Good afternoon Chair Won and members of the City Council Committee on Contracts. Thank you for the opportunity to testify on behalf of Nonprofit New York. Nonprofit New York is a membership based organization of approximately 1,000 nonprofit organizations in the New York City area. Our mission is to strengthen and unite the nonprofit sector, through our member services, capacity building work for the sector, and policy advocacy to promote nonprofits. Nonprofit New Yorkʼs testimony this afternoon is informed by member stakeholder interviews we held about the Cityʼs contracting process throughout 2021, and our CEO, Meg Barnetteʼs, participation in the joint Mayoral and Comptroller Task Force: A Better Contract for New York.1 Nonprofit New York supports the Joint Task Force recommendations to increase accountability and transparency; establish new processes to streamline and modernize procurement and contracting to reduce inefficiencies and delays; promote equity and fairness in contracting; establish leadership and management practices at the highest levels of government; and strengthen the capacity of both nonprofits and the Cityʼs contracting workforce.
New York City’s Nonprofit Sector, Economy, and Contracting
New York Cityʼs nonprofit sector consists of over 40,000 registered nonprofits,2 contributes 9.4% of the Cityʼs GDP, at roughly $78 billion, and employs 18% of the Cityʼs workforce.3 A majority of the nonprofit workforce are women and people of color, and over one third are immigrants.4 Nonprofit providers are contracted to carry out the governmentʼs statutory work,5 providing homeless services, domestic violence response, youth programming, language access, promoting arts and culture,6 education, environmental justice, economic development, and parks, among many other missions. While we do not have comprehensive data on the number of jobs supported by city contracts, we do know that in FY16 human service contracted jobs were double that of city agency employees.7 Nonprofits help make New York City operate - yet face pervasive and ongoing challenges through the procurement process.
PASSPort Has Brought Some Transparency to the Contracting Process but the City Still Has Few Deadlines within Internal Processes
The Cityʼs contracting process has historically been very extremely slow, with overwhelmingly late contract registrations.8 This has come at a significant cost to nonprofits. Out of a sample of 1,025 organizations, registration delays represented a $675 million cash flow burden.9 The Mayor's Office of Contract Services recently digitized the contract registration process through PASSPort, which allows for providers to digitally track their contracts in the registration process.10 This is a welcome reform, as the bureaucratic process of contract registration has historically been opaque. Several members discussed significant operational challenges ongoing for years for their organizations, because nonprofits may not know where their contract is in the registration process. However, under the City Charter,11 the only office required to respond to a contract within a specified timeframe is the Office of the City Comptroller. The Comptroller has 30 days to respond to a contract.
Nonprofit New York acknowledges the importance of the Cityʼs due diligence process, but recommends expanding the use of timelines such as the 30-day timeline required of the Comptroller would balance due diligence with the needs of nonprofit service providers.
The City Must Continue to Streamline Across Agencies
Nonprofit organizations that have contracts with multiple agencies bear a significant administrative burden because the City contracting process is not streamlined across agencies. Agencies maintain different timelines, reporting requirements, negotiation protocols, and notarization requirements. Nonprofit New York members mentioned that both PASSPort and HHS Accelerator were intended to streamline contracting processes among agencies and promote transparency. However, several members described these systems as duplicative and inconsistent. Seasoned administrative and operations professionals reported regularly making mistakes due to the confusing nature of the portals. Invoicing processes place the onus on the vendor to communicate with multiple departments. PASSPort includes a “steps from award” checklist that includes 21 steps. Recent reforms to standardize processes include the Standard Health and Human Service Invoice Review Policy, Indirect Cost Rate Manual, and PASSPort, however nonprofit providers shared implementation has been inconsistent across agencies.
The implementation of PASSPort is a meaningful starting point, but the City must further streamline and standardize application processes, documentation systems, contract management, and invoicing systems across and within agencies. This would enable nonprofit organizations to dedicate less of their limited staff resources to compliance processes. As changes are made, the City must continue to invest in training for its staff to ensure uptake and implementation.
Data Disaggregation, Contracting, and Racial Equity
Process challenges also pose a significant barrier for smaller, often people of color-led, organizations who cannot dedicate the staff resources required to partner with the City. The nonprofit sector, like most institutions within the United States, reflects the legacy of white supremacy. Nationally, people of color are less likely to be in nonprofit senior leadership positions12 and there are stark disparities between the revenues and unrestricted net assets of Black- and white-led organizations.13 Nonprofit New York supports a specific certification process to designate Black, Indigenous, and other People of Color (BIPOC) led and serving nonprofits to track how City resources are reaching BIPOC-led nonprofits and communities.
Finally, current public data on nonprofit contracting is too limited to inform appropriate public policies. The Cityʼs contracting data does not disaggregate city contracting into for-profit and nonprofit vendors. As a part of digitization reforms, the City should increase the data it collects and discloses on all contractors, beginning with a breakdown of which contracts are with nonprofit versus for-profit contractors, and include demographic data collection on leadership and communities served. Certain nonprofit contracted wages have historically been significantly lower than wages paid for the same work by City workers.14 The City should also release data on nonprofit worker salaries funded within contracts to promote equity and living wages for the nonprofit workforce.
1 Office of the City Comptroller and Mayorʼs Office. (February 2022). A Better Contract for New York.
2 Baruch College Marxe School of Public and International Affairs and Nonprofit New York. (March 2021). New York City Nonprofit Data.
3 Office of the City Comptroller and Nonprofit New York.(July 2020). The Economic Impact of NYC Nonprofit Organizations.
5 New York State Social Services Law articles 1 through 11.
6 New York State Arts and Cultural Affairs Law.
7 Office of the City Comptroller. (2017). Strengthening the Frontline: An Analysis of Human Services Contracts in NYC.
8 Office of the City Comptroller. (2019). Still Running Late: An Analysis of NYC Agency Contracts in FY 2018.
9 SeaChange Capital Partners. (August 2018). New York City Contract Delays: The Facts.
10 City of New York. (2022). ABOUT PASSPort.
11 New York City Charter §§ 312 - 328.
12 Building Movement Project. (2017). Race to Lead: Confronting the National Nonprofit Leadership Gap.
13 Echoing Green and the Bridgespan Group. (May 2020). Racial Equity and Philanthropy: Disparities in Funding for Leaders of Color Leave Impact on the Table.
14 SeaChange Capital Partners and United Neighborhood Houses. (March 2019). Closing the Gap: A True Cost Analysis of Early Childhood Education in New York City; p. 3.