underfunded

Struggling Nonprofits Urge Mayor de Blasio to Speed Up Late Payments

The Sheltering Arms drop-in center in Jamaica, Queens, provides 24-hour services for people between 14 and 24 years old.
The Sheltering Arms drop-in center in Jamaica, Queens, provides 24-hour services for people between 14 and 24 years old. Photo: Ben Fractenberg/THE CITY

Nonprofits that rely on city funding say hundreds of millions of dollars in late checks from de Blasio administration agencies routinely force them to scramble and take out loans to pay bills.

Frustrated by the longstanding problem, Robin Hood, a major philanthropic organization that helps nonprofits, is urging the city to add $106 million in the upcoming budget to “start closing the gap.”

In a May 17 letter to top city officials, the group expressed “deep concerns” about “underfunding and late payment” by the city’s contracting system.

The missive cites a recent report that found payment delays caused a cash-flow deficit of about $744 million for city nonprofits. That’s up from the $675 million in the previous year, according to the review by SeaChange Capital Partners, an organization that makes grants, loans and provides advisory services to city nonprofits.

The delays have gone on for so long, some nonprofits expect nothing else.

“We kind of factor it into the cost of doing business,” Sheltering Arms CEO Elizabeth McCarthy told THE CITY. “We’ve gotten to the point where we assume this is going to be the case.”

City officials recommend the nonprofit borrow the money — interest-free — from the Fund for the City of New York, McCarthy said.

But that money can only be used for salaries. It can’t be spent on rent, computers and other expenses.

All told, Sheltering Arms, which helps homeless and runaway youth, was forced to cover more than $8 million as it waited for city funds last year, records show. The reason for the tie-up: 14 of its city contracts were registered an average of 214 days late, according to Checkbook NYC data.

Contracts Nine Months Late

Another nonprofit, Samaritan Daytop Village, was forced to shell out an estimated $21 million of its own money to cover costs, records show. All told, 14 contracts for $251 million were registered an average of 282 days — nine months — late last fiscal year, data from CheckbookNYC shows.

City agencies have long struggled to pay contracted nonprofits on time, and some charity officials say the de Blasio administration has done nothing to streamline the payments.

Cots at Sheltering Arms, on May 21, 2019.
Cots at Sheltering Arms, on May 21, 2019. Photo: Ben Fractenberg/THE CITY

“It doesn’t seem to have improved,” said McCarthy, who suggested the city create a system to enable nonprofits to track the funding process.

“There are a number of places the contract has to pass through, so it can be difficult to know where its getting stuck,” she said.

The delays have drained the reserves of one nonprofit in Queens.

“We’ve dwindled down to nearly nothing,” said Chris Hanway, executive director of the Jacob A. Riis Neighborhood Settlement.

The organization, which provides an array of services to people in several Queens’ neighborhoods, had to wait eight months for city funding for an anti-violence program, according to Hanway.

“That’s one of the mayor’s chief programs,” he said. “It’s vital work.”

City Comptroller Scott Stringer blames city officials.

Last May, an audit by his office found that 90% of contracts for human services were submitted late for registration and after the contract began. Vendors are only paid after the contract is formally registered with the city.

“When we shortchange the nonprofits that provide vital services to vulnerable New Yorkers, we place the providers and the communities they serve in jeopardy,” Stringer told THE CITY. “We’ve highlighted how delayed contract registration compounds the pervasive and unacceptable underfunding of human services providers, and that’s why I have repeatedly called for reforms to improve the speed and efficiency of our procurement system.”

Fears of ‘Financial Disaster’

In September 2016, Mayor Bill de Blasio created a Nonprofit Resiliency Committee designed to “expand lines of communication between the city and the nonprofit human service sector.”

Robin Hood called the committee “an important step in addressing city procurement,” but said it had “has yet to yield results” in decreasing late city payments.

City Hall defended its nonprofit funding.

Jose Bayona, a mayoral spokesperson, said no other city administration has invested more than $600 million annually to support thousands of nonprofits.

“The de Blasio administration continues to work collaboratively with our nonprofit partners to invest in greater flexibility for indirect rates and the cost of service delivery,” he added.

That’s little solace to some nonprofits struggling to stay afloat.

“SeaChange has seen first hand that contract delays can bring even the best-run nonprofit organization to the brink of financial disaster,” said the group’s managing partner John McIntosh.

City Council members are also urging de Blasio to add more money in the budget for nonprofits.

Nearly two months ago, the Council’s Progressive Caucus initially called for an additional $250 million in the budget for human services contracts. That money also should be used to achieve salary parity for certified early- education teachers at community-based organizations, the March 28 letter said.

That request has since been cut to $106 million, according to the Council’s Fiscal Year 2020 Preliminary Budget Response.

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