Nonprofit Fair Compensation Act 

Background: The Coalition for Nonprofit Equity came together around the passing of the Nonprofit Fair Compensation Act of 2020 (NFCA) and is now advocating that DC fully implement this law so that nonprofits receive the full indirect rate compensation that they are due. 

The purpose of the NFCA is to ensure that nonprofits who do business with the DC government receive compensation for their overhead costs as part of their contract or grant. This law makes it possible for nonprofits to 1) use their Federal Negotiated Indirect Cost Rate Agreement (NICRA), 2) elect compensation at a de minimis rate of 10% of total direct costs, 3) negotiate a new percentage rate of total direct costs or elect use of a rate previously negotiated with a District agency within the past two years, or 4) use a rate as determined by a Certified Public Accountant (CPA) using the organization’s most recently audited financial statements.

Nonprofit Fair Compensation Act Current Status (as of 2024):

  • Law: NFCA requires the District to reimburse nonprofits for the indirect costs of providing services to District residents (e.g. facility expenses, centralized staffing, employee benefits, etc)

  • Current Status: Inconsistent and incomplete implementation across agencies

  • Impact: Due to lack of payment for true costs, nonprofits face a loss when they accept a DC grant or contract and are left scrambling to fill the gaps with other sources of revenue. This puts nonprofits in a perilous position, with many forced to consider cutting services, staffing, and more in order to partner with the District. 

  • Looking Ahead: Fully implementing the law supports the livelihood and workforce challenges of the nonprofit sector, which supports vulnerable populations across DC

Full Implementation Requires:

  • Consistent and clear language on the law included in all DC agency contract and grant RFPs / RFAs that nonprofits are eligible to apply for

  • Funding for indirect rates supplements not supplants funding for services

  • Full funding to implement the law at each DC agency that partners with nonprofits through contracts and grants

  • Regulations in place that set clear guidelines and processes for implementation of the law  

  • Regular and ongoing training for grants and contracts officers related to fully implementing the law

Join the Coalition for Nonprofit Equity!