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

also make it easier for CBOs to borrow against amounts due from funders by allowing these payments to be more easily assigned to lenders.

An important and simple step in this direction would be for government agencies to commit to more robust and uniform enforcement of the cost and contracting guidelines contained in the 2014 OMB UniformGuidance. 30 Finally, we recommend that funders also explore the creation of pooled capital funds that wouldmake financial resources available to CBOs in the event of financial distress. Many CBOs do not have, and will find it difficult to develop, the level of financial resources necessary to act as buffers against distress. Moreover, were they to do so, the aggregate amount of these financial resources would be very large – and holding them in reserves rather than using them to support program delivery or organizational development would be costly. Because not all CBOs are likely to be financially distressed at the same time, though, pooled funds could provide a more capital-efficient way of protecting CBOs from distress. These funds could be organized to support specific sub-sectors or specific geographies, as appropriate. The funds could be managed as a source of short-term funds, likely provided via loan agreements, but with the same purpose and effect as in-house capital which would normally be drawn down in times of stress and need, and replenished subsequently. Lenders specifically need to assess their underwriting criteria to ensure that they appropriately reflect the reality of CBOs’ business models (while still meeting the lenders’ needs to evaluate and control credit risk). They should also revisit their policies and practices to ensure that CBO lending is an active part of their internal CRA programs. We also recommend that regulators and legislators explore how they also might more effectively promote growth in the social capital markets. Possibilities could include, for example, making it easier for human service CBOs eligible to participate in the issuance of public municipal bonds; the provision of public default protection on loans made to qualifying CBOs; or enhanced/expanded CRA treatment for bank loans to CBOs. Human services CBOs are subject to a wide range of regulations, many of which are overlapping or even contradictory, covering reporting requirements, standards for service delivery protocols, and more. Many of these regulations were initially and well intentionally designed to protect the privacy and well-being of the recipients of CBOs’ services, and many of these regulations do provide tangible benefits and value. The compliance burden for CBOs, however, is substantial, both in terms of time and hard dollar costs. The full portfolio of applicable CBO regulations has been developed over time, which has also led to the duplication, overlap, conflict between individual regulations within and across agencies, and regulations simply becoming outdated.  NORTH STAR #5: REGULATORY MODERNIZATION

Accordingly, we call on regulators to commit to a fundamental review and reform of human services CBO regulation, and to work together in partnership with CBOs to:

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