State Government - Grants and Contracts - Reimbursement of Indirect Costs
Summary
HB300 changes how certain nonprofit organizations are reimbursed for indirect costs when they receive State-funded grants or contracts. For covered grants and contracts, the bill requires the terms to allow reimbursement at the nonprofit’s negotiated indirect cost rate from a federal award or other qualifying nonfederal arrangement. If the nonprofit does not have such a negotiated rate, the bill raises the default reimbursement floor from 10% to the greater of the federal de minimis rate or 15% of modified total direct costs under OMB Uniform Guidance.
The bill applies to nonprofit recipients and subrecipients of State-funded or mixed State/nonfederal grants and contracts, including extensions and renewals awarded on or after the specified dates. It also directs the Department of Budget and Management to study certain large nonprofit recipients—those receiving more than $1 million and using the default indirect cost rate—by reviewing senior staff salaries, administrative expenses, and, where relevant, changes in indirect cost rates over time. The department must report its findings to the Governor and legislative committees by December 1, 2028.
Impact
HB300 amends § 2-208 of the State Finance and Procurement Article to increase the minimum indirect cost reimbursement available to qualifying nonprofit grant and contract recipients and to align State reimbursement more closely with federal cost principles. It also adds a one-time reporting requirement for the Department of Budget and Management regarding larger nonprofits receiving the default rate, creating a new oversight and transparency mechanism for State grant spending. The bill affects State agencies that award grants and contracts, nonprofit service providers, and the budgeting and procurement rules governing State-funded assistance.
Sentiment
The bill appears to have broad legislative support, passing the House and Senate by large margins with only modest opposition. The voting history suggests general agreement with improving nonprofit reimbursement and reducing the need for organizations to subsidize State-funded work with their own resources. The emergency effective-date language and strong vote totals indicate the measure was viewed as important and relatively noncontroversial overall.
Contention
The main point of contention is the higher indirect cost reimbursement floor, which may increase State spending on grants and contracts and reduce funds available for direct services. The reporting requirement focused on senior staff salaries and administrative expenses suggests some concern about whether higher indirect cost payments could be used to cover overhead rather than program delivery. Any opposition likely centered on fiscal impact, oversight of nonprofit administrative costs, and whether 15% is the appropriate default rate.