How Small Nonprofits can work with Local Governments
A Deep Dive into a Report from Indiana
A recent report from the Indiana Nonprofits Project at Indiana University provided some interesting insights in how local governments and small nonprofits can interact. Local governments in Indiana, like those across the U.S., are responsible for providing a wide range of services to residents, from education and public health to economic development and emergency relief. However, local governments often face fiscal constraints and may lack the necessary expertise to deliver these services effectively. To bridge this gap, they increasingly rely on contracting with external entities, including nonprofits and private businesses.
The report reveals that nonprofits are preferred over for-profit businesses for several services, particularly in areas like mental health, substance abuse treatment, and social services. This preference is largely because nonprofits often have specialized expertise and a mission-driven approach that aligns closely with the public service goals of local governments. Additionally, nonprofits are seen as trustworthy partners that are committed to community well-being, which strengthens their working relationships with local governments.
Implications for Small Nonprofits
For small nonprofits, the findings of this report highlight both challenges and opportunities in engaging with local governments.
Increased Demand for Specialized Services: The report indicates that local governments frequently contract with nonprofits for services that require specialized knowledge and skills, such as mental health and substance abuse treatment. Small nonprofits with expertise in these areas may find increased opportunities for collaboration with local governments. However, to capitalize on these opportunities, small nonprofits must ensure that they have the necessary capacity and infrastructure to meet the demands of government contracts, which often require rigorous reporting and accountability standards.
Importance of Building Relationships with Local Governments: The report emphasizes that the type of local government official plays a significant role in whether a nonprofit is contracted. County commissioners and council members are more likely to engage with nonprofits, while town council members and township trustees are less likely to do so. Small nonprofits, particularly those in smaller towns or rural areas, should focus on building strong relationships with county-level officials who have the authority and inclination to award contracts. This relationship-building is crucial for small nonprofits to be recognized as reliable and capable partners.
Navigating Fiscal Constraints: Local governments’ limited fiscal capacity means they must prioritize certain services over others. Small nonprofits may face stiff competition for contracts, particularly from larger nonprofits or for-profit entities with more resources. To compete effectively, small nonprofits need to clearly demonstrate the value they bring, such as cost-effectiveness, community trust, and the ability to deliver high-quality services.
Impact of COVID-19: The report highlights a significant shift in contracting patterns following the onset of the COVID-19 pandemic. Nonprofits, particularly small ones, were heavily impacted by the pandemic, with many reporting reduced service capacity or even suspension of services. This has led to fewer contracts being awarded to nonprofits post-pandemic. Small nonprofits must address any lingering capacity issues and adapt to the new realities of service delivery in a post-pandemic world. This may include embracing digital tools, developing contingency plans, and seeking diversified funding sources to remain viable partners for local governments.
The Importance of Nonprofit Capacity: The report underscores that local governments prioritize nonprofits that have the capacity to deliver services effectively. For small nonprofits, this means investing in organizational capacity, including staff training, financial management, and technology infrastructure. Small nonprofits must also be prepared to demonstrate their capacity during the contract bidding process, showcasing successful past projects, client testimonials, and strong governance structures.
Challenges of Multiple Service Arrangements: Many local governments use multiple service arrangements, involving nonprofits, for-profits, and other government units to deliver services. This complexity can be challenging for small nonprofits, which may lack the resources to navigate these multi-faceted arrangements. To overcome this, small nonprofits might consider forming coalitions or partnerships with other organizations to pool resources and expertise, thereby increasing their ability to manage complex contracts and deliver services effectively.
Opportunities for Policy Influence: Government contracts not only provide financial support but also offer nonprofits the opportunity to influence public policy. Small nonprofits engaged in contracting can leverage their on-the-ground experience to inform local governments about community needs and the effectiveness of existing policies. This advocacy role can enhance the nonprofit’s visibility and legitimacy, potentially leading to more contracts and greater influence in local governance.
The report on local government contracting with nonprofits in Indiana provides valuable insights for small nonprofits. While the contracting landscape presents several challenges, particularly related to capacity and competition, it also offers significant opportunities for small nonprofits to expand their impact. By building strong relationships with local government officials, investing in capacity building, and adapting to post-pandemic realities, small nonprofits can position themselves as vital partners in delivering essential services to their communities. Moreover, these collaborations can enhance their sustainability and enable them to play a more active role in shaping public policy.