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Special Report on the Government-Nonprofit Partnership

In this holiday season we tend to focus on the role of individual contributions to charities. This is an important subject since many nonprofit organizations receive the bulk of their giving during the last few months of the year. But many nonprofits receive the majority of their funds not from individual donations but from service fees and contracts, particularly those in vitally-needed health and social service agencies. Sunday’s New York Times reported on the mounting debts of states, nearing several trillion dollars, and predicting a crisis point where “it could overwhelm them in the next few years.”

A new study underscores the vulnerability of state and local revenues and how it is beginning to impact nonprofit organizations. Released by the National Council of Nonprofits (NCN), the special report concludes that “The decisions to rely on nonprofits to provide services have sound policy, economic, and administrative justifications. Yet the convoluted, disjointed, and patch-worked laws and practices by which governments contract with nonprofits have led to nonpayment, underpayments, and late payments to nonprofits, in part because contracting and reporting processes have become excessively complex and irrational.”

The report lists a few of the problems occurring in many states:

  • Government does not pay full cost of the services provided
  • Contracts terminated mid-term
  • Salaries frozen or reduced
  • Jobs eliminated
  • Late payments
  • Benefits eliminated
  • Burdensome contracting
  • Excessive reporting requirements

Among the shocking results included in the report:

  • Illinois’ Comptroller released a 50-page list of more than 2,000 nonprofits that the state has failed to pay almost half a billion dollars – and that’s for just the first half of this year;
  • New York’s Comptroller found that 92.5 percent of the state’s contracts with nonprofits were late and the state had delayed paying numerous nonprofits for multiple years;
  • The U.S. Government Accountability Office found that – for a single federal program – some states pass all dollars to the nonprofits to pay for the services while other states take funds for themselves; and
  • The Congressional Research Service warned, “It appears that governments, especially state governments, may be contributing to the financial difficulties of nonprofit organizations, even to the point of not paying for contracted services.”

NCN takes a surprisingly optimistic outlook on solutions – probably more upbeat than I can muster as we work through this recession. Their special report concludes, “Although the convoluted ‘system’ is multi-jurisdictional, multi-layered, and excessively-complex, the solutions are fairly straightforward. Rather than requiring a big investment of money, most of the solutions can be achieved through intentional coordination and discipline in follow-through to make positive change for those being served, taxpayers, and the community at large.”

If you’re interested in learning more and sharing information about what is happening in your state (for better or worse) as well as your ideas for healing the broken system you can go to this link:

Bob.jpgThe preceding is a guest post by Bob Ottenhoff,  Chief Executive of the Center for Disaster Philanthropy. With an entrepreneurial spirit, strong technology focus, and a quest to make an impact in the world, Bob has the ability to take an organization and lead it into strong performance, sustainability, and industry leadership.

Topics: Legal Nonprofits