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NOW
Testimony to the County of Hawaii County Council
Committee on Government Operations and External Affairs h. r
Tuesday,April 1 , 2023, 1:00 p.m.
Bill 32, Relating to Appropriations of Funds to Nonprofit Organizations -
Dear Chair Evans, Vice-Chair Lee Loy, and members of the Committee on Government u
Operations and External Affairs:
On behalf of the Hawaii Alliance of Nonprofit Organizations, I offer our testimony in opposition
to a portion of Bill 32, Amending Chapter 2,Article 25, Section 2-138, of the Hawai'i County
Code, Relating to Appropriation of Funds to Nonprofit Organizations.
Hawaii Alliance of Nonprofit Organizations (HANO) is a statewide, sector-wide professional
association of nonprofits. Our mission is to unite and strengthen the nonprofit sector as a
collective force to improve the quality of life in Hawai'i. Our member organizations provide
essential services to every community in the state.
Bill 32 would amend Section 2-138 of the Hawaii County Code to: 1) disallow the use of County
grant funds for the repayment of debts held by the nonprofit organization, and 2) only allow
County grant funds to be used for"the actual cost of expenditures that are necessary and
directly applicable to the service or activity covered by the grant agreement."
HAND takes no position on the first proposed amendment regarding the use of funds to repay
debt. HANO strongly objects to the second proposed amendment which would appear to
prohibit the use of County grant funds for indirect or administrative costs that are needed to
support the program and services funded by the grant.
Nationwide, the majority of nonprofits report problems with governments not paying
nonprofits the full cost of services they provide for the government. This situation is true for
nonprofits in Hawaii and was recently confirmed by data collected by the True Cost Coalition, a
group of 50 Hawaii nonprofits representing all counties and formed to tackle the issues of
underfunding of services in government contracts. One of the most problematic ways this
occurs is through the imposition of caps on or outright disallowance of indirect costs
(sometimes called overhead costs or administrative costs).
Examples of indirect costs include the salaries of administrative staff such as the Executive
Director who must spend time to oversee the grant's services or the accountant who processes
invoices, payroll, and financial grant reporting, rent for the building that houses the program,
liability insurance premiums to cover the program, and so on. These costs are the realities of
running any business.
Comm. ,
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Ref. ate APR 1 8 2023
According to the National Council on Nonprofits, studies reveal that the usual range of
overhead rates for for-profit companies and nonprofit organizations alike is approximately 25%
to 35%. Yet, governments have historically treated nonprofit organizations differently,
imposing arbitrary restrictions on the reimbursement of indirect costs that undercut the ability
of the nonprofit to succeed on behalf of taxpayers. Unrealistic limits on reimbursement of a
nonprofit's legitimate costs undermine its efficiency, effectiveness, and ability to perform vital
services on behalf of the governments.
Furthermore, the County has the ability to ensure funds are reasonable and necessary through
its grant application and contracting process which includes a review and approval of an
applicant's budget.
For these reasons, HANG requests that subsection (5) under Section 1 of this bill be deleted.
Mahalo for the opportunity to provide written testimony.
Lisa Maruyama
President and CEO