GAO Finds Grants to Nonprofits Insufficiently Cover Costs

The Government Accountability Office (GAO) recently released a report on federal grants and nonprofits. Federal policy permits nonprofits to keep a share of contract funds for indirect costs, costs not exclusively associated with particular programs or projects, such as overhead. Unfortunately, state and local governments often keep the money for themselves. "GAO found differences in the rate in which state and local governments reimburse nonprofits for indirect costs."

The report found that federal grants frequently do not provide enough money to cover the complete cost to carry out federal services, and nonprofits struggle to make up for this gap. When the groups are not adequately reimbursed, nonprofits "may reduce the population served or the scope of services offered, and may forgo or delay physical infrastructure and technology improvements and staffing needs."

"Collectively, these issues place stress on the nonprofit sector, diminishing its ability to continue to effectively partner with the federal government to provide services to vulnerable populations."

For more information, visit the National Council of Nonprofits.

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