Unfunded Mandate of Minority and Women-owned Business Enterprise Participation Goals

The story of the unfunded mandate is one that nonprofit organizations know all too well. When a policy requires agencies to allocate resources towards compliance and is implemented without additional funding, it is an unfunded mandate. The Minority and Women-owned Business Enterprise (M/WBE) participation goals set by Governor Cuomo is a prime example of the significant potential for negative effects from business-oriented regulations that are also enforced in the nonprofit sector without input from our sector.[1]

The 30% target set by Governor Cuomo for M/WBE participation is an attempt to incentivize businesses and nonprofits under government contracts to vend out to minority or women-owned business enterprises. This goal should be lauded as a socially progressive policy and a positive step in the effort to support economic development for these groups. However, it is one that the human services sector may find difficult to comply with and could potentially hurt the providers and beneficiaries of their services. Due to the financial difficulties faced by the human services sector, additional burdens or operational constraints with regards to compliance with new policies without appropriate funding can be detrimental to the services provided.

Nonprofit organizations want to be compliant with the M/WBE goals; however, the State has not created an environment where compliance is simple to accomplish for many organizations. Compliance can be difficult for nonprofits as compared to for-profit businesses because our subcontracting practices are drastically different. Usually, there are significantly more opportunities for for-profit businesses to subcontract to M/WBE firms in comparison to nonprofits. Despite this difference, the policy does not differentiate between the nonprofit sector and for-profit businesses.[2] Unlike for-profit enterprises, nonprofits do not have proprietorship; meaning they cannot be considered M/WBE’s themselves, so there is no way to include nonprofit subcontracts into these quotas. Allowing nonprofits to subcontract to other nonprofits within the M/WBE structure would increase their opportunity for compliance.

In addition, for human services organizations, it is not usual to have staff directly focused on dealing with reporting on M/WBE participation or other regulatory paperwork. An organization might need to reallocate or invest additional resources that could be used to provide services into the bureaucratic process of filing the required data on vendors and subcontracting plans in order to reach compliance.[3] This leads to an unfunded mandate if the funding levels provided by these State contracts do not increase, forcing organizations to use additional resources to be compliant. The regulations in their current state show how operating under the same regulations as a business can be detrimental to service provision if there is no additional funding to balance a mandate for increased investment of resources. Unfortunately, the State did not include our sector in the dialogue when creating these participation goals.

When it comes to the daily operational costs of a nonprofit, the best investment for a contract to provide services are in the workers providing direct services. The State should recognize that the human services sector mainly employs women and minorities, with its services largely serving to women and minorities. There should be more effort to adequately integrate nonprofit organizations into minority-owned and women-owned business initiatives without imposing business-oriented regulations that could prove to be detrimental to our vital sector.

[1] http://cityandstateny.com/articles/politics/new-york-state-articles/exclusive-for-the-first-time,-mwbe-contracting-drops-under-cuomo.html#.WIYmiNIrLcs

[2] https://cdn.esd.ny.gov/MWBE/Data/01282015_OFFICIAL_COMPILATION_OF_MWBE_REGS.pdf

[3] http://www.nydailynews.com/opinion/n-y-s-unfair-new-policy-underpays-nonprofits-services-provide-article-1.944833

Andrea Parejo, Government and External Relations Intern

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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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