March 30, 2017; Crain’s New York Business
Government at all levels outsources many of its functions through contracts with community-based nonprofits. But it’s tough, sometimes fatal, doing business with public agencies.
In an op-ed in Crain’s New York Business, NPQ contributor John MacIntosh, whose work on risk management frequently references problems in government contracting, called upon Mayor Bill de Blasio to provide some common-sense solutions to the problem in New York City—a problem experienced by nonprofit government contractors across America.
Many nonprofits are already on the edge. More than 10% are insolvent (18% in human services) and almost half have virtually no cash and limited access to credit. Reductions in federal discretionary spending will hit them very hard.
Nonprofits will never be able to fundraise their way out of inadequate government payments. Most services are provided by organizations that are overwhelmingly funded by the government and the overall pool of private donations is largely fixed, no matter how hard individual nonprofits try to raise money.
These are efficient, professionally run organizations that despite their nonprofit status must compete in the market for resources like employees, real estate and technology. They cannot recover from cuts in government funding by becoming more efficient, having bake sales or leaning on volunteers.
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[The mayor] also knows that while nonprofits are often taken for granted and seldom make the news unless there’s a scandal, they employ hundreds of thousands of people, serve millions, and provide much of what makes our city great in the arts, education, recreation, health care and human services.
MacIntosh spells out five things the City of New York should do:
- Establish a “fair reimbursement” principle under which the city commits to pay nonprofits enough to cover the actual costs of the services it has contracted with them to provide…
- Give nonprofits an “amnesty period” during which they can, without penalty, surrender any city contract that they believe violates the fair-reimbursement principle…
- Pay on time and make it easier for nonprofits to borrow against the money owed to them by the city by allowing nonprofits to assign the payments to third-party lenders…
- Give nonprofits more flexibility in how they use city money…
- Establish a multi-agency “fast-track” mechanism for struggling nonprofits to surrender their government contracts and close up shop on an orderly basis…
“These changes would make a huge difference for nonprofits, and only the first costs money,” the Crain’s op-ed says. MacIntosh calls upon nonprofit stakeholders to act in concert on behalf of the “organizations they love.”
Good advice, regardless of where you are.—Larry Kaplan
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