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Bill would raise minimum allowable indirect cost rate on state grants from 10% to 15% to align with federal change
Summary
House Bill 300 would increase the state floor for reimbursable indirect (overhead) costs on state grants and contracts from 10% to 15%, mirroring a federal Office of Management and Budget change; nonprofit witnesses said 15% remains modest but would reduce pressure to subsidize state contracts from philanthropy or unrestricted funds.
House Bill 300 would raise the state minimum de minimis indirect cost rate that nonprofits can charge on state grants and contracts from 10% to 15%, aligning state policy with a 2024 revision to the federal Uniform Guidance that set the federal de minimis at 15%.
Why it matters: Nonprofits told the committee that 10% indirect reimbursement often fails to cover shared administrative costs — rent, HR, finance, IT, insurance — and can make state contracts financially untenable. Witnesses said raising the floor to 15% would not change grant award amounts but would allow grantees to use a larger share of contract funds to cover legitimate overhead.
Henry Bundy (policy director, Maryland Nonprofits) and leaders from community development, mental‑health and hunger‑relief organizations described how indirect costs enable organizations to maintain accounting, compliance and staffing needed to deliver contracts. They said 10% has long been insufficient and cited the federal change to 15% as justification for aligning state practice.
Witnesses gave practical examples: delayed state payments create borrowing costs for small nonprofits; some organizations decline grants where indirect reimbursement is too low; capital and compliance costs (insurance, cybersecurity, IT) have risen and strain small providers. Rob Malone, CEO of The Arc of Prince George’s County, testified that delayed reimbursements create interest costs that effectively reduce the usable overhead for contract execution.
Ending note: Testimony uniformly supported a favorable report; committee members did not oppose in the hearing and the panel asked agencies to consider fiscal and implementation details for state grant administration.
