Gotham Gazette Thu, 25 Apr 2019 12:21:18 +0000 en-gb (Webmaster) City Approach to Nonprofit Contracting Questioned council hearing rosenthal

Council Member Rosenthal at a recent hearing (photo: William Alatriste) 

Human services nonprofits serve the city’s most vulnerable populations, providing a range of critical programs like foster care, homelessness services, after-school programs, mental health care, food pantries, and more. But, many of these organizations are faltering due to problems with the ways in which government approaches contracting.

On Monday, the New York City Council Committee on Contracts held an oversight hearing to examine serious and systemic issues facing human services nonprofits operating under contracts with the city. The hearing, chaired by Council Member Helen Rosenthal, was held in response to a report released by the Human Services Council (HSC), a coalition of 170 nonprofits that provide vital programs like childhood education, senior care, and job training to New Yorkers. The report identifies the major challenges facing the nonprofit human services sector, as well as recommendations to strengthen and stabilize it.

Leaders from 25 organizations testified at the hearing, echoing the issues outlined in the report and painting the picture of a sector in crisis: government contracts account for the majority of provider budgets, but pay roughly 80 cents or less of each dollar of true program delivery costs, creating budget gaps and diminishing the quality of services nonprofits can provide; contract payment is chronically late, forcing providers to turn to costly borrowing to meet their organization’s needs, often accruing interest that is not covered by government contracts; and, programs are often developed without input from the human services nonprofits that are responsible for implementing them, resulting in “ineffective and unworkable programs,” according to the HSC report.

“We absolutely feel that the government has left us behind,” said Dr. Jeremy Kohomban, president and CEO of The Children’s Village, during his testimony. “In addition to underfunding, we often deal with delayed reimbursement, and hidden costs upon reimbursement of interest payments, that we are forced to make on extended credit lines.”

“While we are untiring in our fundraising,” Kohomban added, “our donors are most interested in helping children and families, and least interested in subsidizing what they increasingly see as government shirking its responsibility.”

The city is required to provide many of the support services involved, but contracts them out to nonprofits in order to save on costs and increase efficiency. According to the Human Services Council, the city’s human services nonprofits deliver “essential government services to 2.5 million New Yorkers” every year.

According to the HSC report, the sector includes more than 200,000 workers and New York City is engaged in over 5,100 contracts worth $4.3 billion in the current fiscal year, which ends June 30. There are also thousands of state contracts that add another $1.5 billion in contracts.

Many of these organizations rely on the government for almost all of their funding, and are told to seek grants or other funding methods to account for the rest of their expenses. The city often turns to outside providers to meet city needs, for instance, “When the city decides to build a $40 million bridge, they hire a construction company with that expertise,” Council Member Rosenthal said during her opening remarks.

However, Rosenthal continued, “the city would never say to a construction company, ‘We’re going to pay you $35 million. Try to get philanthropy, foundations, or other jobs that you do to pay for the remaining $5 million.’”

Not only do those contracts rarely cover the actual operating costs of the city’s human services nonprofits, but the payment is often late and unpredictable, creating an unsustainable situation that forces many of these nonprofits to take out loans from private banks in order make payroll and rent.

“Do you know of any human services providers that have had to borrow from a bank in order to provide services?” Rosenthal asked Michael Owh, director of the Mayor’s Office of Contract Services, during his testimony. Owh said he didn’t have any specific examples, but knows that some providers have lines of credit.

Rosenthal asked leaders from several human services nonprofits if they had been forced to take out a loan due to a lack of timely and sufficient funding, and eventually instructed Allison Sesso, executive director of the Human Services Coalition, to consult with her organization’s affiliates and put together a comprehensive list of how many providers have needed to borrow money.

“We are often forced to borrow against a line of credit to meet payroll…last year, CAMBA paid $375,354 in interest for the use of our line of credit,” said Thomas Dambakly, chief administrative officer of CAMBA, a large Brooklyn-based nonprofit that provides employment, education, health, legal, and youth services.

Several human services nonprofits have been forced to close in recent times, and a number of others are on the brink of insolvency. According to a report from SeaChange Capital Partners, a merchant bank serving the nonprofit sector, 18 percent of New York City nonprofits in the health and human services sector are insolvent, while the HSC report (created by a commission of 32 human services executives, civic and philanthropic leaders, former government officials, and others) determined that 60 percent of humans services nonprofits are financially distressed, with no more than three months of cash in reserves.

In March of last year, after 80 years of operation, the Federation Employment and Guidance Service (FEGS), a “$250 million behemoth nonprofit human services provider, announced it would be closing; a clear signal that systemic issues threatened the survival of the sector as a whole,” says the HSC report.

Before filing for bankruptcy, FEGS provided mental health, housing, disability, home care, and employment services to 120,000 households and individuals. As a result of FEGS’ closure, the city’s remaining nonprofit human services providers have been relied on to meet the needs of those 120,000 households and individuals who relied on FEGS services.

