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Nonprofit News: Federal, State, and Local Governments Are Now Required to Pay Overhead Costs Incurred By Nonprofits


New rules from the federal Office of Management and Budget (OMB) now require all levels of government – federal, state, and local – to reimburse non-profits for “reasonable” overhead and administrative costs incurred while working on government projects. The new rules, called the Uniform Guidance, took effect on December 26, 2014 and apply to any projects that are funded wholly or partially through government funds.

  The minimum amount to be reimbursed, as dictated by the Uniform Guidance, is 10% above the direct costs spelled out in grants or contracts; however, there are opportunities for non-profit organizations to negotiate higher indirect cost reimbursement rates.

According to the Chronicle of Philanthropy, “To many nonprofits, it’s probably hard to imagine that the federal government is the source of meaningful traction to wipe away widespread perceptions that nonprofits can work miracles without the administrative and other costs that make service delivery possible. But that is just one reason the rules are so exciting. They promise benefits for everyone: governments, nonprofits, grant makers, and the public. Nevertheless, the real work has only just begun. Nonprofits and foundations will play a critical role in determining whether the new rules are carried out in a way that meets their full promise—or if they end up doing little.”

Indeed, the new rules don’t enact meaningful change unless all levels of government are educated and on-board, and non-profits educate themselves on the new rules and advocate for their rights. There is much work to be done on both sides.  Luckily for the independent sector, the National Council of Nonprofits has put out a“Know Your Rights” document to help walk non-profit organizations through the process.  For more information about the Uniform Guidance’s impact on non-profits, visit the Chronicle of Philanthropy.

The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources believed to be reliable, but there is no guarantee as to its accuracy. This communication does not constitute a legal opinion and should not be relied upon for any purpose other than its intended educational purpose.

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