State Government - Grants and Contracts - Reimbursement of Indirect Costs
Summary
SB127 changes Maryland law governing reimbursement of indirect costs for certain nonprofit organizations that receive State-funded grants or contracts. For covered grants or contracts for services funded wholly with State funds, or with a mix of State and other nonfederal funds, the bill requires the grant or contract terms to allow reimbursement of indirect costs at the same rate the nonprofit has negotiated under a direct federal award or with another nonfederal entity using federal cost principles. If the nonprofit does not already have a negotiated indirect cost rate, the bill raises the default reimbursement floor from at least 10% to the greater of the federal de minimis rate under OMB Uniform Guidance or 15% of modified total direct costs.
The bill applies to certain grants and contracts awarded on or after October 1, 2018, including qualifying renewals and extensions, and it continues the existing framework tying State reimbursement rules to federal Uniform Guidance concepts. It also leaves intact the Maryland Efficient Grant Application Council’s broader mandate to study and recommend improvements to the State grants system, including possible regulatory adoption of Uniform Guidance with modifications for State grant-making entities.
In practical terms, SB127 increases the amount some nonprofits may recover for overhead and administrative expenses when they perform State-funded work. That affects State agencies that award grants and contracts, nonprofit direct recipients and subrecipients, and the budgeting of State grant programs, because agencies may need to account for higher indirect-cost reimbursements in future awards.
The general sentiment reflected in the voting history is strongly supportive and largely noncontroversial. The bill passed the Senate unanimously and passed the House with a substantial bipartisan majority, suggesting broad agreement that nonprofit grantees should receive more adequate reimbursement for indirect costs and that the State’s grant practices should better align with federal standards.
There is little evidence of major opposition in the available record, but the main policy issue is fiscal: higher indirect-cost reimbursement can increase State spending or reduce funds available for direct program services. Any concern would likely come from budget-conscious lawmakers or agencies managing grant dollars, while supporters would emphasize nonprofit sustainability, administrative fairness, and consistency with federal reimbursement practices.
Impact
SB127 amends § 2-208 of the State Finance and Procurement Article to increase the minimum indirect-cost reimbursement available to certain nonprofit organizations receiving State-funded grants or contracts, and it preserves the existing statutory definitions and applicability rules for covered awards. The bill does not create a new grant program; instead, it changes the terms that must be included in covered State grant and contract agreements and thereby affects how State funds may be allocated between direct program costs and overhead. It also leaves § 2-210 intact, continuing the Maryland Efficient Grant Application Council’s study and recommendation role regarding statewide grants management and Uniform Guidance implementation.
Sentiment
The bill appears to have enjoyed broad bipartisan support and little visible controversy. It passed the Senate 44-0 and the House 111-22, with no committee transcript indicating significant debate in the provided record. The vote margins suggest general agreement that nonprofit grantees should be reimbursed more fairly for indirect costs and that Maryland’s grant rules should better reflect federal cost principles.
Contention
The principal point of contention is the fiscal effect of increasing indirect-cost reimbursement from a 10% floor to the greater of the federal de minimis rate or 15% for nonprofits without a negotiated rate. Supporters are likely nonprofits and advocates for grant-funded service providers, who benefit from higher overhead recovery and more sustainable operations. Potentially cautious stakeholders are State budget officials and grant-making agencies, who may worry about higher administrative costs, reduced flexibility in grant budgeting, or fewer dollars available for direct services. No specific organized opposition is reflected in the provided transcripts or vote record.