WASHINGTON, D.C. — Under a law passed in 2020, nonprofits doing work for the District are supposed to be paid fairly – and that includes payment for indirect costs that all organizations bear in order to provide their services. But that doesn’t always happen.
Councilmember Brianne K. Nadeau, D-Ward 1, along with Councilmembers Frumin, Lewis George and White, has introduced the “Nonprofit Services Preservation Amendment Act of 2025”. The bill clarifies and updates the “Nonprofit Fair Compensation Act of 2020” to ensure that nonprofit organizations partnering with the District government are fairly and consistently reimbursed for the full cost of delivering vital services in our communities.
“Nonprofits are indispensable partners in carrying out the District’s mission—from providing housing and food access to youth programming and healthcare,” Nadeau said. “They deserve to be paid fairly for their direct services and for the behind-the-scenes support that makes those services possible—that is, their indirect costs.”
Those include salary, rent, and technology, without which they would not be able to provide the District-funded services in the first place.
While the 2020 law was meant to address the lack of payment for those indirect costs, it has not been fully implemented, and as a result, nonprofits have had to make tough choices between providing their staff with adequate benefits and wages and maximizing the services they provide directly to the community.
Without payment for true costs, nonprofits face a loss every time they accept a D.C. contract or grant. This chronic underfunding can force nonprofits to cut staff or even close altogether.
This bill clarifies that funding for indirect costs supplements, rather than supplants, direct funding for services, as was intended in the original law; it increases the minimum indirect cost rate for nonprofits from 10 percent to 15 percent, matching the federal rate that went into effect in October 2024; and includes provisions to improve transparency and implementation, such as requiring clearer, standardized contract language, regulations and guidance for agencies and grantees, and staff training on compliance. Finally, the legislation establishes a non-profit relief grant program to help eligible nonprofits cover funding gaps and indirect costs.
By treating indirect costs as essential, not optional, this bill supports the long-term health of our nonprofit sector and ensures they can continue providing life-changing services without being financially penalized for doing so.
Download the full text of the bill [PDF].
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