Testimony of Joanna Blotner, Director of Government Affairs, before the Committee on Public Works and Operations

Good morning, Committee Chair Nadeau, and thank you for holding today’s hearing on the Nonprofit Services Preservation Amendment Act of 2025, a bill that DC Action was proud to partner with your office to draft and introduce. DC Action uses research, data, collective action, and a racial equity lens to break down barriers that stand in the way of all kids reaching their full potential. We also convene three coalitions composed predominantly of nonprofit direct service providers – the Under 3 DC Coalition, the Out-of-School-Time Coalition, and Youth Economic Justice Coalition – and our extensive work with nonprofit service providers led us to join the Steering Committee of the DC Coalition for Nonprofit Equity. The simple fact is that the District’s nonprofit service providers cannot achieve their missions or help kids reach their full potential if every time they accept a grant or contract from the District, they do so at a financial loss. Failure to compensate nonprofits for their indirect costs – the full and shared organization-wide business costs of operating – means lower quality services, diminished outcomes, and severed relationships for District residents with the greatest need. When it comes to serving vulnerable children and families, DC Action believes that the city can’t afford NOT to invest in fair compensation of our hardworking nonprofits who are stretched further and further every day to meet the needs of their clients and community. 

Bill 26-249 strives to alleviate some of the financial hardship nonprofits experience when delivering services to District residents. In addition to raising the floor of the de minimus rate nonprofits would be eligible to receive from the District (raising from 10% to 15%), this bill helpfully clarifies and standardizes many government practices around indirect costs that will improve the stability of our nonprofit sector. I want to highlight important provisions of this legislation – in addition to the de minimus increase – that we urge the committee to preserve as the bill advances: 

1. The bill makes clear that indirect costs should be paid out on top of what it requires an organization to deliver the direct services required of a grant agreement or contract; compensation for indirect costs should not have to come at the expense of reducing services for District residents. (Lines 33-35)
   
   
2. The bill enables the de minimus indirect costs rate to increase for inflation to help organizations keep pace with the rising costs of doing business. (Lines 37-39)
   
   
3. The bill reduces administrative burdens on the District government and on nonprofit organizations by allowing negotiated indirect cost rates to be honored across agencies, for up to three years, and based on audits conducted within the past three years, recognizing how long some audits can take and that they may not align with grant or contract cycles. (Lines 42-50) 
4. The bill reduces administrative burdens on small nonprofits (annual revenue less than $250,000) when negotiating an alternative indirect cost rate, understanding that undergoing a formal audit with a certified public accountant is an unaffordable barrier for many small nonprofits. (Lines 51-54)
   
   
5. The bill prohibits discrimination in grant and contract decisions on the basis of an organization’s requested or negotiated indirect costs rate. Nonprofit organizations should not be put in a position of underbidding one another and shortchanging their true costs in order to win a District grant or Contract. (Lines 56-62)
   
   
6. The bill requires the District to include, standardize, and use plain language regarding indirect cost rights in all District grant and contract solicitations for nonprofit services, and to promulgate a standardized and community-informed set of rules regarding indirect cost compensation. (Lines 72-103; 119-122; 150-152)
   
   
7. The bill requires better, uniform, and more frequent training for agencies and District government employees who are directly involved in grant or contract management with nonprofit services providers. All nonprofits deserve fair compensation for their indirect costs and to understand their rights around these laws, not just those who win the ‘program manager lottery’ and get to work with an employee who goes out of their way to be helpful; help should be the standard when you are in public service.  (Lines 106-118)
   
   
8. The bill empowers the Mayor to issue grants to nonprofits to help them cover immediate overhead or indirect expenses associated with providing human services to District residents, recognizing that the District has failed to fairly compensate its service providers for decades which had pushed many nonprofits to a financial cliff. This grant authority can serve as bridge funding as the District works to fully fund and stand up the requirements of the bill and the underlying law the Nonprofit fair Compensation Act of 2020. (Lines 124-148)          
9. The bill creates a more realistic and affordable phased-in implementation timeline. The underlying law previously expected the District to begin by increasing grant and contract payments – in order to fairly cover indirect costs – for all nonprofits receiving awards of $1 million or less. The reality is that most nonprofit grants and contracts are well under $1 million, per grant or contract competition cycle. This would cost too much too quickly. The bill amends the implementation timeline to first pay out for grants and contracts of $500,000 or less and creates a more incremental approach to fully phase in payment of indirect costs. (Lines 155-171)  

As you can see, there is a lot of good this legislation is poised to accomplish to make fair compensation for indirect costs a reality in the District. To provide the best services to District residents – the quality of services our residents deserve – we must compensate our nonprofit organizations fairly to ensure they can retain their staff, reach their clients, pay the rent, afford miscellaneous program supplies, maintain their buildings, and keep the lights on – all to strengthen and serve our residents and communities in need. 

It is a callous calculation to continue to starve the service providers who have long struggled to maintain their levels of service and quality. Nonprofits are already scrappy and savvy when it comes to stretching their dollars to reach all those in need but we do not make that same ask of the District’s for-profit contractors who come back year after year asking for millions of dollars in adjustments to their agreements which the Executive and Council are far too quick to rubber stamp. The District’s budgets cannot continue to be balanced on the backs of residents and organizations with the fewest resources. The District needs to come up with a funding solution for this bill, and they need to do so quickly. The Administration has sat on this matter for four years, failing to conduct the financial assessments necessary and refusing to explore or propose revenue solutions. There is a tremendous amount of untapped wealth in the District that can be progressively taxed to ensure every kid, family, and community has the resources they need to thrive in our city. If we fail to take advantage of solutions like these and continue to deprive the nonprofit sector of the bare minimum compensation they deserve, there will be no organizations left to provide the services so many of our residents depend on. 

Thank you for your time and I would be happy to answer any questions.