Little Hoover Commission hearing says state grant rules hinder nonprofits; witnesses urge advance payments and less paperwork

The Little Hoover Commission held a hearing on state grant making and contracting with nonprofits on Aug. 28 in Sacramento, where commissioners heard testimony that payment delays, low allowances for indirect costs and burdensome reporting rules hamper service delivery across California.

"Nonprofits are vital partners for the state, delivering everything from food and housing to health care and wildfire resilience," Little Hoover Commission Chair Pedro Nava said, citing the commission's survey that covered nearly 400 nonprofits and found widespread payment and reporting problems.

The witnesses described several recurring problems: long delays on reimbursement payments, inconsistent use of advance payments, low or capped indirect-cost (overhead) rates, and heavy, duplicative reporting requirements. Jeff Green, chief executive officer of the California Association of Nonprofits, told commissioners that "advance pay is a critical tool" and said states should normalize upfront payments rather than treat them as one-off experiments.

Why it matters

Nonprofits deliver services the state relies on but often lack the cash reserves to float publicly funded programs. The commission’s survey — discussed by Nava and witnesses — found that nearly 40% of nonprofits reported never receiving advance payments…