NYC effort to cover nonprofits’ indirect expenses underway

New York City Hall

New York City Hall Zach Williams

Yes, it’s happening – New York City is officially launching its initiative to help its nonprofit contractors cover their indirect costs. After years of complaints from local providers, the New York City Council approved a budget in June that will allow community-based organizations to get support for indirect cost rates exceeding 10% of a city contract. And starting Monday, they’ll be able to begin applying for that support. The main resource organizations looking to apply should consult the City of New York Health and Human Services Cost Policies and Procedures Manual – more succinctly dubbed the Cost Manual. But to give organizations a basic overview of what to expect, NYN Media looked into the main questions providers may have. 


What is an indirect cost?

Indirect costs are often understood as administrative expenses or overhead costs for nonprofits, such as rent, water bills and staff wages. But for the purposes of New York City’s contracts, indirect costs refer to expenses that may not be explicitly identified within a contract but provide benefits to it. This means some administrative costs may actually qualify as direct costs, such as the salary of a lawyer providing legal services under a contract. On the other hand, an indirect cost could be the salary for an accountant whose work supports the nonprofit in general. The Cost Manual explains which costs are eligible and which would be categorized as direct or indirect, broken down under categories such as insurance costs and transportation costs. 


What contracts does this initiative apply to?

The indirect cost rate initiative applies to most existing health and human services contracts that are effective as of July 1, 2019. This includes a range of city agencies, including the Department of Education. Those with contracts that start before July 1 may also be able to take advantage of the initiative, with a contract amendment, but that indirect cost rate would only be effective as of July 1, 2019. 

City Council discretionary contracts, which are doled out by city councilmembers to nonprofits, are currently not eligible for the initiative, nor are contracts supported by either federal or state funds that prohibit the city from applying the Cost Manual.


How can organizations access funding for their indirect costs?

There are three main options to access funding for indirect costs. Organizations are eligible to receive support for an indirect cost rate of 10% or less of their contracts without submitting a verification documentation. For groups looking to establish a rate above 10%, documentation is required. Organizations with a federal “Negotiated Indirect Cost Rate Agreement” may submit that, or otherwise use an independent accountant’s report signed by an independent CPA.

A fourth entryway to funding is also available to organizations that know they have an indirect rate greater than 10%, but need more time pulling together the documentation. This one-year conditional option will allow providers to establish an indirect cost rate of up to 12% just for fiscal year 2020, if they commit to submitting either the federal agreement or independent accountant’s report. That documentation would need to be submitted before Dec. 31, 2020.

The city’s webpage for indirect investments will allow providers to submit the form choosing their entryway to funding starting Monday. Organizations need to be registered through PASSPort to get started. 


What is the timeline for submitting applications and funding?

The first deadline coming up is for organizations seeking the one-year conditional option, and they must fill out the form by Jan. 31, 2020. For all other providers wishing to receive retroactive funding on their fiscal year 2020 contracts, the initial entryway form, verified documentation and completed Delta Template – a form which the city will share with the provider to fill out – must be uploaded by the end of next June. The deadline to submit anything would be end of next year. 

The timeline for groups to receive approval and funding for indirect costs is currently unknown. However, the city will be tracking the turnaround times starting Monday and then will share that on its indirect investment webpage

The city has posted further resources on its updated webpage, and will send weekly updates to providers via email. Organizations can email to receive updates as well.