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November 14, 2011


DiNapoli: State's Late Payments Hurt Service Providers

Late approval of contracts and late payments to not-for-profit service providers by state agencies are jeopardizing critical services for people in communities across New York, according to a report released today by Comptroller Thomas P. DiNapoli, who made a series of recommendations to address the delays and other challenges facing not-for-profits.

The report notes that in 2010, state agencies were six months late, on average, in approving nine out of 10 contracts valued at $50,000 or more, often after the services were rendered. Not-for-profits continued to provide services even while their contracts were bogged down in the state approval process.  Further analysis by the Comptroller’s office of the first six months of 2011 revealed that nearly 90 percent of contracts approved by the Comptroller were submitted late by state agencies. These delays create financial difficulties for organizations, which cannot be paid until contracts are approved.

“Not-for-profits operate on very thin margins,” DiNapoli said. “Yet they provide vital services for vulnerable New Yorkers.  Delay only costs taxpayers money and hurts New Yorkers who rely on these services.  The state should ensure it gets not-for-profit contracts approved on time and address other longstanding issues that continue to harm the not-for-profit sector.”

New York relies heavily on not-for-profits to provide basic services – from health care clinics to work force development programs – with 22,000 active grant contracts totaling $16.8 billion. The not-for-profit sector employed 1.25 million people statewide in 2010, 14 percent of New York’s workforce, and contributed nearly $148 billion in annual revenue to the state’s economy.

Not-for-profits often incur unreimbursed operational costs under the current arrangement.  This is compounded by current economic instability, which has resulted in heavier caseloads due to increased unemployment, cuts in government funding, and a significant drop in private donations.

The Prompt Contracting Law of 1991 requires state agencies to process contracts with not-for-profit entities within 150 to 180 days. Under a 2007 amendment, DiNapoli’s office must report annually on how quickly this is accomplished. Last year, 71 percent of not-for-profit contracts were not approved by the start or renewal date, according to the Comptroller’s office.

“There is widespread frustration with the state’s inability to meet the deadlines in the law,” said Susan K. Hager, president and CEO of United Way of New York State.  “Payments continue to be late. Yet we continue to serve those who rely on us for help. It is time for real reform.”
“It is disappointing that 20 years after prompt contracting legislation was first enacted, so many state contracts are still not processed in a timely fashion,” said Ron Soloway, managing director of government and external relations for UJA-Federation of New York. “Late state contracts mean many New Yorkers are not assured of having their needs met in a consistent and timely manner.”

“The time for reforming the way New York state does business with the not-for-profit sector is now. It is our hope that New York state’s leaders will work together to bring about these much needed changes,” said Michael Stoller, executive director of the Human Services Council.

The Comptroller’s report concludes that solutions for many of the issues facing not-for-profits can only be achieved through executive and legislative action. DiNapoli has submitted legislation to improve the grant contracting process and require agencies to pay interest on late contracts earlier to ease the financial burden on not-for-profits.

In addition, the report offers recommendations to help address challenges experienced by the not-for-profit sector.  They include:

  • Develop multiyear contracts to improve funding transitions.
  • Consider master contracts for not-for-profits working with multiple agencies.
  • Eliminate or reduce funding for inefficient programs while supporting effective ones.
  • Provide interim financial support for not-for-profits facing contract delays, such as a revolving loan fund repayable from the executed contract.
  • Require state agencies to pay contracting interest with the first payment due after the start of a late contract.
  • Ensure that the Statewide Financial System (SFS) works with state agencies to facilitate the timely execution of contracts.

For a copy of the report on New York’s Not-for-profit sector, click here.

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