Testimony of New York City Comptroller Brad Lander Before the New York City Council Committees on Aging, Contracts...

Testimony of New York City Comptroller Brad Lander Before the New York City Council Committees on Aging, Contracts and Youth Nonprofit Contracting and the Joint Task Force to Get Nonprofits Paid on Time

Thank you, Chair Hudson, Chair Stevens and Chair Won, and members of the Aging, Contracts, and Youth Committees for the opportunity to testify today on the work of the Joint Task Force, the initiatives of the Comptroller's office to ensure prompt payment of not-for-profit service providers, and the legislation on today's agenda. I truly appreciate your partnership in this critical work.

Nonprofit organizations provide essential services to all of our communities, partnering with and supplementing government services to nourish, shelter, educate, spark the imagination of, and care for New Yorkers from early childhood to late adulthood. In Fiscal Year 2022, New York City procured $12 billion in human services, which and served millions of New Yorkers. The City contracts with a vast array of nonprofits: our library systems, homeless service providers, hospitals, community-based arts organizations, day care providers, after-school programs, environmental groups, violence interrupters, alternatives to incarceration, domestic violence, immigrant advocacy and services, job training, affordable housing, the list goes on and on.

One thing, alas, that all these groups have in common is that it takes them far too long to get paid by the City for the work they do. To provide these essential services, the City of New York requires organizations to navigate complex, multi-step processes that often mean services are provided for months, and even years, before payment - an untenable situation for many organizations.

Those contracts spend a significant portion of that time in retroactive status, preventing invoicing and payment, and forcing providers to front the cost of delivering services to New Yorkers at risk. Imagine if we said to our schools, police precincts, and fire-houses: please start providing services on July 1st, and we'll start paying you sometime around next May. They could not and would not do it. Yet that is what we do to thousands of nonprofit groups.

Dramatically improving this system has long been a top priority of mine. So even before I was sworn into office, I reached out to then Mayor-elect Adams to address it together. Previously, the Administration and the Comptroller pointed fingers at each other, but nothing changed. Knowing that the changes we need in procurement can only coming in partnership, Mayor Adams and I convened a task force in December 2021 to address longstanding delays in contracting with the city's nonprofit human service providers.

What's Been Accomplished So Far

Over the past year, City Hall, the Mayor's Office of Contract Services, City agencies, and the Comptroller's office, working closely with nonprofit organizations, and in regular conversation with the City Council, have made meaningful on several of the recommendations of the non-profit task force:

• Our joint "Clear the Backlog" initiative, a months-long, all hands effort across agencies last summer and fall, cleared over 4,000 backlogged contracts, unlocking over
• The Mayor's Office of Contract Services brought PASSPort Public online, making it possible for the first time for organizations and members of the public to see where contracts are in the processing and registration process. I know that frustrations remain, and that there is work to do to enable PASSPort to achieve its goals; but the difference it makes to have the data in a unified, more visible system is significant.
• Agencies have been empowered to add an allowance of up to 25%, to account for potential changes such as COLAs (cost of living adjustments) or indirect cost rate increases. Previously, these post-contract additions required contract amendments, which are processed through the same lengthy process as the original contract, and which freeze payments during that time. Now, these additions can be drawn from the allowance, without a contracting amendment taking months. To date, our office has registered over one thousand of these allowance amendments.
• We sought and received approval to raise the threshold for contracts requiring "FCB (Financial Control Board) approval" from the NYC Office of Management and Budget from $5 million to $50 million. To be honest, I wish we would eliminate this step entirely (OMB already reviews all contracts anyway); but this eliminates the step for 90% of the contracts that were covered previously.
• Our office, under the leadership of Deputy Comptroller for Contracting and Procurement Charlette Hamamgian, has been registering contracts in record time, once they reach us. While we have a deadline of 30 days (we are the only agency with a statutory deadline), our average for human service contracts has been half that, while still preserving our critical work to ensure that procurement rules have been followed. We also identified several hundred grants to small, community-based arts organizations that were being submitted to our office for registration, where this was not required.
• Last month, Mayor Adams appointed Karen Ford as the first Executive Director of Mayor's Office of Nonprofit Services, created by Local Law 164 of 2021, of which I was a co-sponsor when I was a Council Member. The new office can will help to communicate with, coordinate, and advocate within City Hall for nonprofits, so that we continue to drive change.

What We Need to Do Next

There is, of course, still a very long way to go. This is a problem that build up over many years, and that results from dozens of separate process steps. There is no one silver bullet, but instead many steps we must still take to achieve the goal of a reasonable timeline for contract processing and registration. Some of the key next steps include:

• ContractStat, a performance management system designed to hold agencies accountable, is projected to launch in the coming months. This is a critical next step for identifying bottlenecks, both for individual contracts but especially systemic ones. This will allow us to see how long each contracting and oversight agency is taking to perform its work, and then to set and monitor clear goals for improvements.
• Working with City Hall, and with members of the Capital Reform Task Force, we will be seeking legislative changes in Albany this session, some of which will benefit nonprofit contracting as well. The most significant of these is legislation that would dramatically reduce the number of contracts that require a public hearing - hearings that more than 99% of them time no one goes to, but that still require nearly a month to prepare for, schedule, and hold. In place of these almost-always-empty hearings, information about the contract could be posted online. The public would actually get more timely information about contracts in the pipeline, and the process could be sped up by several weeks.

