Sequim Council raises cap on municipal grant indirect costs to 25%

Sequim City Council on March 10 directed staff to update the city’s municipal funding policy to allow indirect expenses of up to 25% of an awarded grant, a change from staff’s earlier draft that capped indirect costs at 15%.

The motion, moved by Councilor Kelly Berger, directs staff to revise the municipal funding policy and requires applicants to track personnel costs under updated guidelines. Councilor Kelly Berger made the motion; it was seconded and adopted without opposition.

Council members and staff said the change is intended to balance the city’s interest in funding direct services with the operational realities of local nonprofits.

Maren Packer, executive assistant in the city manager’s office, told the council staff used the U.S. Code of Federal Regulations definition for the 15% de minimis approach when drafting the earlier policy language but brought forward the item with council direction to set a firm cap. Public commenter Dale Jarvis urged the council to permit a two-option approach that would allow organizations with higher documented indirect costs to request a negotiated rate; Jarvis said federal grant practice recognizes both a de minimis 15% option and an alternative based on actual cost accounting.

City Manager Matt Hewitt and staff described how the change would work in practice: a grant award remains the same total amount, and higher indirect rates simply shift more of the award to administrative costs and less to direct services. Staff said applicants would submit budgets that separate direct and indirect costs and that city staff will meet with applicants on the front end to clarify budgets and reporting.

Several council members voiced concerns that a higher indirect rate could reduce the proportion of funds going to direct services, especially for smaller organizations that need administrative overhead to operate. Councilor Vicki Lowe and others said they preferred language and processes that encourage most dollars to reach direct service delivery while allowing for reasonable documented administrative expenses. City finance staff, including Sue, the city’s finance director, described the mechanics: the grant total is fixed and indirect-rate changes shift the internal allocation within that total.

After discussion, Councilor Kelly Berger moved to direct staff to update the municipal funding policy to state that indirect expenses may not exceed 25% of the total municipal funding amount and that personnel costs must be tracked according to the updated guidelines. The council approved the motion with no recorded opposition.

The council and staff said they will implement clearer application forms requiring direct-versus-indirect budget breakdowns, meet with applicants before funding decisions, and maintain reporting requirements so the city can review actual expenses. Staff also noted the June 15 application deadline for the current municipal-funding cycle and said they will meet with applicants before that deadline to review budgets and reporting expectations.

Questions and follow-up: staff said they will return the revised policy and any draft application changes to council for final approval and will continue front-end meetings with applicants to reduce surprises during budget review and invoicing.