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In a pair of reports funded by the Bill and Melinda Gates Foundation, the Urban Institute and National Council of Nonprofits examined the issues faced by nonprofit organizations with government contracts or grants. The Urban Institute’s report included a survey with state-by-state breakdowns along with state rankings, and largely focused on the problems acknowledged by nonprofit groups. The National Council of Nonprofits report echoed these findings, but focused the bulk of the report on suggesting recommendations of how to ameliorate these concerns. The problem? Government. Their solution? Government.

The Urban Institute study analyzed 55,702 nonprofits with government contracts and grants. The total government price tag for these contracts and grants was nearly $137.3 billion (for perspective, President Obama’s 2015 budget allots $72 billion of federal discretionary spending towards education and $26 billion to transportation; there, of course, may be overlap in these figures, but they do provide a comparative vantage point). Of these nearly 56,000 nonprofits, 70 percent reported that they work with two or more government agencies. Clearly, these nonprofits are greatly ‘entangled’ with the federal government (and yes, these nonprofits do include religiously-affiliated organizations).

So let us take a look at the survey’s topline. What sorts of problems do these nonprofits report as being problems (the numbers below include “small" problems and “big" problems)?

-          71% report a problem with the “complexity of/time required by application process[es]”

-          71% report a problem with the “complexity of/time required by reporting process[es]”

-          54% report a problem that “payments do not cover full cost of contracted services.”

-          45% report a problem with “late payments (beyond contract specifications)”

-          43% report a problem with “government changes to contracts/grants midstream.”

 So 7 in 10 government-affiliated nonprofit groups have great issues with the application and reporting processes, and over half of these groups claim the payments don’t cover the cost of services. This is clearly a problem, no?

How do the nonprofits respond to such government incompetence?

Twenty-six percent reported that they reduced their number of employees; 13 percent reduced the number of people they served; 42 percent drew on their organization’s reserves; and 53 percent froze or reduced employee salaries.

Without a doubt, the government’s overall ineptitude regarding its affairs with nonprofits indicates the necessity of reform. Thus, turning to the National Council of Nonprofits report, “Toward Common Sense Contracting: What Taxpayers Deserve” spends about half of its focus on suggesting “Common Sense Solutions,” which are categorized into four groups: “Collaborative Problem Solving,” “Accountability for Full and Prompt Payments,” “Elimination of Unilateral Mid-Stream Contact Changes,” and “Simplifying Complex Application and Reporting Requirements.”

Quoted in the Chronicle of Philanthropy (which deserves a h/t for pointing out these two reports), the president of the National Council of Nonprofits, Tim Delaney, stated: “Nonprofits are over a barrel . . . because they recognize the services need to be delivered, but they can’t get paid.”

Unfortunately, NCN’s so-called “solutions” drop the nonprofits directly into the barrel, as they call for more bureaucracy and more laws. On the bureaucracy end, the report calls for “government-nonprofit task forces,” the creation of a “nonprofit liaison” position, “joint training programs” (note: joint training programs adhering to government guidance), and an “independent government office to protect charities from contracting abuses.” While these are certainly well-intentioned efforts to alleviate nonprofit concerns, they merely grant the government more power under the veils of decentralization and accountability (N.B. decentralization in the name of streamlining). If the nonprofits are complaining about the bureaucratic overhead in the current process, is it really appropriate to create more bureaucracy?

On the laws end, NCN calls for “prompt payment laws” and “prompt contracting laws.” If the government cannot follow its own contracts, would a law really fix the mess? While 1 in 10 government-related nonprofit has to reduce the number of people it serves, NCN thinks laws (which would thus bring legal fees, unnecessary time, and a host of new issues to the fore in the case that the government breaks said law) will improve effectiveness.

Of course, there is overlooked nuance in my criticism of the NCN report; however, nuance in the name of unproven, overcomplicated government processes merely inveigles one to support more expansive, still unproven, bureaucracy as the solution. Instead, larger questions regarding scope, effectiveness, and charity should be reexamined to reposition this discussion.

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