Committee hears testimony on H.233 to standardize indirect rates and speed state grant contracts and payments

On March 27 the Government Operations & Military Affairs Committee heard testimony on H.233, a bill that would require a uniform method for calculating nonprofit indirect cost rates, set 30‑day deadlines for executing state‑funded grant agreements and for paying valid reimbursement requests, require public reporting of late grants, and create a working group to study state grant processes.

The bill’s sponsors and counsel told the committee the measure is largely session law directing administrative practice rather than rewriting broad statutes. Rick Segal, counsel in the Office of Legislative Counsel, described the principal provisions: Section 1 would direct the Secretary of Administration to develop, by July 1, 2025, “a uniform formula and approval process” for allowing nonprofit grantees an indirect rate higher than the federal de minimis rate; Section 2 would require state agencies to execute grant agreements within 30 days of appropriation or notice of award and to pay grantees within 30 days of a valid written payment request, with a requirement that agencies notify the Agency of Administration (AOA) in writing if they cannot meet those deadlines; and Section 3 would create a working group to assess grant procedures and report back to the committee by Sept. 1 of the following year.

Why it matters: nonprofit witnesses told the committee that delayed contracts and reimbursements strain organizations that deliver health, human‑service and safety‑net programs on the state’s behalf. Emma Paradise, manager of policy and strategic initiatives at Common Good Vermont, said it is “virtually unheard of for organizations to receive an indirect rate that’s higher than the standard 15%,” and that one organization’s calculated overhead was closer to 30% but went unpaid at that higher rate. Paradise said H.233 would “create a standardized methodology to calculate indirect costs” and that tracking late payments is a necessary first step even though the bill in its current form lacks enforcement penalties.

Testimony from nonprofit leaders detailed impacts. Daniel Franklin, executive director of the Vermont Association for Mental Health and Addiction Recovery, described multi‑month delays he has seen and told legislators, “If you don’t feel secure in your finances, you can’t build and grow and plan for the future.” He said some grants that normally arrive in July commonly come in September, October or later, and recounted one employer who waited 11 months for payment. Olivia Sharrow, executive director of Vermont’s Free and Referral Clinics, said her network of eight clinics served more than 13,000 patients in 2024 and that their single largest legislative appropriation sometimes arrives seven to eight weeks after invoicing; she quoted a clinic director: “It is hard to manage cash flow with these increasingly unpredictable turnaround times, and any accompanying communication about why or when is virtually and consistently nonexistent.”

Smaller and mid‑sized agencies described concrete financial strain. Russell Bradbury Carlin, executive director of Interaction, said state contracts make up roughly 55% of his agency’s budget and that reimbursement‑based payments force agencies to hold large cash reserves or maintain lines of credit. Tim Keith, chief financial officer at Lund, and Ken Schatz, interim CEO at Lund, said Lund’s grants and contracts account for roughly 70% of revenue; Keith said renewal delays last summer ranged from 70 to 155 days and left Lund roughly $750,000 behind on collections for one residential program before a contract was signed in October. Russell Carlin told the committee Interaction spent about $35,000 in interest on reimbursement contracts in 2024.

Committee discussion and bill details: witnesses and counsel noted the bill includes softening provisions: agencies that cannot meet the 30‑day deadlines must submit a written explanation to AOA, and the AOA would create an online form and publicly accessible database showing non‑confidential reports of late execution or payment. The working group would include the Secretary of Administration (or designee), representatives from Common Good Vermont, nonprofit representatives, one House member, one Senate member, and a Governor‑appointed representative from the Department of Finance and Management; it is tasked with assessing state grant and contracting practices, reviewing consistency between federal and state indirect rates, analyzing impacts of delayed reimbursements (including nonprofits’ need for bridge loans), and recommending process improvements. The working group would begin meeting Sept. 1, issue a report to the House and Senate committees by Sept. 1 of the next year, and expire in December 2026.

Questions from legislators included concerns about enforcement. Representative Heather Hoover asked whether the bill contains any “stick” to require timely performance; counsel and witnesses acknowledged the current draft relies on transparency and study rather than penalties. Rick Segal noted the version differs from last biennium’s H.140 and that Appropriations had previously expressed concern about potential implications for grant requirements.

What’s next: the committee indicated it will take more public testimony, consider amendments and pursue additional inquiry into administrative and federal funding constraints. No formal action or vote on H.233 was recorded during this hearing.

Ending: supporters asked the legislature to move quickly because witnesses said delayed payments and late contracts are already causing program closures, staff attrition and service reductions in Vermont’s nonprofit safety‑net.