Year of Publication



Martin School of Public Policy and Administration

Executive Summary

A number of factors have contributed to the rise in nonprofit organizations during the last three decades. No matter the reasons one significant consequence has been an intensification of competition for available funding. With the increasing competition for funding there is growing concern that there may not be an equitable and efficient method in place for many funders to base their allocation decisions on. These concerns arise from the issues that occur during funding processes such as: how open and competitive is the request for proposal process; is there duplication of the same service; can the organization adequately provide the service to the public; and how are the programs evaluating their service delivery?

Government allocations face harsher scrutiny more so than private foundations or corporations because when government funds are at stake there is a sense of public ownership and often the public wants to be involved. Ensuring that funding decisions have public support and are made in an equitable manner is important in order to justify spending taxpayer dollars. Assessing community needs is a good beginning to prioritizing allocations. The issue of local government contracting is especially sensitive because the people making the funding decisions are often familiar on a personal level with the nonprofits requesting funding. This level of familiarity increases the chances of favoritism and of having funds used in a fiscally irresponsible manner.

This research paper seeks to address the following three questions concerning government/ nonprofit organizations contracts:

  • How can local government contract funding decisions be determined in a manner that is equitable to nonprofit organizations and the community?

  • How can political influence be minimized in contract funding decisions?

  • How can government ensure that quality contracted services are provided to the citizens while keeping its own costs down?

In order to answer these questions I utilize a literature review, interviews with stakeholders, and analysis of two local governments’ funding processes (Lexington, KY and Evansville, IN). I outline seven recommendations for improving the contracting process between local governments and nonprofit organizations based on equity, efficiency, and effectiveness: 1. Determine funding focus areas; 2. Determine collaboration opportunities; 3. Utilize written procedures to determine funding decisions; 4. Consider multi-year funding; 5. Evaluate service delivery; 6. Determine a central monitoring source; and 7. Self-evaluate.

Determining what services the government wants to provide to the public and who the best partner in the community is to provide these services is crucial to maximize government resources. Competition among nonprofit organizations leads to service delivery cost savings and raises the level of service being provided to the community. Although there are many factors involved with government contracting, when implemented correctly the local community will benefit.