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June 10, 2010

DiNapoli: State’s Financial Crisis Hurting Not-For-Profits

Long Contract Delays and No State Budget
Forcing NFPs to Scramble to Provide Services or Even Stay Open

Breakdown of Late Contracts by Geographic Region and Organization Available

State contracts with not-for-profit organizations providing services to New Yorkers were approved late 82 percent of the time in 2009, compared to 63 percent in 2008, according to a report issued today by State Comptroller Thomas P. DiNapoli. In addition, as a result of the late state budget not-for-profits are not getting paid for services provided under existing contracts, forcing some organizations to consider suspending services until the state passes a budget or even closing their doors.

“The budget crisis is causing a financial crisis for not-for-profits,” DiNapoli said. “It’s a double shot of trouble. Contracts for services are being held up and organizations can’t get reimbursed for services they have already provided. It’s wrong to expect organizations that operate on shoe string budgets to float the state.

“This is another example of why the state cannot continue to operate by passing weekly emergency spending bills. New York needs to change the way it does business because business as usual is hurting New Yorkers.”

The state adopted a prompt contracting law in 1991 to expedite the contract process and payments for not-for-profits to avoid service interruptions and financial hardships. State law requires that not-for-profit contracts be processed by state agencies within 150 to 180 days. DiNapoli’s office is required to report annually on how quickly state agencies process contracts for not-for-profits based on data that is self-reported by state agencies to his office. Currently, the state has 25,811 contracts with not-for profits totaling $41.9 billion.

DiNapoli’s office found that higher dollar not-for-profits’ contracts $50,000 or higher were approved late nearly 93 percent of the time. In total, DiNapoli’s office found 5,844 of 6,318 contracts, valued at $4.2 billion, were approved an average of 152 days late by state agencies in 2009 (see late contracts broken down by geographic region and organization). DiNapoli’s office typically approves contracts within 11 days after receiving them from state agencies.

Approximately $176,000 was paid in interest to not-for-profits by state agencies for processing their contracts late in 2009, an 18 percent increase from last year.

Richard E. Barnes, executive director, New York State Catholic Conference, said “Comptroller Tom DiNapoli has again shown himself to be an ally of the non-profit community in our struggle to obtain fairness and equity in the contracting process. We know within our non-profit service agencies that the system is broken. Comptroller DiNapoli’s Annual Report proves it. Now we stand ready to work with him and our other friends in state government to fix the problems once and for all.”

Ron Soloway, chair of the NYS Not for Profit Contracting Advisory Committee and mangaing director of Government and External Relations for UJA-Federation of New York State, said, “It is disappointing that another year has passed with no improvement in prompt contracting with not-for-profit organizations. We hope that with the new initiatives proposed by Comptroller DiNapoli that progress will be made in the coming year.”

After identifying the persistent problems that not-for-profits have when contracting with state agencies, DiNapoli’s office issued regulations last year that detail when state agencies owe interest to not-for-profits. He also hosted a series of forums statewide on contracting and responding to tough economic times for not-for-profits and issued a report examining the challenges facing the not-for-profit sector.

In the report issued today, DiNapoli made a series of recommendations to streamline and speed up the contracting process including:
State agencies should choose start dates for grant contracts that are later than April 1, the start of the state’s fiscal year, so that the processing of contracts is not affected by the timeliness of adopting a state budget;
State agencies need to use the grant contract boilerplate in a consistent manner ensuring that the terms are uniform for all state agency grant programs;
Master contracts with the same not-for-profit should be utilized when feasible; and
The Not-for-Profit Contracting Advisory Committee should continue to meet regularly to review recommendations from the not-for-profit community and state agencies.

Click here for a copy of the prompt contracting report.

Click here for a breakdown of late contracts by geographic region and organization.


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