprofit groups are facing a growing wave of problems with the way the government processes and awards contracts that are supposed to help these groups provide services to the needy, according to a new report by the National Council of Nonprofits.

In the report—“Costs, Complexification, and Crisis: Government’s Human Services Contracting ‘System’ Hurts Everyone”—the council says these problems have been exacerbated by the bad economy.

“That the ‘system’ for contracting for human services is broken cannot be denied: Governments contract with nonprofits to deliver needed services but then don’t pay full costs, sometimes don’t pay at all, and too often use administrative processes that seem designed to exhaust rather than assist communities,” said Tim Delaney, chief executive of the National Council of Nonprofits.

Part of the problem, the council said, is that the process for applying for government grants has become much too complex.

“Bidding burdens, needless red tape, and other government contracting policies and bidding practices routinely impose avoidable inefficiencies, create waste, reduce the amount of services delivered to individuals and communities in need, and add costs to taxpayers,” the council said.

The report suggests solutions to contracting problems that could be followed by government agencies, nonprofit organizations, citizens, and others.

One approach: Legislatures in each state “should require state and local governments to reimburse nonprofit contractors for a statutory substantial late-payment interest penalty, or their actual costs of securing credit as they await payments from the government, whichever is greater, and provide mechanisms so these laws can be strictly enforced.”

The report from the National Council of Nonprofits was made public in conjunction with the release of a report from the Urban Institute, “Human Service Nonprofits and Government Collaboration: Findings from the 2010 National Survey of Nonprofit Government Contracting and Grants.”