Balancing the Mission Checkbook

The Minnesota Office of the Legislative Auditor issued the Office of the Legislative Auditor’s report on January 5, 2007 that evaluated state agencies’ methods for awarding and administering grants to nonprofits. The report was critical of state agencies for their lack of consistent and transparent systems. However, the report was not critical – in any way, shape or form – of any of the nonprofit organizations who receive state grants, of any of the grant programs, or even of the value of the community work that is funded by these grants. Unfortunately, there were those in the public and nonprofit sector who were quick to jump to conclusions about the report and conclude that the report implied that there were problems with grants and the nonprofit recipients. Some nonprofit directors have expressed concern that their work will get more cumbersome with additional reports and reviews. Please, everyone, slow down, read the report, and consider the recommendations.

According to the report, in 2005 the State of Minnesota made $4.7 billion in payments to nonprofit organizations for a wide range of services in health care, education, environment, and human services. The Office of the Legislative Auditor reduced the pool of payments for review by removing payments of $3.7 billion made to hospital, health plans and similar “institutions”. Of the remaining $1 billion, about $700 million flowed through counties and was therefore not granted to nonprofits directly by state agencies. That left $300 million (approximately 1% of the state budget) for the purposes of this review and resulting report. The report states that the use of nonprofits to deliver services to citizens of the state is appropriate and valuable. The purpose of the report is to evaluate the systems and practices used by state agencies, not the programs and services delivered by nonprofit grantees.

The report includes three primary conclusions:

1. The state’s approach to managing grants to nonprofit organizations is fragmented and inconsistent, and does not provide adequate accountability.
2. Many state agencies have grant-making policies and procedures, but they vary considerably in the degree to which they provide for oversight and accountability.
3. Agency oversight of grant recipients is especially weak when the Legislature selects and names a recipient in law, rather than allowing the agency to select the recipient.

These conclusions don’t seem revolutionary to me. Anyone who has dealt with more than one state agency for grants, or even more than one program within an agency, could tell you that the process for applying for, reporting, and receiving payment for grants is not always consistent or easy for a new grantee to access. The recommendations from the Office of the Legislative Auditor follow their findings – to establish a Grants Management Office in the executive branch to strengthen accountability and improve management of state grants; to formalize and require agencies to follow the best practices discussed in the report; and that the Legislature should not name grant recipients in law but allow agencies to select recipients through a competitive process.

In general, I think that all nonprofits in Minnesota could embrace the concept of a clear, consistent, easy-to-access process for applying for and administering grants from state agencies. Imagine if all of the grants a nonprofit received from the State of Minnesota used the same budget format, report requirements, and payment system. Rather than worry about more cumbersome requirements we could work with the state to simplify, streamline and make both the state government and our nonprofits become more efficient in serving our citizens and clients. The Minnesota Council of Nonprofits has also responded with support for the overall goal of creating a more efficient, transparent, and consistent process for state grants.