Comptroller Stringer Urges City to Stop Shortchanging Nonprofits on the Frontlines of COVID Relief

(New York, NY) — New York City Comptroller Scott M. Stringer sent a letter to Mayor de Blasio urging the City to stop shortchanging nonprofits on the frontlines of COVID relief and honor indirect cost rate (ICR) funding promised to nonprofits for human service contracts in FY 2021. The indirect cost rate initiative – which helps pay overhead costs and other indirect expenses incurred by nonprofits – was slashed in its first year of implementation after nonprofits had already spent the funding that was promised. The City directed vendors to implement the cost changes while promising to pay for it down the road – but this bait-and- switch left non-profits out of pocket and in the red.

“Our nonprofit human service organizations have been on the frontlines during the pandemic running emergency food programs for the growing number of New Yorkers experiencing food insecurity, providing wellness checks for seniors who became isolated in their homes, and operating homeless shelters out of hotels to reduce the spread of COVID-19, to name just a few lifesaving activities,” said Comptroller Stringer. “Yet we are now six months into Fiscal Year 2021 and the very organizations that are keeping our communities afloat in this time of crisis still do not know how much they will be paid for their services. It is essential that we treat out nonprofit partners fairly and ensure the communities they serve are not inadvertently harmed.”

Nonprofits employ almost 18 percent of New York City’s private workforce and account for nearly 5 percent of all businesses. They pay nearly $42 billion in wages each year and have workforces comprised primarily of women and people of color – making the sector an especially important employer as communities of color continue to be hard hit by COVID-19. As New York City grapples with the enormity of the path back from COVID-19 In July, Comptroller Stringer and Nonprofit New York released a report analyzing the nonprofit sector’s economic impact, emphasizing that any plan for New York City relief and recovery must prioritize nonprofits that are essential to the local economy. The report found that nonprofits employ over 660,000 people and contribute more than $77 billion annually to the city’s economy – over 9 percent of City economic output.

Comptroller Stringer requested information regarding the impact of ICR funding on the City’s FY20 and FY21 budgets, and urged the City to honor the previously agreed upon ICRs for FY21. In August, Comptroller Stringer called for full funding of the ICR initiative to ensure that the city’s nonprofit sector could continue to deliver critical services to the most vulnerable New Yorkers. Comptroller Stringer also sent a letter to Mayor de Blasio raising concerns about the City’s decisions to delay or stop registration of FY20 contracts and to suspend the Summer Youth Employment Program. The letter urged the City to ensure that budgetary decisions do not jeopardize the ability of the City’s nonprofit organizations to continue to serve New Yorkers.

The full letter is available below and here:

Dear Mayor de Blasio:

I am writing today about the increasingly dire situation that our City’s nonprofit organizations find themselves in due to the unsettled state of indirect cost rate funding for human service contracts in Fiscal Year 2021.

Our nonprofit human service organizations have been on the frontlines during the pandemic running emergency food programs for the growing number of New Yorkers experiencing food insecurity, providing wellness checks for seniors who became isolated in their homes, and operating homeless shelters out of hotels to reduce the spread of COVID-19, to name just a few lifesaving activities. Yet we are now six months into Fiscal Year 2021 and the very organizations that are keeping our communities afloat in this time of crisis still do not know how much they will be paid for their services because their indirect cost rate (ICR) funding for the year remains unsettled. This is an untenable position for these organizations that requires immediate resolution.

The indirect cost rate initiative, which was to be implemented for the first time in FY20, was the long-awaited light at the end of the tunnel for nonprofits that had been underpaid for their indirect costs in City contract for years. Seeing this initiative slashed in its first year of implementation after nonprofit providers had spent the funding that had been promised was not only profoundly disappointing, but an alarming breach of trust. As you know, our City’s human service providers were advised of the FY20 cut to their federally approved or CPA-certified indirect costs rates after they had spent their anticipated FY20 funding, leaving holes that were never filled.

In order to understand the impact of ICR funding on the City’s FY20 budget, as well as its potential impact on the FY21 budget and beyond, I request the following information be provided to my office:

1. What was the total amount approved for ICR funding in FY20, including for organizations that submitted federally-approved and CPA-certified rates?
2. How much did the City actually spend on ICR funding in FY20, including funds that have been allocated but not yet paid out for the same time period?
3. How much funding will be needed to fully fund approved ICRs for FY21?

In addition to seeking answers to these questions, I am urging you to swiftly settle this matter for the current fiscal year by honoring the previously agreed upon ICRs for FY21, or if you believe that is not possible due to the City’s current fiscal position, finalizing the ICR funding at as close to the agreed upon rates as possible so nonprofits can manage this year’s spending against actual known income.

Despite the City’s current fiscal crisis, it is essential that we treat out nonprofit partners fairly and ensure the communities they serve are not inadvertently harmed by these funding cuts. I would appreciate a response to this letter, including the budget figures I have requested, by January 26, 2020.

Sincerely,

Scott M. Stringer
New York City Comptroller

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