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"Nobody would do business this way": New York City seeks to pay nonprofit partners faster

In late April 2020, city officials approached the Volunteers of America nonprofit’s Greater New York chapter to ask for help with a major undertaking: Convert a midtown hotel into a transitional housing facility for homeless New Yorkers during the pandemic.

The VOA-NY agreed, and, within a week, the new shelter was housing up to 155 men at a time, with 34 assigned staff members; meal service three times a day; laundry service twice a week; and a slate of restorative and rehabilitative services offered. All told, the shelter project cost $7.9 million for 13 months of service and operations.

But, thanks to an onerous and complicated billing process, the city did not pay a dime for their services until six months later in November, according to VOA-NY’s CEO Myung Lee. The nonprofit took out lines of credit to cover their expenses in the meantime.

“Nobody would do business this way,” Lee said.

That sluggish reimbursement pace is the target of a new joint report from City Hall and the city comptroller’s office to expedite the payment process for the thousands of nonprofits that work with the city, in a $12 billion industry that covers a vast range of human services, from health and housing assistance to afterschool programming.

The delays have been as long as two years for organizations to get paid, said City Comptroller Brad Lander.

“What that means for large nonprofit organizations is that they’re paying millions of dollars a year in interest to float the city social services, whether they can get a loan or whether they float it internally,” Lander said at a press conference Monday. “And what that means for our smallest organizations is they can’t survive because they don’t have an ability to get a lot of capital or a lot of money in the bank.”

While the report acknowledges much of this work will fall to the newly created Mayor’s Office of Nonprofits, many of the recommendations call for more efficiency in existing contract and billing methods, like adopting a city-wide procurement process that works across multiple agencies.

The report also calls for a new key transparency metric by way of a dashboard called Contract-Stat to track performance management, similar to NYPD’s Compstat which tracks crime statistics.

Mayor Eric Adams said New York City’s dependence on the nonprofit industry, which employs more than half a million workers who are largely nonwhite, shows the necessity for reforms to the payment system.

“For too long, the City has relied on nonprofits to deliver essential services without holding up its end of the bargain,” Adams said in a press release. “The failure to pay our nonprofits in a timely manner has not only hurt our nonprofit sector, which is predominantly made up of Black and Brown workers, but also the New Yorkers who rely on their services.”

Lee said the time and money Volunteers of America devoted to dealing with delayed payment from the city are resources that could have been spent on their mission instead. “Anytime we have to have people dealing with administrative burdens, or dealing with tracking invoices and doing all that, or money that we frankly end up paying commercial banks for interest on lines of credit because the city’s not paying us—that is money that I think is being wasted,” Lee said.

She added, “We just want to be treated fairly. We’re not asking for anything special. We just want to get paid for the work that we do, and get paid on time.”

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