A National Imperative: Joining Forces to Strengthen Human Services in America (Jan 2018)

For government contracts, spending caps prevent human services CBOs from covering their indirect but necessary costs associated with delivering services. Disallowed expenses can prevent CBOs from pursuing more effective treatment strategies. Restrictions on the types of services covered can prevent CBOs frommeeting community needs. For example, CBOs may not be allowed to use funding earmarked for housing services to address the actual, root causes of homelessness, such as substance abuse or mental health disorders. A human services CBO leader from Florida explained the tough choice he faced: “You can create programs to meet guidelines and get paid, or you can create programs that you know work better and not get paid. That’s a tough place to be in as a mission-driven organization.” In 2014, the OMB issued UniformGuidance (“Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”) intended to simplify and consolidate guidance to CBOs on which types of costs should be considered allocable to government contracts. 19  The guidance is intended to apply nationally to state and local contracts with CBOs to ensure consistent and fair contracting processes. Unfortunately, in our discussions with CBOs, many report that understanding of the UniformGuidance remains uneven within the state and local agencies with whom they contract. In many cases, the UniformGuidance is poorly understood, unevenly implemented, and has had little impact on the actual contracting process at the state and local level. Overall, the constraints imposed by government contracts results in: a) expensive and time-consuming negotiations and accounting, b) an inability to allocate and include some critical costs; c) greatly reduced flexibility for human services CBOs’ management and boards to determine how best to spend their organizations’ money; and d) limited ability to invest in new capabilities and infrastructure. GOVERNMENT FUNDING We asked human services CBOs to estimate the percent of their expenses covered by government funding. We also asked government agencies to provide an estimate for the average CBO. Both human services CBOs and government agencies estimated that government funding covers about 70 cents on the dollar for direct program expenses. Human services CBOs reported that government funding covers just 30 cents on the dollar for indirect expenses, but government agencies provided an equivalent estimate of 44 cents on the dollar. In other words, government agencies appear to acknowledge that they provide limited funding for indirect expenses, but still overestimate the amount by nearly 50% relative to CBOs’ own views. 18 INFLEXIBLE SPENDING Over 60% of human services CBO and public agency leaders agreed that inflexible funding impedes the impact and overall strength of the human services ecosystem. NATIONAL IMPERATIVE SURVEY RESULTS:

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