If the city does not address the issues facing the sector, providers argue, the communities that these nonprofits serve will be the first ones to suffer the consequences.

“Our ability to effectively serve New Yorkers is seriously compromised by a government system that simply doesn’t cover the true cost of programs and services, and how those costs grow over time,” said Dan Lehman, chief financial officer of the Children’s Aid Society. “Failure to address this issue jeopardizes the viability of community-based organizations, and ultimately harms those who we serve, and who the city depends on us to serve.”

The HSC report and representatives from human services nonprofits who testified at Monday’s hearing put forward a number of solutions that could ameliorate the nonprofits’ dire financial situation. For one, the government could seek input from and collaborate with the human services sector while designing programs, which would ensure the creation of programs that the nonprofits are truly capable of implementing.

Additionally, the government could issue contracts that fully fund nonprofits’ operating costs, including so-called “indirect costs,” or expenses like IT, building maintenance, accounting, and human resources, and fulfill those contract payments in a more timely and consistent manner. These contracts, human services workers say, should also account for cost increases that occur over time due to inflation or newly added mandates.

Toward the end of the hearing, Council Member Rosenthal asked Sesso to return to the testimony table to answer a few additional questions. “Do you think it’s reasonable to ask the administration for some sort of roadmap or strategic plan for how you get from these recommendations to implementation?” Rosenthal asked.

“At the heart of this is the rates, and it’s about what do we consider to be program costs...I do think that, [Mayor’s Office of Contract Services] would be a good partner, but there does have to be a directive at the very highest levels of the administration to do this.” Sesso replied.

“And if there’s another recession,” Sesso continued, “If government has to cut back, we are first on the list - this is going to be a big problem if we do not act, in the context that we are providing services that are a bridge to opportunity for some of the neediest people in New York City.”

by Meg O'Connor, Gotham Gazette

Read more by this writer.

City Approach to Nonprofit Contracting Questioned Tue, 05 Apr 2016 23:58:55 +0000
Hearing Will Examine Pay for Workers Serving City’s Most Vulnerable rosenthal contracts alatriste

Council Member Rosenthal (photo: William Alatriste)

For six years, a particular group of workers employed through contracts with the city, and filling important roles, saw their wages stagnate. In May of this year, however, Mayor de Blasio announced that his Executive Budget for the 2016 fiscal year, beginning July 1, 2015, would provide a 2.5 percent cost-of-living adjustment increase and an $11.50 per hour wage floor for some of New York City's human services providers - workers who staff senior centers, homeless shelters, foster care agencies, and more.

Though the wage adjustments have been hailed as a much-needed step and heralded as part of the mayor’s equity agenda, an upcoming City Council oversight hearing will explore the process for implementing them and ways in which wages can be raised even further.

On Monday morning, Council members and advocates intend to discuss ways to raise the wages of a human services workforce that is increasingly in need of the types of provisions and programs - such as food stamps - that they help provide for others. One aspect of this is ensuring that the mayor’s promise materializes, part of the impetus behind the hearing, according to Contracts Committee Chair Helen Rosenthal, one of two City Council members who will preside over the hearing - which comes five months after de Blasio’s announcement.

Previewing the hearing, Rosenthal told Gotham Gazette, “It’s truly an opportunity for the administration to explain how they’re implementing this policy goal and I think we’ll learn a lot of critical details and answers to questions we've been asking for the last few months."

Mayoral spokesperson Amy Spitalnick told Gotham Gazette in a statement that "The City is actively working with the non-profit service provider community and the appropriate City agencies to ensure that implementation covers all the intended employees and programs, and that it is done in an efficient manner that doesn’t place any undue burden on providers. It will be retroactive to July 1."

Human services nonprofit organizations, which employ these workers and contract with the city, have seen years of cuts in funding. The wage floor and cost of living adjustment announced by de Blasio came much to the relief of the sector’s many low-wage workers, Michelle Jackson, associate director and general counsel of the Human Services Council, a coalition of nonprofit human service providers, told Gotham Gazette.

"Our workforce has been chronically underfunded for years. During the recession, there was divestment, and [prior to this year] we hadn't seen a reinvestment since the recession. Since 2010, there had been about $1 billion in cuts to human services across the state," Jackson said.

"I think there’s a misperception that people who work for nonprofits do it as volunteer work - these are crucial services that government is not providing, that they have contracted out to nonprofits," Jackson explained. "Looking at state and city cost of living adjustments over the last few years up until this year, human services workers have been forgotten about. We’re about 15 percent of the state’s workforce, and it's the government’s job to make sure that human services workers are compensated fairly because they are employed through contracts."

These human services workers provide a range of critical programs to some of the city’s most vulnerable populations, including in foster care, senior services, early childhood education, after-school programs, homeless shelters, job training and placement, and community health services. Nonprofit organizations on human services contracts delivered about $2.3 billion in services to New York City in fiscal 2015, according to the Mayor’s Office of Contract Services.

