Downtown Women's Center

Perspectives

Paying Nonprofits Fairly: Q&A with Dr. Va Lecia Adams Kellum

Dr. Va Lecia Adams Kellum

It’s no secret nonprofits are often underpaid in their government contracts for providing critical services to the community’s most vulnerable members. And for nonprofits based in, staffed by and serving communities of color, these unsustainable contracting and reimbursement practices present a huge barrier in accessing public resources to fund their work or pay their staff a livable wage.

At the Weingart Foundation, we are committed to supporting efforts to ensure that nonprofits are fully reimbursed for their costs—both direct and indirect—for services that public agencies contract them to provide. Vera de Vera, Program Director, leads our work in this area and recently spoke with Dr. Va Lecia Adams Kellum, President & C.E.O of St. Joseph Center—a countywide provider of housing, mental health and wellness services, education and workforce training to help individuals and families live healthier, happier lives. In this Q&A, Dr. Adams Kellum shares her perspective on improving the contracting and reimbursement systems between the local governments and nonprofits.

Vera: Hi Va Lecia, thanks for joining us. The Los Angeles Times recently ran an editorial that described how service providers—specifically those who work tirelessly to provide housing, mental health, health care, education support and workforce development and other support to individuals and families who are unhoused—are, in fact, often underpaid by the City and County for providing these services. What was your reaction to this editorial calling for the city and county to pay nonprofits the full cost of providing services to our region’s most vulnerable members?

Dr. Adams Kellum: My reaction to the editorial is—it’s about time! Getting fully funded for providing services is a tremendous concern that I, along with a number of my colleagues, have been working on for quite a while. We’ve been advocating behind the scenes, and it’s validating to see the same set of concerns raised by the Times.

It’s hard to think of a parallel to this funding approach in any other area that the government operates. Social service agencies get short shrift because we are nonprofit organizations, and there is a perception that we’d be doing this work no matter what. There is some truth to that, because we are all mission-driven. But we are also providing essential services that the community relies on, more so now than perhaps ever before. And those very missions are put at risk by a system that creates a deficit every time a contract is signed.

Vera: How do these current systems impact the work you do, and more importantly, the lives of those you are trying to help—who often are disproportionately people of color living in poverty?

Dr. Adams Kellum: One big practical implication is that there are times when I or some of my colleagues have actually declined contracts because they would simply cost us too much money. We have all faced situations where there was work we wanted to do—work that was in alignment with our mission, work that we knew we could be successful at—but we knew it would be financially irresponsible to take it on, because of the deficit position it would put our organizations in. If we don’t act responsibly with respect to our finances, everything we do goes away. That’s what is really on the line.

There are also some important equity pieces to consider. Many of the staff who are underpaid as a result of the current contracting system are people of color. In addition, there is a systemic issue stemming from the fact that not all service providers have the same access to charitable resources, which can create an additional barrier to entry for smaller organizations who are based in historically marginalized communities. Especially because these smaller organizations do not have the same capacity to cover the deficits that are built into many of these contracts. Some service providers are based in affluent communities that can help them cover the deficits that come with these contracts. The neighbors in these communities also often have informal connections to institutional philanthropy through their personal networks.

Vera: How has the pandemic impacted the need for substantial reform of these systems?

Dr. Adams Kellum: The pandemic has revealed many gaps in all of our systems. One thing that has been made clear is the injustice in asking people to put their health and their families’ health on the line for substandard wages. The L.A. Times editorial highlighted that LAHSA pays their outreach workers a minimum of $24 hour, which we applaud, but the funding currently available doesn’t allow service providers to pay our staff the same salary. In essence, you have people doing the same job at significantly different rates, which decreases morale.

Vera: What are some of the efforts you and other nonprofits are involved in to change these systems?

Dr. Adams Kellum: We have been advocating behind the scenes for quite some time. The first step a few years ago was coming together with peers to really understand the breadth and depth of this challenge. It was something we had known and even discussed anecdotally for a very long time. Once we got in a room together and sat down to talk about the numbers, it really became clear how pervasive this is—and how damaging the impact has been.

I’m happy to share that we’ve begun to make substantive progress. More than a year ago we joined a coalition of agencies (led by John Maceri of the People Concern) that started advocating for the next federal COVID relief package to include a provision mandating that contracts awarded under it cover the actual program costs for providers. The American Rescue Plan Act of 2021 enacted in March included this language!

On the local level, we’re working with Supervisor Mitchell and Supervisor Kuehl to promote equity and equal access to county contracts for nonprofit organizations and small businesses, especially those from communities with a history of disinvestment. Our goal is to reform outdated, burdensome contracting and auditing practices that create significant barriers for organizations of all sizes. We appreciate that our elected officials are hearing our concerns and working with us on solutions.

Vera: If there were a genie that could grant you three wishes to improve the local public contracting and reimbursement systems, what would they be?

Dr. Adams Kellum: If a genie were to grant me three wishes for the local contracting and reimbursement system, the first wish would be for all contracts to pay the full cost of service, including overhead, which is fundamental to sustain this critical work.

My second wish would be for all public funders to make their payments in a timely manner. For many years there has been significant variation in how long it takes some local entities to make reimbursement payments to their contractors. Depending on how much cash an organization has in the bank, this can create real problems with respect to paying your staff and covering your other operating expenses. A nonprofit organization really should not have to worry about the financial risk they may take on waiting for payments from government entities.

For my third wish, I would ask for the system to be revised so that the financial risk to service providers is eliminated altogether for rental assistance payments. If we are making rent payments to landlords on behalf of clients enrolled in our programs, we should never have to take any risk or liability. Unfortunately, we sometimes wait quite a while to be paid back. When that happens, we—nonprofit organizations—are effectively providing a loan to the government. Some of our partners have actually had to take out bank loans to cover cashflow shortfalls because they were not reimbursed in a timely manner. So, on top of not being paid enough to cover the cost of providing the service, you are now paying interest on a loan that you took out only because the contracting agency could not pay you back in time.

Vera: On May 10, 2026 (five years from now), what do you want the headlines in the L.A. Times to read?

Dr. Adams Kellum: The L.A. Times headline I’d like to see five years from now is, “Los Angeles is Beating Homelessness.” We’re not going to solve everything in five years, but it’s long enough to clearly turn the tide. I am hopeful that by then, we will have fully developed the regional, coordinated approach we desperately need, and that we will have the sustainable local and state funding mechanisms in place that we need to meet this challenge.

Vera: How can other nonprofits get involved?

Dr. Adams Kellum: Any other nonprofit leaders who want to get involved in advocating for a shift to more equitable funding can contact me directly at vadams@stjosephctr.org. I can help connect them with our coalition.

For additional information on this issue, please go to Nonprofit Overhead Project and Full Cost Project | Philanthropy California.