Indiana local government officials’ contracting with nonprofits

While most local governments provide services directly, many also routinely contract with other institutions to provide services to their constituents—even for the same service the local government provided. Local government officials (LGOs) have limited capacity to provide such services as mental health, substance abuse prevention and treatment, emergency relief services, and free and low-cost health care. Moreover, revenue collected through local, state, and federal government funding usually cannot meet all service demands, In addition to lacking resources, LGOs may also lack the capacity to meet particular community needs. In such cases, they may access the expertise and capacity of nonprofits and other institutions to provide these essential services. Almost one-fourth of Indiana nonprofits receive some form of government funding, accounting for nearly two-fifths of their revenues. 

Based on a study prepared by Dr. Kirsten Grønbjerg and graduate student Eric Schmidt, of the O’Neill School of Public and Environmental Affairs, this policy brief updates data from a previous analysis of the extent to which LGOs contract with nonprofits as part of a series on nonprofit-government relations in Indiana from the Indiana Nonprofits Project: Scope and Community Dimensions.  

The brief examines the services arrangements LGOs used to provide a range of specialized services and how services have changed over time. While focusing primarily on service arrangements with nonprofits, the authors also compare them with contracts awarded to other government units and private business firms. The brief highlights the need for LGOs to have the skills and capacity to coordinate different service arrangements as well as manage services provided directly. 

Key findings

  • While most local governments provided services directly, many contracted with other governmental units, nonprofits, or private businesses to meet community needs.
  • At least 80% of LGOs relied on internal resources, in part, to provide all but eight of the 29 listed services.
  • Only for juvenile detention did more than half of LGOs report using another local government unit to provide services.
  • LGOs contracted with nonprofits and/or for-profits just as often as they did with other local governmental units for service delivery.
  • Forty percent or less of LGOs contracted with nonprofits to provide each of the 29 listed services.
  • LGOs contracted with nonprofits most often to provide mental health, substance abuse prevention and treatment, emergency relief, free/low-cost health care, correctional facility addiction treatment, and child and family welfare services.
  • Half of the LGOs contracted with nonprofits to provide at least one service.
  • LGOs contracted significantly more frequently with for-profit businesses than nonprofits only for high-speed internet services, solid waste, and property assessment.
  • LGO contracting with nonprofits was relatively stable from 2017 to 2020.
  • Nonprofit service capacity appears to be a more important consideration for LGO nonprofit contracting than nonprofit contract cost efficiency or LGO capacity to manage contracts.
  • To be effective, LGOs must have the skills and capacity to coordinate multiple service arrangements with nonprofits, for-profits, and government units and manage services provided directly.