Comptroller Stringer Calls for Full Funding of Indirect Cost Rate Initiative So Non-Profits Can Continue to Deliver Critical Services

(New York, NY) — New York City Comptroller Scott M. Stringer sent a letter to Mayor de Blasio calling on the City to fully fund the Indirect Cost Rate (ICR) initiative, which helps non-profit organizations pay the costs of human resources, facilities, finance staff, rent, utilities, and other indirect expenses that are not covered by City contracts. The $54 million annual budget for the program was cut by a substantial $20 million for both FY20 and FY21 — a budget shortfall that will undoubtedly impact the stability and operations of nonprofits at a time when their services are sorely needed. Many nonprofits are still waiting to learn how much of their agreed upon indirect rate payments for FY 2020 (which ended June 30^th) will be paid out, and what they’ll be left holding the bag for.

Comptroller Stringer’s letter stems from substantial concerns raised by a non-profit sector that is currently facing a financial crisis amid the COVID-19 pandemic. The letter emphasized the importance of restoring full funding for the program to ensure that the city’s non-profit sector can continue to deliver critical services to the most vulnerable New Yorkers.

The full text of the letter can be viewed below and here.

Re: Indirect Cost Rate Funding for FY 2020 and FY 2021

Dear Mayor de Blasio:

I write today out of deep concern about the stability of the nonprofit sector and its ability to meet the ongoing needs of New Yorkers amidst the COVID-19 pandemic and beyond. Nonprofit organizations are anchors of our neighborhoods and have been a lifeline these past few months, providing emergency food to the hungry, shelter to the homeless, and wellness calls for seniors. This summer, with extremely limited notice, nonprofits leapt into action and implemented a modified version of SYEP to provide our City’s young people with meaningful summer employment. These types of critical programs and services are at risk if nonprofits are shortchanged on funding for their indirect costs – funding that was established at agreed upon rates in the Fiscal Year 2020 and 2021 budgets, but that has now been slashed by $20 million per year.

As you are well aware, human service programs do not operate in a vacuum. Every program and service a nonprofit organization provides is supported by human resources, facilities, and finance staff, requires that the organization’s rent and utilities be paid, and can require a range of other expenditures that are not directly covered by City contracts. For years, nonprofits were woefully underfunded for these expenses in City contracts. The FY 2020 budget agreement that established the indirect cost rate (ICR) funding initiative was a light at the end of the tunnel.

The ICR initiative was designed to fund nonprofit organizations’ indirect costs based on an organization’s federally-approved rate or a CPA-certified rate. Fifty-four million dollars in annual funding for the ICR was included in the November 2019 financial plan to fund the initiative. Nonprofits submitting claims by June 30, 2020 were to receive funding retroactive to the beginning of Fiscal Year 2020.

However, in the April Executive Plan, funding for FY 2020 was reduced from $54 million to $34 million, which was characterized at the time as a “right-sizing” of the funding needed to fulfill FY 2020 contract submissions. In the Adopted Budget, funding for FY 2021 and the outyears was also reduced to $34 million. My office is currently hearing that nonprofits are awaiting guidance from the City on the FY 2020 rates that will be paid out and are unable to close their books for the year as a result.

If the funding available cannot cover the organizations’ federally approved or CPA-certified indirect rates, than it is not a right-sizing, but rather another attempt to close the budget gap on the backs of the providers who are serving our most vulnerable residents at one of the toughest times in our City’s recent memory. This is unacceptable, and I have no doubt that if it is not corrected, we will undermine the ability of our nonprofits to serve communities most in need.

Investing in the human sector is more critical than ever as our residents weather the storm created by COVID-19. I urge you to ensure that the terms of the City’s indirect cost rate initiative are honored and fully funded.

Sincerely,

Scott M. Stringer
New York City Comptroller

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