Testimony on Interest for Late Payments to Community-Based Orgs
Testimony & Public Comments
October 30, 2023
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On Monday October 30th, Policy and Advocacy Associates Rebecca Charles and Caitlyn Passaretti submitted written testimony to the New York City Council Committee on Contracts about the interest to be paid on late contract payments to community-based organizations (CBOs). In this testimony, Rebecca and Caitlyn commend the Council for focusing on this pivotal issue as certain providers have not been paid for their services in years. Read further to understand CCC’s stance on the bill which would facilitate payments.
Read the testimony below.
Testimony of Caitlyn Passaretti and Rebecca Charles
Policy and Advocacy Associates Citizens’ Committee for Children of New York
Committee on Contracts Nonprofit Contracts October 25th, 2023
Since 1944, Citizens’ Committee for Children of New York has served as an independent, multi- issue child advocacy organization. CCC does not accept or receive public resources, provide direct services, or represent a sector or workforce; our priority is improving outcomes for children and families through civic engagement, research, and advocacy. We document the facts, engage and mobilize New Yorkers, and advocate for solutions to ensure that every New York child is healthy, housed, educated, and safe.
We would like to thank Chair Won and all the members of the Committee on Contracts for hosting this hearing on the interest to be paid on late contract payments to community-based organizations (CBOs). We appreciate the focus being brought to this important issue.
CBOs play a pivotal role in providing vital services and support to New York families. They address some of the most pressing issues that New Yorkers face, including education, healthcare, housing, and social services. However, CBOs often operate with limited financial resources and must adhere to strict budgets. Late payments for services rendered can place an enormous burden on these organizations, jeopardizing their ability to carry out their mission effectively.
Since FY’22, there has been a monumental delay in payments to CBOs contracted through the City’s early childhood education system. In September of 2022, Seachange reported $464 million owed to child care providers for the FY’22 fiscal year (a fiscal year that concluded in June 2022).i The DOE has taken several important steps to address this crisis, including committing to meet the center-based contract payment floor of 75% of the full contract value, employing rapid response teams to work with providers, and permitting the batching of multiple months of invoices to help expedite catching up – all solutions that CCC supports. However, we continue to hear distress from providers about payments owed for FY’22, FY’23, and now FY’24. Sadly, this is occurring at a time when early childhood education providers in contract with the City’s Department of Education continue to suffer severe financial hardships due to delayed payments, leading to center closures and lapses of care for families.
The inability to be paid on time has already had devastating consequences in the youth services space. Sheltering Arms, a 200-year-old organization, closed its doors last year due to millions of dollars in late contract payments. The Urban Resource Institute and New York Times have reported on how similar bureaucratic challenges of getting agencies paid are massively disrupting programming for youth and their families. The Human Services Recovery Task Force reported that 70% of organizations said they had a delayed payment from the City, and the average amount of the delayed payment was $8,025,000.ii It is essential to stabilize the sector that provides services and resources to youth and families, especially as the City expects COVID funds to run out. Investing in youth and ensuring the organizations that serve them exist cannot be an afterthought.
CCC supports Int 0982-2023 to require interest to be paid on late payments to CBOs. This legislation is an important step towards ensuring that CBOs are compensated adequately for the time and effort they put into providing services to New Yorkers while being able to keep up with inflation. It would also send a message that the city values the work of nonprofits and is committed to supporting them. This measure will not only protect non-profit organizations from financial strain but also incentivize the City to process payments in a timely manner, something that it has been failing to do for the last three fiscal years. This legislation would ensure a more level playing field between CBO providers and their City-employed counterparts, help CBOs fulfill their obligations to their employees and those they serve, and enhance stability of the systems in which these CBOs serve.
Part D of Int 0982-2023 reads:
If any interest payment required pursuant to this section is made from amounts appropriated for program purposes such that it reduces the amount available to be spent on the program, the contracting agency shall notify the council in writing of the amount of such reduction and the reason why other funding could not be used for such interest payment.
CCC recommends that this language be struck from the bill, as it creates a potential loophole for city agencies to waive the interest payments by simply citing their budget numbers, rendering the bill ineffective. This practice happens frequently among state agencies in regard to a similar law at the state level.
By supporting this legislation, the City Council would be taking a significant step towards safeguarding the stability and effectiveness of non-profit organizations and, in turn, ensuring the well-being of the constituents they serve. We urge the City Council to pass this important bill, and to continue identifying solutions to address the deep-seated contracting challenges facing so many of our essential CBO providers.
Thank you for your time and consideration.
