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Social service nonprofits feel burden of government contracts

Images of Money

Many social service nonprofits in Hawaiʻi rely on government grants, but that strategy has brought on more unique challenges.

Government contracts can send social service nonprofits into a tailspin, said Lisa Maruyama, president and CEO of the Hawaiʻi Alliance of Nonprofit Organizations.

Maruyama explained in a recent PBN roundtable that the cost reimbursement structure of government contracts for nonprofits often expects the nonprofit to front large amounts of money for operations.

These costs get reimbursed later, and not without a certain amount of pain. Contracts often put onerous caps on specific expenses a nonprofit might need to claim, such as a labor or project administration.

One result of this dynamic is that organizations have to fundraise the difference, or finance it with loans.

Venus Rosete-Medeiros is CEO of Hale Kipa, which has served at-risk youth and families for 50 years.

She said about 88% of Hale Kipa’s total revenue comes from state, city and county contracts. For the remaining 12%, the organization holds fundraisers. On top of that, it often fronts expenses until reimbursement arrives.

Stella Wong, vice president of programs of Catholic Charities Hawaiʻi, said her organization has often relied on loans in the past to pay the bills while waiting for government reimbursement.

However, she has seen improvement in the systems. Loans are rare now, and where Catholic Charities would have to wait until December or January for payment on a contract that started in July, the turnaround is now much faster.

A. Kam Napier is the editor-in-chief of Pacific Business News.
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