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June 10, 2008

DiNapoli Calls For Improved Process For
Awarding Contracts to Not-For-Profits

Report Finds State Agencies Processed Contracts Late 70% of the Time

State Comptroller Thomas P. DiNapoli today proposed a series of recommendations to correct the current contracting and payment system used by State agencies to pay not-for-profits for state-financed services. At a press conference announcing the recommendations, DiNapoli released his office’s first ever report on prompt contracting. DiNapoli was joined at the press conference by not-for-profit leaders.

“Not-for-profits can’t afford to float their budgets while they wait for State agencies to approve their contracts,” DiNapoli said. “And New Yorkers can’t wait for services while those not-for-profits struggle to make ends meet. Many not-for-profits operate on shoe string budgets and can’t pay their bills or make payroll when State contracts and payments are processed slowly. State agencies need to speed up their procedures. We’re stepping up our audits to make sure agencies approve contracts on time and not-for-profits can provide the vital services so many New Yorkers depend on.”

DiNapoli’s report found that State agencies failed to meet required time frames for processing grant contracts with not-for-profit organizations 70 percent of the time, affecting 7,660 of the 10,970 contracts with not-for-profits processed during calendar year 2007. As a result, some not-for-profit organizations may have begun work for State agencies months before their contracts were approved. DiNapoli’s office has implemented new procedures to ensure State agencies comply with the law, including pre- and post audits to ensure that interest is paid when appropriate.

“Not-for-profit organizations deliver essential services to our most vulnerable citizens, and the State needs to do a better job of paying them in a timely manner for their critical work,” said Governor David Paterson. “I’m committing my Administration to providing the cooperation and collaboration needed to improve the process and ensure that these organizations get the funding they’ve earned in a time frame that allows them to continue their important work.”

Ron Soloway, managing director of Government and External Relations, UJA-Federation said “When prompt contracting legislation was first enacted over a decade ago State agencies responded by processing a high percentage of not-for-profit contracts in a timely manner. Comptroller DiNapoli documents today that State agency prompt contracting efforts have faltered. That said, with the renewed commitment of Governor Paterson and Comptroller DiNapoli, I believe that the State can achieve its goal of prompt contracting of not-for-profit contracts.”

Susan Hager, president, United Way of New York State said “This issue has been around almost a quarter century, since passage of the prompt payment law in 1984. Since then, a bipartisan coalition of state legislators, leadership from Comptrollers of both parties as well as the not-for-profit community have clamored for resolution. Given this track record, we are very disappointed at the lack of progress reflected in Comptroller DiNapoli’s report. The solution to this problem is communication from the Governor’s Office that this issue is to be addressed, that progress will be monitored by his staff, and agency leadership will be held accountable for the results. We welcome the new Governor’s commitment to change and the continued leadership of the Comptroller DiNapoli to resolving these issues.”

Richard E. Barnes, executive director, New York State Catholic Conference said “New York State’s unique partnership between government and the nonprofit service providers is a relatively simple concept: direct State funding, often in combination with private charity, through the nonprofit community to efficiently provide services to the sick, vulnerable and others in need. But this simple concept involves many complex details and contractual arrangements, and the details need attention for the system to properly function. We in the nonprofit community are grateful that we have in our State public officials who are willing to work with us to address these issues.”

Over $2.1 Billion in Not-For-Profits Contracts
New York State relies heavily on not-for-profits to provide services through grant programs such as health care clinics, workforce development and mortgage foreclosure programs. DiNapoli’s office reviewed and approved more than 38,000 contracts valued at $37 billion in State Fiscal Year 2007-08, including not-for-profits contracts valued $2.1 billion.

Widespread Problem
Under a 2007 law, DiNapoli’s office is required to report annually on how quickly State agencies process contracts and payments for not-for-profits to reduce late contracting and interest payments. The report examined self-reported data from State agencies and found:

  • Only 3,310 of the 10,970 contracts with not-for-profits were processed within the required period of time;
  • Only two agencies paid interest as required by the law when not-for-profit contracts are late. The Department of Health and the Office of Children and Family Services paid $203,636.84 on 612 contracts;
  • The five agencies that reported the highest number of not-for-profit contracts were the Office of Children and Family Services, the Department of Health, the Department of Education, the Office of Mental Retardation & Development Disabilities and the Department of State; and
  • Agencies that failed to submit information, as required by law, include the Division of Parole, the Commission on Quality of Care and Advocacy of Persons with Disability, Office for the Prevention of Domestic Violence, and the NYS Interest on Lawyer Account Fund.

Practical Solutions
DiNapoli made several recommendations, including:

  • The Prompt Contracting Advisory Committee should meet immediately to review DiNapoli’s and any other recommendations;
  • The Office of Technology and the Division of Budget should ensure that future financial management systems are designed to assist State agencies in the timely execution of contracts including using electronic contracting;
  • State agencies should use standard grant contract language to improve standardization among contracts. This is particularly useful for not-for-profits that provide services to multiple State agencies;
  • State agencies should clarify and simplify contract submission instructions and make greater use of written directives, advance payments and other funding mechanisms to avoid late payments; State agencies should make use of multi-year contracts, eliminating the need for executing a new agreement each year;
  • State agencies should better train staff on the contracting process;
  • State agencies should start their grant procurement planning process earlier and establish reasonable payment schedules to meet prompt contracting time frames; and
  • State agencies should identify common mistakes made by not-for-profits during the contracting process and recommend solutions to the Advisory Committee as well as its grantees.

Click here for a copy of the report.

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