On Monday, November 2, the City Council Committee on Contracts, in conjunction with the Committee on Community Development, will hold an oversight hearing to evaluate the administration's progress in implementing the policy change and allocating funding for the wage floor and the cost of living adjustment.

Council Member Rosenthal told Gotham Gazette that she expects representatives of the de Blasio administration to come to the hearing "with a clean and easy-to-understand explanation of how the money is being allocated. We want to find out which agencies and which programs within each agency is being affected, how many employees are getting the increase, and what the cost is per program.”

Although the mayor set aside a certain amount of money in the budget to pay for the wage adjustments, Rosenthal explained, "the budget did not dictate exactly which agencies and which contracts and which programs would get that pay increase. So, it's my understanding that what's been happening over the last three or four months is that city has been collecting information from contract service providers about the workers they have, the titles, and how much they’re currently being paid in order to now allocate the lump sum of money to the specific agencies."

Allocating the funds can be a complicated process, given that in Fiscal Year 2015, eight City agencies, including the Department of Youth and Community Development, the Administration for Children's Services, and the Department of Homeless Services, registered 16,524 contract actions, according to the Mayor’s Office of Contract Services. In the human services industry, those contracts are awarded to vendors, predominantly nonprofits, for the purpose of providing programs such as day care, housing and shelter assistance, and counseling services.

The 2.5 percent increase for approximately 35,000 of the city's 125,000 contracted human services workers and the wage floor for roughly 10,000 social services employees fall short of salary adjustments advocates were pushing for, but are still generally viewed as a significant step in the right direction.

"It really is a crucial first step and shows a real commitment from the mayor in investing in human services workers," Jackson told Gotham Gazette.

Going forward, human services advocates plan to push for continued investment into the sector. "We want to see the cost of living adjustment systematized so it's not the case that every five years, groups have to advocate for one," Jackson said, "there should be consistency in how cost-of-living adjustments are applied for nonprofits."

Rosenthal said she also hopes the hearing will "help to give us a sense of how much money it would cost to get these workers up to $15 an hour. As we understand that, we can start to advocate for that increase in the budget for next year - I think we'll learn a lot more about the details of getting us there from this hearing."

Governor Andrew Cuomo has recently come out in support of a statewide $15 hourly minimum wage for all workers, calling for the wage to be phased in by 2019 in New York City and by 2021 across the state. The move is part of a nationwide push to raise the minimum wage, as cities like Seattle ($15 by 2021), Los Angeles ($15 by 2020), San Francisco ($15 by 2018), and Chicago ($13 by 2019) have passed legislation to phase in a minimum wage increase.

Just last week, Syracuse Mayor Stephanie Miner increased the minimum wage for the city's employees to $15 an hour. The raise affects about 69 employees, including laborers and information aides, some of whom had previously made as little as $8.75 an hour (the state’s current minimum wage), The New York Times reported.

Some have wondered why Cuomo, who said during his minimum wage announcement last month, “every working man and woman in the state of New York deserves $15 an hour as a minimum wage,” doesn’t lead the way by raising the wages of state employees, more than 15,000 of whom make less than $15 an hour living wage, according to a New York Post review of records kept by State Comptroller Tom DiNapoli’s office.

There is room to ask the same of de Blasio with those on the city payroll or working through city contracts.

Though the human service nonprofit sector would indeed be affected by a statewide minimum wage increase, Jackson told Gotham Gazette, nonprofits under contract with the government would need more funding in order to pay their employees higher wages since, unlike businesses, human service nonprofits cannot simply raise the price of their services to cover the costs of paying their employees more. "We would need the increase to be covered in contracts. The government would need to pay that," Jackson said, explaining that when Mayor de Blasio wanted human services workers to have a higher wage floor, for example, he increased funding for contracts in order to pay for that increase.

Human services workers are not the only ones who would benefit from higher wages. Research has shown that higher wages sharply reduce employee turnover. “We [human services workers] have a very high turnover rate,” Jackson said. “There’s a consequence of that turnover rate on the people in need of services. You want to retain talented workers. These are people who do really important jobs in the community - taking care of your children, your parents, people with mental health issues and substance abuse problems.”

Raising the wages of human services workers by increasing funding in the human service nonprofit sector would contribute to the city’s efforts to reduce homelessness and inequality, since outreach programs, supportive housing, drop-in centers, and other programs are more successful with greater consistency and quality of service.

“These are workers who basically work for the city,” Rosenthal told Gotham Gazette. “The city is having these workers provide services for our residents, whether it's in homeless services, senior services, or as caregivers. I think it’s critical that we pay our workers $15 an hour, and for many years, these workers have languished without any salary increases.”

by Meg O'Connor, Gotham Gazette

Hearing Will Examine Pay for Workers Serving City’s Most Vulnerable Fri, 30 Oct 2015 01:29:13 +0000