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June 14, 2012

 

DiNapoli: State Agencies' Late Approvals of Contracts with Not-For-Profits Rose to 80 Percent Last Year

Legislature Passes Comptroller's Reform Proposal; Breakdown of Late NFP Contracts Available by Region

State agencies were late more than 80 percent of the time in approving contracts subject to the Prompt Contracting Law with not-for-profit (NFP) providers last year, according to a report released today by State Comptroller Thomas P. DiNapoli. This prompted interest payments that cost taxpayers nearly $200,000, the report found.

Recently, the state Senate and Assembly passed DiNapoli's legislation to require agencies to pay interest sooner for late contract payments to ease the financial burden on NFPs. The bill is awaiting action by the Governor.

"Not-for-profit organizations provide billions of dollars in essential services but are not paid on time as they should be," DiNapoli said. "This prompts interest payments and taxpayers foot the bill. I commend Senator John DeFrancisco and Assemblyman Steve Englebright for sponsoring legislation that will fix this growing problem."

New York relies heavily on not-for-profits to provide basic services – from health care clinics to work force development programs – currently with 14,596 active grant contracts valued $14.7 billion. In 2011, nearly 2,000 of the 3,060 contracts approved late by agencies were eligible for interest.

DiNapoli reported that in 2011, contract approvals by state agencies were late more than 80 percent of the time, a 9 percent increase from 2010, even as NFPs continued to provide services while awaiting approval. Click here for a breakdown of not-for-profit contracts by region and length of days for approval.

The Prompt Contracting Law enacted in 1991 requires agencies to process contracts within 150 to 180 days. Under a 2007 amendment, the Comptroller must report annually on whether agencies meet this time frame and the reasons for delay, and must provide recommendations to improve timely contracting.

"I would like to thank Comptroller DiNapoli for his leadership on this issue," said Assemblyman Steve Englebright (D-Setauket), who chairs the Assembly's Governmental Operations Committee. "Not-for-profits play an important role in New York state, serving critical causes and working on behalf of disadvantaged and vulnerable populations. When payments for their services are delayed, NFPs experience hardship and critical services can be delayed to residents who need them the most. This measure will work to reduce delayed contracts and payments by making state agencies more accountable."

"There is often a substantial delay between the date that a not-for-profit begins providing service, and the date on which that organization receives payment from the state for providing the service. In some cases, they must take out loans to cover their expenses, said Senator John A. DeFrancisco (R-I-C), who chairs

the Senate Finance Committee. "This bill will help organizations manage their cash flow by creating a predictable 30-day turnaround time in which they would receive payment, or be entitled to the interest due to the late payment. I commend Comptroller DiNapoli for urging reform to alleviate financial difficulties for not-for-profits and the New Yorkers who depend on these services."

"Late contracts often lead to delayed services to poor and vulnerable New Yorkers," said Ron Soloway, managing director of government and external relations for UJA-Federation of New York. "We thank Comptroller DiNapoli for issuing this report on state agency adherence to prompt contracting requirements as it sheds sunshine on the facts and what must be done to improve outcomes."

"This report finally dispels the myth that late state budgets are the cause of late contracts and payments to not for profits," said Susan K. Hager, president of United Way of New York State. "The challenge to reform this broken system now passes to the Governor. We urge him to correct this unacceptable treatment of this state's not for profits."

"While the nonprofit sector is being rightly pushed toward greater accountability and more efficient business practices, the state should strive to execute its contracts and pay its bills in a timely fashion," said Michael Stoller, executive director of the Human Services Council.

"The nonprofit community once again has good reason to thank Comptroller DiNapoli," said Richard E. Barnes, executive director, New York State Catholic Conference. "Yes, the statistics are grim; and the state agencies are simply not processing their contracts in a prompt and timely manner. Some might throw up their hands at seeing a similar result year after year and walk away. But, instead, Comptroller DiNapoli has committed his office to getting to the cause of the problem and asking how can it be fixed. We stand with him, and with all our partners in state government, as we face the challenges highlighted in this report."

The Comptroller's report recommends that state agencies:

  • Make prompt contracting a priority to reduce costs to the state and not-for-profits;
  • Pay prompt contracting interest with the first payment due after the start of a late contract. The Comptroller's program bill codifying this requirement awaits the Governor's signature;
  • Expand the use of multiyear contracts to streamline contract management and reduce the risk of potential interest payments by the state;
  • Consider more effective use of advance payments to alleviate cash flow issues;
  • Re-align contract start dates to reflect the time required for the procurement process; and
  • Ensure that grant awards and contracting are automated within the new Statewide Financial System.

Last year, the Comptroller recommended a series of reforms to the way the state does business with NFPs. This year, the Comptroller launched "Don't Get Burned," a statewide fraud prevention training program for not-for-profit accountants, directors, board members and staff.

For a copy of the legislation, visit:
http://www.osc.state.ny.us/legislation/2011-12/oscb9.htm

For a copy of the report on New York's not-for-profit sector, visit:
http://www.osc.state.ny.us/agencies/pcl_reports/pcl_2011.pdf

For a breakdown of not-for-profit contracts by region, visit: http://www.osc.state.ny.us/press/releases/june12/late_contracts_by_region.pdf

To read the Comptroller's proposed prompt contracting reforms, go to: http://www.osc.state.ny.us/reports/nfp/nfpreport11-2011.pdf



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