Discretionary Funding

One important area where this is significant opportunity for improvement is discretionary awards to nonprofit organizations by the City Council. As a former Council Member, I know how valuable these smaller, more flexible awards can be to a treasured community-based arts group, a culturally competent domestic violence organization, or the neighborhood food pantry that unlocks so much community goodwill - but also how challenging it is for small organizations to navigate our contracting process, and to go for many months without funding.

City Hall, MOCS, and my office have therefore begun conversations with Speaker Adams, Chair Won, and Council central staff to make changes that could significantly accelerate discretionary awards. Meaningful steps forward here include:

• The establishment of a "multi-year contract" mechanism that we believe will be ready for the FY24 application process. This will allow agencies to issue a notice to proceed to organizations that typically receive the same funds year-over-year. It would allow a subsequent award from the Council to be more like a contract renewal, instead of requiring the organization to start from step zero each year. While this won't save time in the first year such a contract is adopted, in the subsequent years it would mean the organization does not have to go through the registration process again, but can instead just keep submitting invoices. We believe this could impact nearly three-quarters of awardees each year.
• Aligning the application process across submission to the Council, Council Finance Review and Agency-level review is another priority. Currently, nonprofits submit extensive materials to the Council as part of their application process early in the calendar year. However, because this is in a separate system maintained by the Council, after awards are made in the Adopted Budget in June, the nonprofits must submit many of the same materials, all over again, in the fall, to the contracting agency for processing.
  We are currently working together to map each discrete step of the discretionary process. We hope to be able to develop a system and process that achieves alignment, so nonprofit organizations can submit documents during the application process which can then be used by the agencies after budget adoption, without resubmission.
• Ultimately, it would be a significant benefit for the Council to move its application and review process for discretionary awards into PASSPort.

We know these steps will not be easy, and that some of them require substantial work on the part of City Council, agency, oversight, and Comptroller staff. Nonetheless, we believe that the payoff will be significant. Ultimately, the changes we are making not only have the potential to dramatically reduce how long nonprofits are waiting for their contracts, but also to reduce needless bureaucracy, while still improving transparency, integrity, and good government.

Legislation on today's agenda

I am encouraged by Intro 510, sponsored by Chair Stevens, which would require setting prevailing wage standards for nonprofit workers. So many of the nonprofit workers who perform all these essential services are paid such low wages that they cannot afford their rent and rely on emergency food providers themselves. Raising their wages hold the potential of pulling tens of thousands of New Yorkers out of poverty, predominantly women and people of color.

At the same time, there are critical things to get right about this bill. First, we have to reckon honestly and clearly with the cost. As these are specifically for City contracts, the funding will have to come from the City budget. That requires a clear accounting of the cost, putting that money in the budget in advance, and identifying where it will come from. There are a number of challenges here. The Comptroller's office sets prevailing wages for a sector after extensive study of the sector, which we have not conducted here, and the Administration would need to provide substantial information on relevant positions in order to develop the full estimate.

The Council and the Mayor would also, of course, need to identify the funding source for this much-needed increase. As I have indicated, in order to create a more equal economy coming out of the pandemic, it will likely be necessary to ask the wealthiest New Yorkers, many of whose portfolios and property values grew significantly through the pandemic, to pay just a little bit more - in this case so that our human service workers do not have to live in poverty.

Finally, the bill as drafted lacks an enforcement mechanism. I encourage the Council to add strong enforcement language to ensure that workers actually receive the wages and benefits that they earn, modeled on State prevailing wage law. The Comptroller's Bureau of Labor Law enforces prevailing wages under State law, and if empowered, we would work diligently to do so here as well.

I support Intro 511, also sponsored by Chair Stevens, would require the Procurement Policy Board (to which the Comptroller appoints two of five members) to set time limits within which contracting and Mayoral oversight agencies would be required to complete each step of the procurement process, and the Mayor's Office of Contract Services to assess whether agencies are complying. The Comptroller's office is currently the only City agency with a mandated timeline - we must register or return each contract we receive within 30 days - and we are proud to meet and generally exceed that deadline.

It is important to recognize that many of the steps in the procurement process involve a back and forth between contracting agencies and vendors, as well as contracting agencies and City oversight agencies. While that may render it difficult to pinpoint in whose court the ball is in at a particular moment, measuring the overall cycle time for important process milestones will help to identify system and procedural bottlenecks and inefficiencies that merit reform.

The ContractStat process I mentioned above will be an essential next step, in letting us see how long each step of the process is currently taking. That will allow us to set reasonable timelines for each stage of the process. The City would need longer than 120 days to conduct the study and set time limits, but I believe it could be done by the end of the calendar year.

Since I took office, my team and I have worked hard to do what is in our power to speed up the contract process for nonprofits and other critical vendors that serve the city. We are proud of the progress we have made, but we know there is a very long way to go. We pledge to continue doing all we can, and we remain hopeful and committed to working with all the key players involved in the procurement process, including the City Council, to make real, quantifiable progress. So many New Yorkers, and the nonprofit organizations who serve them, depend on it.

Thank you.

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