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Nonprofit groups need government to provide payment on timely basis

With leadership changes at Washington Place, Honolulu Hale and at least one of two legislative chambers in Washington, there is an opportunity to forge a new compact between the nonprofit sector and government. This is not about Republicans or Democrats. Rather, it is about how government will partner with that part of our society that provides essential services for our citizens and creates effective programs to bolster our communities.

For decades our country has been on a path of shifting services, which traditionally were handled by government agencies, to external providers, with the aim of shrinking government and with the intention that those services could be done more efficiently by others. As a result the nonprofit sector underwent a period of significant growth, largely fueled by government contracts. In Hawaii more than 60 percent of the revenues for the sector come from government sources.

However, there were several unintended consequences from this change. Government leaders lost connection to those services, which resulted in dwindling allegiance to the nonprofit groups in tough budget times. Also, increasingly difficult terms in government contracts left nonprofit groups facing a draconian decision: stop providing needed services or enter into contracts that could eventually drive them to insolvency.

It seems the time is right to consider how government leaders can work with the nonprofit and philanthropic community to create a new compact for our society.

It starts with a definition of roles. There are clearly services that are best performed by government, such as public safety and licensing, infrastructure development and the planning and allocation of resources such as fresh water. Other functions are so costly that it is not feasible to expect that government can turn those over to outside entities unless they are accompanied by the necessary funding to carry them out. Dealing with our homeless population, adults with chronic mental health issues or our growing elderly population are three examples. Nonprofit organizations can and do make significant contributions here, but not without the government resources to support those programs.

Probably the most important role for the nonprofit sector and philanthropy to play is to pioneer effective programs and strategies. Once proven, they can seek government support to fund such programs to scale, creating greater efficiency as a result, and make needed policy revisions. To do so, however, nonprofit organizations will need to improve on demonstrating results and creating innovative solutions, while government leaders will need to recognize the limitations of external resources, like charitable dollars, for public priorities.

It will require a different kind of relationship. A new compact would be founded in a partnership that recognizes the complementary strengths of both sectors. A system that reinforces collaboration among nonprofit agencies and with government departments needs to replace a system that currently fuels competition and protection of turf. Ongoing dialogue to develop long-range strategies to tackle some of our toughest issues would replace the season of nonprofit organizations roaming the hallways of the Legislature in search of short-term funding.

And it needs reform.

The current system of contracts for services provided by nonprofit agencies often does not cover the full cost of services, nor does it provide for payment on a timely basis. We still hear stories from agencies that must wait for months to receive payments for services rendered. Imagine if a contractor working on your house was required to purchase all the materials themselves and wait to get paid for 90-120 days into the job. Start-up payments, minimum-capacity payments and minimizing payment lags will all go a long way toward ensuring that nonprofit agencies can continue to provide the level and quality of services needed.

Everywhere we go in our communities, we know of people and families who are in need. The people of Hawaii are looking for a new deal with our society, and it is the responsibility of our government and the nonprofit sector to help them. We can do a lot more and go a lot further if we begin by changing the way those two essential parts of our community work together.

Kelvin Taketa is president and chief executive officer of Hawaii Community Foundation.

 

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