Policy Alert: Reimbursement of Indirect Costs on State Grants and Contracts (SB 1045)
Senate Bill 1045, enacted by the 2018 General Assembly, is a modest step to help the sustainability of our smaller nonprofit service organizations, and to streamline and simplify the treatment of indirect costs across state agencies and other intermediaries (or ‘pass
Why was this necessary?
Sustaining a healthy community of willing qualified providers is crucial for state programs – consistent underfunding seriously threatens that. A significant number of nonprofits, some believe a majority, have less than 30 days operating reserves. Underfunding by not allowing indirect costs, coupled with administrative burdens and often payment delays are serious threats. But many state service contract or grants still limit or disallow the nonprofit providers’ actual indirect costs of administering the grants or contracts
What does Senate Bill 1045 do?
that nonprofit service providers
What are “Indirect Costs”?
Senate Bill 1045 uses the same definition that applies to most federal funds being passed through state & local governments:
- Indirect (F&A) costs means those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved …. “OMB Uniform Guidance
- “typical examples of indirect (F&A) cost for many nonprofit organizations may include depreciation on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting.” OMB Uniform Guidance
Questions? Contact Henry Bogdan, Public Policy Director, Maryland Nonprofits.