Building upon two previous reports that found community nonprofits provide mental health and other services like substance abuse treatment more efficiently than the state, a group of business leaders issued a report Monday urging the state to streamline its contracting with tens of thousands community providers by creating a cross-agency human services organization.

The state gives these nonprofit providers about $1.5 billion a year. The nearly 17,000 Connecticut nonprofits employed more than 192,000 people in the state in 2011, but many of those workers are still struggling to survive.

According to a report last year by the Commission on Nonprofit Health and Human Services, 50 percent of Connecticut nonprofits reported deficits, ranking them 5th highest in the nation. The sector also has been forced to reduce employee-related expenses and benefits so much that some of their employees now qualify for state assistance.

These same nonprofits received a 1 percent cost-of-living increase for the first time this year and Gov. Dannel P. Malloy has proposed earmarking $40 million over the next two years in bonding for the nonprofit community, but the Connecticut Institute for the 21st Century believes the state can do more.

With a lingering state budget deficit, the report doesn’t ask the state to spend more money or transfer any services to private nonprofit community providers, but it does ask the state to streamline a request-for-proposal process for the seven state agencies that contract with nonprofits.

The request is similar to the one made last year by the Community Providers Association and the Cabinet on Nonprofit Health and Human Services, which called for a streamlined state contracting process.

At the moment, providers sign a master contract with the state but have different types of contracts with each agency. The agencies then add their own items, reporting requirements, and sometimes payment requirements. That means nonprofits have to employ more staff to keep up with the reporting or sometimes in order to make sure they get paid. It also distracts them from their mission of serving clients and getting the desired outcomes.

John Mertz, co-executive director of AIDS Connecticut, said his group received a $100,000 payment just last week from the state. The payment was supposed to have arrived October.

“We still don’t know why that payment was held up,” Mertz said.

He said the experience is not unique and other nonprofits have faced similar delays over the years. He said state workers really don’t want to work with nonprofit providers through a “cumbersome” system, but they’re stuck with it.

According to the report, “the current service model is a confusing, non-integrated, inconsistent and out-of-balance system that is neither efficient nor effective.”

But those nonprofits that have survived are optimistic that change is in the air.

“I, for one, am very excited and very optimistic about this report and the possible future that it lays out for us,” Mertz said, adding that he feels like momentum is building and “all sectors of society have coalesced around the key topics of this report.”

Unlike other reports by the Connecticut Institute for the 21st Century, there are no savings identified in the report. But Jim Torgerson, president and CEO of United Illuminating, said the purpose of the report was to bring together the state and nonprofits.

“The problem with these reports is they often become recommendations on a shelf,” Brian Renstrom of Blum Shapiro, who compiled the report, said. “Our recommendation is about institutionalizing the improvements to this system.”

He said their recommendation and report is slightly different than what’s been offered previously because it calls for the creation of an entity to manage the system.

“To own the population results, to own the strategy, to have authority and accountability, across the agencies,” Renstrom said. “To create one POS [point of service] process as opposed to seven.”

He said it can’t be voluntary. He said the state needs to mandate the creation of this system because “there’s no signing up on that voluntary list.”

The report was applauded by the nonprofit community.

“Nonprofits are the places where communities come together to solve problems,” Ron Cretaro, executive director of Connecticut Association of Nonprofits, said. “Now is the time to act on plans to improve nonprofit sustainability and improve the economic outlook in our state.”

Cretaro appreciated the report’s recommendation to transition the Cabinet on Nonprofit Health and Human Services into an oversight role with authority and accountability to implement changes across the board to streamline strategy across existing agencies and ensuring the greatest number of people are served with the highest quality, most cost efficient care.