United Neighborhood Houses owed $88.9 million

New York City owes $88.9 million to 15 settlement houses that are a part of United Neighborhood Houses due to retroactive contracts, according to a member poll taken last month. 

Settlement houses, organizations offering housing, educational and other social services to marginalized communities, are nonprofits that derive most of their revenue from government funding to pay for vendors facilitating programs. As a result, many nonprofits that take out loans end up being burdened due to substantial interest on loans and discouraged vendors who opt out of working with them for failure to make payments.

University Settlement CEO Melissa Aase called the relationship between city government and the nonprofit sector as “imbalanced,” saying “we're not treated as partners, nor are we treated the same way that the business sector, construction sectors are treated when they are contracting with the city.” Read more here. 

The procurement process is overseen by the Mayor’s Office of Contract Services while human services make up 40% of the city’s procurement portfolio, according to the Mayor’s Office of Nonprofit Services. These late payments exist amid feared budget cuts to the contracts office along with staffing inadequacies. 

The Adams administration has shown some effort into getting payments processed through the “Clear the Backlog Initiative” in 2022 and mandating city agencies to have their own Chief Nonprofit Officer.  However, with the recent departure of officials, including the resignation of City Contracts Director Lisa Flores, who Aase called an “incredible systems thinker,” and frequent turnover in city government worry her.  Nonprofit financial consultant John MacIntosh, managing partner of SeaChange Capital Partners, wrote in an op-ed for City & State about building out a database as nonprofits leaders express their dissatisfaction with the city’s digital procurement system PASSPort Public,  due to technical difficulties further extending the timeframes for payment. 

The city agencies that owe the most to settlement houses are the Department of Homeless Services and New York City Public Schools due to their high cost contracts, according to J.T. Falcone, director of Development & Communications at United Neighborhood Houses.

“Our work has not been prioritized in a way that creates strong, efficient, effective systems of contracting and payment,” Aase adds, citing the millions of dollars her organization is owed from the city, especially New York City public schools.

Aaase said her organization had to reduce staff and sell off one of their properties to stay afloat while drawing on lines of credit. Though retroactive contracts have been an existing problem, Aase said her and other nonprofits in UNH share the sentiment that “it is the worst that any of us have ever seen in our careers.”

“We manage our money to the day and to the week and to the month,” she added, “meaning we are watching every penny and pulling every penny that we can and then we are making decisions about which bills we can pay in which order.” 

CEO of SCAN-Harbor Lew Zuchman told City & State that the “City council should be passing legislation that insists that this happened, and if it doesn't, there should be penalties and methods where something would be immediately instituted to ensure this happens. But that hasn't happened.” 

He added that his organization is owed $6 million from New York City agencies. 

Tara Klein, United Neighborhood Houses’ deputy director of Policy & Advocacy, testified before the City Council during a preliminary budget hearing recommending they pass bills like Intro 982 and Intro 511 as well as revamp the procurement process to a grant-based model to facilitate earlier payments. 

Many of these recommendations exist within the Joint Task Force to Get Nonprofits Paid On Time, a coalition created in 2022, of which UNH Executive Director Susan Stamler is a member. When asked about the task force’s debated efficiency, Falcone noted that “each year that goes by that they don't take any one of the five really well-founded and well-researched and well-thought-through recommendations tells me a little bit more that maybe that was just a publicity stunt.”

Zuchman called the ongoing task force “ridiculous.” They're always a task force. You know that's the games government plays,” he told New York Nonprofit Media. “The city has more money than the rest of us.” 

Rod Jones, executive director of Riverside Goddard, said his organization is owed $15 million from city contracts and that it was not financially feasible to pursue more.

“The real question is, where's the answer from City Hall, right? All the rest of us can do is speculate. ‘What's the problem in City Hall? What's the answer to this perpetual promise to fix it?” Jones asked. “It's going to get fixed, it's going to get fixed, it's going to get fixed. But here we are.”