State Grant Reform

Each year the state of Minnesota grants about $500 million to nonprofits to provide essential services. Nonprofits make up 14 percent of the state’s workforce and hold high community trust and connections within historically under-served communities. Grant funding to nonprofits allows the state government to flexibly undertake a wide scope of work otherwise too dispersed and diverse to accomplish through state agencies alone. 

Changes in oversight of state-funded grants to nonprofits is a topic at the Legislature this year. The nonprofit community welcomes appropriate oversight, as having the trust of our communities is essential to meeting our missions. MCN is working on behalf of the sector to ensure any new or changed state regulations are developed with input from nonprofits and consideration of how nonprofits will be impacted. Nonprofits must be included in implementing any and all reform efforts.

Why is state grant reform a topic at the Legislature? There are two main reasons.

1. The state’s Office of the Legislative Auditor, an entity that provides the legislature with objective audit and evaluation reports, released a report in February 2023 focusing on the extent the state has established comprehensive policies for administering grants to nonprofits.
2. We expect to see legislation proposed in response to the immense fraud that is part of the Feeding Our Future scandal.

Prioritizing nonprofits in reform efforts

The state’s system is decentralized — grants go through 27 different state agencies, each with many of its own rules and processes. These processes have come under scrutiny for the reasons above.

We believe it is a good sign that recent reform proposals and government reports align with MCN’s long-term advocacy to remove or lessen barriers to government funding for nonprofits. (Reports: Equity in Minnesota State Grantmaking; State Grants to Minnesota Nonprofits)

At the same time, we are concerned that lawmakers may go overboard in their attempts to ensure “perfect” procedures and compliance, creating undue burdens on nonprofits. 

If provisions are developed without input from nonprofits or without consideration of how nonprofits will be impacted, it’s likely the provisions will be at best ineffective and at worst harmful. We will need you to advocate with us against these proposals!

Analysis of Current Policy Proposals:

MCN strongly supports these specific proposals (HF 2940 / SF 2979). Any new or changed state regulations must be developed with input from nonprofits and consideration of how nonprofits will be impacted.

Nonprofits must be included in implementing any and all reform efforts.

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MCN strongly supports these specific proposals:

Improve grants administration oversight by expanding capacity at the Office of Grants Management (OGM)

• Problem: This 1 FTE office is responsible for training all grants management staff at 27 granting agencies, as well as creating policies for grant oversight. 1/3 of grants management staff said OGM provides too little training on its policies.
• Solution: OGM would be able to provide core support and more specific guidance to state agencies on how to implement its policies and develop standards for consistently funding grants management at the state agencies.

Create an Office of Equity in Grants

• Problem: Rural-based, small, and/or BIPOC-led and serving nonprofits receive disproportionately less state funding than larger, established, and/or Twin Cities-based nonprofits (source: MCN’s Equity in State Grantmaking report).
• Solution: This new office would increase the state’s capacity to provide the ongoing needs for effective resources, training, policy guidance, data collection, and data analysis to support state granting agencies in advancing equity in and through grant making processes. The new office would also include dedicated staff for outreach and training to encourage and assist community-based and culturally specific organizations in applying for state grants.

Design and implement a grants management platform for all granting state agencies

• Problem: Nonprofits deliver a large portion of state-funded services, many through grants from the state, yet partnering with the state via grants is a significant pain point for many nonprofits in part due to unnecessarily cumbersome application and reporting processes. The 27 granting agencies use 13 different grants management systems; the remaining have no such platform.
  
  A recent report from Minnesota Management and Budget found that 64 percent of all surveyed nonprofits (and almost 80 percent of BIPOC led- and/or serving organizations) reported applying for a grant was “difficult” or “somewhat difficult”.
• Solution: A single platform would allow agencies to review a nonprofit’s past performance partnering with a different agency before awarding new grants and increase the state’s efficiency in grantmaking. It would increase transparency and data availability on state grants to nonprofits for legislators and the public and it would save nonprofits resources when applying for state grants, leading to a wider variety of nonprofits delivering services throughout the state.
  
  This component is also in a stand-alone bill with bipartisan support: HF 2190 / 2447

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