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June 7, 2010, 02:53 PM ET
Federal Government Needs to Clarify How Grants Cover Charity Costs, Report Says
The way nonprofit groups are reimbursed for work done under federal grants is erratic and needs to be clarified, says a new report by the U.S. Government Accountability Office. Much of the money flows through state and local governments, which offer different rates depending on their policies, it says.
That makes it difficult to get a clear picture of whether the contracts are covering the indirect costs (such as rent or utilities) of the charities doing the work, it says. When such costs are not fully paid for, it adds, the groups cut back on their services -- or on vital "back office" functions, which can over time compromise their ability to fulfill their missions.
Financing gaps "potentially limit the sector's ability to effectively partner with the federal government" and could even "risk the viability of the sector," the report says.
The GAO -- which based its report on interviews, a review of policies and research, and a study of six federal grants awarded to more than 20 local government and nonprofit organizations -- proposes that the Office of Management and Budget bring together representatives of nonprofit groups and federal, state, and local governments to propose ways to clarify how indirect costs should be treated.
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