Financing the Nonprofit Sector: Meeting with Director of the Office of Management and Budget

The change in administration in NYC has presented a unique opportunity for the nonprofit sector specifically to establish ourselves as a vital part of accomplishing Mayor De Blasio’s goals of reducing inequality in the city. Since the new administration took office in January, HSC has been working to establish relationships with important officials and position the sector as an important partner to the City. These relationships will allow us to progress in empowering our members and the nonprofit sector as a whole to better provide services to New Yorkers.

The New York City budget has a huge impact on many nonprofit organizations, as most receive at least some funding from City contracts. HSC and our Board were able to meet with the Office of Management and Budget Director, Dean Fuleihan along with Deputy Mayor for Health and Human Services Lilliam Barrios-Paoli, on June 10, 2014. We were afforded the opportunity to express concerns and discuss issues in terms of finances and budgeting.

To begin, Kristin Giantris of the Nonprofit Finance Fund presented recent findings from the 2014 State of the Nonprofit Sector Survey, which detailed the problems that nonprofits are facing both in New York and around the country. The findings were significant, and proved the need for changes in how governments as well as the public view nonprofit organizations.  Over 80 percent of New York health and human services organizations reported that demand for services increased in 2013, however 57 percent were unable to meet demand. A big problem facing nonprofits is financial sustainability, with 42 percent of New York nonprofits reporting long term financial sustainability as their biggest concern. [1]

As most nonprofits are funded at least partially by government contracts, those contracts have a big impact on the financial situation of the organizations. Only 25 percent of New York health and human service organizations receive State contract payments on time, and even less receive local contract payments on time. To manage these delays, nonprofits rely on some type of debt, use reserves or are forced to delay payment to vendors or creditors. Over 50 percent of nonprofits utilizing a loan or line of credit are doing so to manage delays in payment from government contracts. Additionally, 31 percent of respondents reported spending over 300 hours per month managing government grants or contracts.[2] The time and energy spent managing the contracts, as well as the frequent delays in funding, impact an organizations’ ability to run its’ business effectively and serve clients successfully.

This report demonstrated the need for change, and set the stage for other members to discuss problems and potential solutions. The need for a cost-of-living adjustment (COLA) was emphasized, as many organizations struggle with employee retention. The nonprofit sector in New York have not received a COLA in six years, which puts the sector at a severe disadvantage in competing for the talented individuals who could be running many of these vital programs in NYC.

Members also noted that many government contracts do not cover the full cost of the services contracted for. Many contract awards have remained constant for years, even as the cost of doing business rises. For example, if a higher minimum wage is enforced, without taking into account the fact that most nonprofits have consistent revenues, nonprofits have to find the money in their already strained budget in order to comply. These financial constraints impact an organizations ability to deliver the outcomes it desires, and negatively affect those served by the organization.

Director Fuleihan and Deputy Mayor Barrios-Paoli were receptive to the ideas presented throughout the meeting. Both were focused on realistic and actionable solutions, and members were appreciative of their acknowledgement and feedback. With a new, change-oriented administration, meetings such as this one can go a long way in making officials aware of the issues nonprofit organizations face, establishing the sector as an important partner of the government, and creating action plans to drive positive change.

 

Contributed by Kristin Kelsch of the Human Services Council.

 

[1] Nonprofit Finance Fund 2014 State of the Sector Survey,  http://survey.nonprofitfinancefund.org/

[2] Nonprofit Finance Fund 2014 State of the Sector Survey,  http://survey.nonprofitfinancefund.org/

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About Human Services Council

The Human Services Council strengthens New York's nonprofit human services sector, ensuring all New Yorkers across diverse neighborhoods, cultures, and generations reach their full potential.
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