Explaining the OMB Super Circular – A Reshaping of the Nonprofit/Government Relationship

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July 9, 2015; National Council of Nonprofits and Florida Philanthropic Network

Give credit to the National Council of Nonprofits for playing a crucial role in both promoting the adoption of new uniform guidance from the Office of Management and Budget and educating the nonprofit and philanthropic sectors about what the new rules mean. The Council has been touring the nation, appearing at state nonprofit association convenings and other venues explaining what happened to the old circulars—A-122, A-133, and A-110 (and others)—that have been replaced by OMB’s new reforms for establishing the parameters of what government will and will not require of nonprofits that work on federally-funded contracts.

We’d like to take a moment here to acknowledge not simply Tim Delaney, the president and CEO of the Council, and David Thompson, the Council’s VP for public policy who undoubtedly did much of the detailed negotiations with federal regulators, but also Beth Bowsky, a public policy specialist at the Council who has been widely credited by sources we respect with generating excellent training materials on the OMB changes.

As NPQ has noted in covering the emerging parameters of the OMB Uniform Guidance, a key change applicable to nonprofit contractors is the requirement of federal agencies directly contracting with nonprofits and subgrantors with federal funds contracting with nonprofits (actually all written agreements, whether contracts or grants) to compensate nonprofits for their indirect costs. Nonprofits that had already negotiated federally approved indirect cost rates have to stay at those rates, but nonprofits without approved indirect cost rates can opt for either a de minimus 10 percent indirect rate or to try to negotiate a higher amount with the contracting agency or pass-through agency.

The importance of the Council’s training slides and other explanatory materials is to make sure that nonprofits become educated about the new guidelines and prepared for potential federal agency administrators trying to skip out from under the requirements—for example, asking nonprofits to waive their entitlement to indirects entirely or pass-through entities contending that their grant or contract funds aren’t really federal.

There is some debate within the sector about just how momentous—or not—the OMB “Super Circular” is for nonprofits. Our suspicion is that for many nonprofit contractors already doing a lot of business with the federal government, the new regulations may not be hugely different, but for new organizations entering the federal contracting or grant process, they establish ground rules that are the platform for what nonprofits can and should expect from their government partners. Over time, however, like A-110, A-122, and A-133, the OMB Super Circular will gravitate into many realms of nonprofit-government interaction, setting parameters for legitimate partnerships through grants and contracts, and even seeping into the thinking of state and local government players.—Rick Cohen