Officials sound the alarm on cuts to NYC contracts office

The Joint Task Force to Get Nonprofits Paid On Time has not yet lived up to its name.

Two years after New York City Mayor Eric Adams and Comptroller Brad Lander formed the body to help clear a backlog of late payments to the city’s nonprofit contractors, the providers of essential human services are still barely scraping by. While the Mayor’s Office of Contract Services, which administers the city’s procurement process, has taken steps to ameliorate the delays, providers continue to face long waits to register contracts and get paid for them. At the same time, nonprofits are incurring tens of millions of dollars in “indirect” costs not covered by the city. Between the delays and the indirect costs, nonprofit providers often go into debt to offset expenses, officials testified at an oversight hearing Tuesday held by the Council’s Committee on Contracts.

With Adams’ looming cuts to the Mayor’s Office of Contract Services, MOCS officials told members of the City Council that the office may fall further behind in processing nonprofit contracts, which would overburden city agencies and lead to service reductions. In particular, a relatively modest $7.2 million proposed cut to maintenance for the city’s new procurement system, PASSPort, could disrupt efforts to improve contract registration and payment timeframes. The mayor’s executive budget proposal would reduce MOCS budget by more than a third to $30.4 million. Negotiations between the administration council leaders over the mayor’s proposed $111.6 billion budget are ongoing ahead of the July 1 start of the fiscal year.

“Honestly and candidly, there will be service impacts and service reductions,” said MOCS First Deputy Director Kim Yu.

“With the reduction in resources there will be, possibly, additional time that the vendors will face when they have questions regarding their contract processing, their contract registration and their contract payment,” Yu added, noting that the cut would put more pressure on already overburdened agencies that have human services contracts, along with MOCS, itself.

Michelle Jackson, executive director of the Human Services Council, said improving the latest phase of PASSPort, which launched in 2022, should be “a hyper focus” of the administration. “Nonprofits do have to take lines of credit or they’re just not paying people and bouncing vendors back and forth to try to make ends meet, often mirroring the clients they serve,” Jackson said.

Close to half of the city’s human services contracts are submitted by city agencies to the comptroller after the contracts’ start date, forcing providers to rely on a limited set of interest-free loans provided by the city. For example, the Department of Youth and Community Development submitted just 17% of its 154 human services contracts on time in fiscal year 2023, according to MOCS’ 2023 Citywide Indicators Report. The Mayor’s Office of Criminal Justice submitted no human services contracts on time during the same period. A bill in the City Council would require the city to provide bridge loans to some nonprofits that contract with the Department of Small Business Services, which did not submit its sole human services contract to the comptroller’s office that year before the work was set to begin.

Between contracts that have not been registered or paid on time, nonprofits are out about $800 million, according to John MacIntosh, managing partner of SeaChange Capital Partners, a consultancy that works with nonprofits with city business.

According to MOCS Director Lisa Flores, the $7.2 million cut to PASSPort would mean the city would lose 100,000 working hours dedicated to maintaining the system, the most complex municipal contracting portal in the country. Those hours would have to be made up internally by MOCS staff. At the same time, the Mayor’s Office of Nonprofit Services, which serves as a liaison between city agencies, MOCS, and providers, currently has only four employees out of a budgeted headcount of seven, Yu said.

“Are you able to work an additional 100,000 hours with the staff that you have to cover the hours that were lost?” asked Council Member Julie Won, chair of the committee.

Flores demurred: “We continue to endeavor 1000% to ensure that we are providing services without service gaps.”

MOCS had also been eying a $1 million contract for PASSPort quality assurance but reversed its plans after a round of cuts as part of the mayor’s Program to Eliminate the Gap, Flores told the committee, a revelation Won found “very alarming.”

“The people in this room are here to testify on all of the struggles they are facing to get paid on time and to get paid at all,” Won said. “And if we’re hearing that even the quality assurance contract was cut then who is doing quality assurance? Ourselves, we’re checking ourselves on the quality of the work?” she added to a resounding hush from the administration.

“OK, I think the silence speaks for itself,” Won said.