State transportation staff opposes HB233; national expert urges working group, prompt payments for nonprofits

Cara Mayo, an audit specialist at the Vermont Agency of Transportation, told the Government Operations & Military Affairs committee that the agency opposes House Bill 233 because of the additional time and staff resources it would require. "We oppose the bill due to the time and resources that it would take for our, small staff that we have," Mayo said.

The bill would require a review of state grant execution and payment practices, create a working group to recommend reforms, and clarify a process for nonprofits to request indirect (overhead) cost rates. The committee heard competing perspectives Tuesday as part of a broader review of state-funded grants and contracts.

Why it matters: The bill aims to reduce administrative friction between state agencies and nonprofit contractors — a long-standing issue that affects payment timing, overhead recovery and reporting burdens for providers of social services. Supporters say reform could speed payments and simplify contracting; agency witnesses warned of implementation costs for small state teams.

Mayo described the Agency of Transportation’s current process for negotiating overhead rates with regional planning commissions and other nonprofit recipients. She told the committee the state follows 2 CFR 200 rules for nonprofit indirect‑cost rates and that nonprofits typically obtain an approved rate three ways: by using the 15% de minimis rate, by submitting a cost‑allocation plan (the method most RPCs use), or by completing an indirect‑cost rate calculation. "Each RPC needs to follow the MOU that's in place and submit their audited financials with the financial report as well as their cost allocation plan with their proposed overhead rate," Mayo said.

In separate testimony, Lauren Moultonberger, interim MPA director and nonprofit coordinator in the Department of Public Administration at Villanova University, urged the committee to advance the bill. Moultonberger framed the problem around three core areas — payments, process and problem‑solving — and cited national research showing recurring issues between government funders and nonprofit contractors. She said, "I urge the committee to support House Bill 2 3 3 and move it forward. Strengthening the state's relationship with its nonprofit partners will not only improve service delivery, but it also promotes a healthier, more resilient civic infrastructure for everyone in Vermont."

Moultonberger summarized several reforms other states have adopted: prompt‑payment laws (she cited Maryland), advanced or partial advance payments (California has a model authorizing up to roughly 25% advance payments), and state portals or centralized grant databases (examples from California and New York). She also said Illinois has recently changed indirect‑cost rules to raise minimum allowable indirect cost recoveries in some circumstances. Moultonberger told the committee the bill’s proposed working group would be consistent with national practice; she noted that in 2024, the National Council of Nonprofits tracked dozens of similar bills across states.

Committee members asked clarifying questions about how existing state processes are communicated to nonprofit recipients, the current 30‑day standard for payments in Vermont, and whether a working group could identify circumstances for advance payments. Moultonberger recommended clear goals, timelines and balanced membership for the working group, drawing on past task‑force models.

The committee did not take a vote on HB233 during the recorded portion of the hearing. Members invited witnesses to submit written materials and additional state examples for the committee’s record.