April was a particularly active month in terms of grant and procurement news specific to nonprofits. The White House issued guidance on reducing the administrative burden related to grants and other forms of financial assistance in the wake of the sequester, as well as a proposed budget for fiscal year ("FY") 2014, which includes specific efforts aimed at strengthening nonprofits and other organizations. The National Council of Nonprofits issued a report that provides recommendations for streamlining the government-nonprofit contracting process. And the U.S. Supreme Court heard oral arguments on a case that may have significant ramifications on the strings that the government can attach to grants.

More News on the Sequester: Guidance to Reduce Administrative Burdens

On April 4, 2013, the U.S. Office of Management and Budget ("OMB") released additional guidance to federal agencies regarding how it will manage and administer the sequestration budget cuts. Among other topics, the guidance discusses how agencies can reduce the burden of sequestration for state, local and tribal governments. Specifically, the memorandum advises that:

To the extent agencies provide grants or other forms of financial assistance to States, localities, or tribal governments, agencies should consider if there are ways to help such entities mitigate the effects of funding reductions due to sequestration through reducing administrative burdens or other standard administrative processes, consistent with applicable legal requirements associated with the funds provided.

While this guidance does not spell direct relief for nonprofits in the grant world, it may provide such organizations with the ability and authority to seek relief from unnecessary administrative burdens and processes.1

The President’s FY2014 Budget

Earlier this month, President Obama released a proposed budget for FY2014, which aims to “strengthen[] nonprofits, philanthropic, faith-based and other community organizations on multiple fronts . . . .” To this end, the budget, broadly speaking, proposes to “invest[] in innovative nonprofits,” “engage[] nonprofits in community-based solutions,” increase the “use of evidence in social services,” “strengthen[] national service opportunities,” “support[] local volunteerism,” “improve[] reporting requirements for nonprofits,” and “improve[] [the] use of evaluation.”2 Some of the highlights include:

  • Investments in innovative nonprofits.
    • “Strengthen[] financing to scale proven community solutions” by proposing an investment of $49 million in the Social Innovation Fund,3 four million of which is dedicated to a pilot program “to improve grantee access to State and federal administrative data.”
    • “Expand[] innovation in education and workforce development” by investing $215 million in Innovation (i3),4 $150 million in Workforce Innovation Fund,5 and by creating a $260 million First in the World fund.6
  • Engagement of nonprofits in community-based solutions.
    • “Partner[] with communities to help them rebuild” by investing in three key programs supporting Promise Zones to “promote partnerships across the public, private, and nonprofit sectors:”
      • $300 million in Promise Neighborhoods,
      • $400 million in Choice Neighborhoods, and
      • $35 million in Criminal Justice Innovation Grants.
    • “Increase[] funding for homeless assistance grants” by providing $2.4 billion for Homeless Assistance Grants.
  • Increase in the use of evidence in social services.
    • “Expand[ing] pay for success to drive results” by broadening support for Pay for Success,“ reserving up to $185 million in the areas of job training, education, criminal justice, housing, and disability services.”
    • “Creat[ing] performance partnerships that provide flexibility while demanding results.”
  • Strengthen national service opportunities.
    • “Support[] national service” by funding “approximately 82,000 AmeriCorps members through the Corporation for National and Community Services (CNCS) core programs.”
    • “Leverage[] service as a solution” by continuing support for FEMA Corps and School Turnaround AmeriCorps, and supporting an additional 1,600 AmeriCorps members.
  • Support local volunteerism.
    • “Increase[] the capacity of nonprofits to support volunteers” by providing $10 million for the reactivated Volunteer Generation Fund.
    • “Strengthen[] programs that engage seniors.”
  • Improvement in reporting requirements for nonprofits.
    • “Expand[] e-filing to all tax-exempt organizations” by phasing in a “requirement that all tax-exempt organizations file their returns electronically” and requiring “the IRS to release those data in a machine-readable format in a timely manner.”
    • “Ensure[] [that] recipients of federal awards are properly reimbursed” by proposing “new guidance that adds a minimum reimbursement rate of 10 percent of direct costs, available for up to four years of the grant.” “OMB is seeking input through early June on this [matter] and other proposed guidance that seek to reduce the administrative burden or nonprofits and other grant recipients.”
  • Improvement in the use of evaluation.
    • “Learn[] and share[] what works" by supporting “new evaluations across the Government to demonstrate and analyze program impacts in areas ranging from health care to housing, from education to employment, and from international development to community development.”7

Streamlining Costs

On April 4, 2013, the National Council of Nonprofits (“NCN”) issued a report – Partnering for Impact: Government-Nonprofit Contracting Reform Task Forces Produce Results for Taxpayers8– that provides recommendations to streamline the government-nonprofit contracting process. The report focuses on recent efforts in nine states (Connecticut, Hawaii, Illinois, Maine, Maryland, New Jersey, New York, North Carolina, and Texas) where joint task forces are making progress in fixing inefficient systems in their states and saving taxpayers money by eliminating redundant processes, promoting online document repositories, and initiating other solutions. The report is the third in a series offering state and local governments solutions to improve nonprofit contracting processes. While the report focuses on taxpayer savings at the state and local levels, it would seem that some of the recommendations and processes could apply at the federal level as well.

U.S. Supreme Court Hears Grant Case

On April 22, 2013, the U.S. Supreme Court heard oral arguments in the case of Agency for International Development v. Alliance for Open Society International (No. 12-10). Alliance presented the question of whether a 2003 law that attached certain conditions to a grant violated the First Amendment of the U.S. Constitution. Specifically, the question before the Court was whether grantees receiving federal funds to combat AIDS abroad could be required to adopt policies opposing prostitution. The organization challenging the 2003 law neither promoted nor approved prostitution, but argued that the law contained a flaw that “requir[ed grantees to] profess a personal belief, and refrain from certain private speech outside the context of the government program.” While the policy of the law appears laudable on its face, requiring organizations to adopt certain policies outside of the government’s sphere of influence certainly raises far-reaching questions for nonprofits in their dealings with federal, state and local governments. Consequently, the decision of the U.S. Supreme Court in this case could have important ramifications for nonprofits and grantees.9