Disclosure bill responding to Queens library scandal stalls in City Council

Nearly a month after an initial hearing in the New York City Council, legislation that would increase the financial disclosure requirements for the city’s nonprofit organizations has stalled, sources tell City & State.

“The bill, as currently written, doesn’t get at the problem that it was meant to solve: the corruption at the Queens Public Library,” Stephanie Buhle, a spokesman for City Councilwoman Helen Rosenthal, said in an interview last week.

“It’s clear that there isn’t the sort of oversight that needs to be in place,” Buhle continued. “The question is figuring out a way to implement that kind of oversight while taking into consideration the concerns raised by human services nonprofits, and the current bill doesn’t do that.”

Yet City Councilwoman Elizabeth Crowley, the sponsor, maintained that there is political support for the legislation, and that specifics could be hammered out through the existing framework of the bill.

The bill would require all “persons in leadership positions” – including board members and senior staff members – at nonprofit organizations that receive funding from the city to submit financial disclosure forms, as well as require the disclosure of “any transaction, direct or indirect, between such person and any institution” to the city, in an effort to prevent conflicts of interest and corruption.

The bill comes in the wake of a recent scandal involving senior management of the Queens Public Library, an organization that relies heavily on city funding.

Thomas Galante, the library’s former chief executive officer, along with other members of senior leadership, spent over $300,000 in prohibited expenses, according to an investigative report released by City Comptroller Scott Stringer in July. Galante also received payment as a “part-time consultant” for another employer, the Elmont Union Free School District, at the same time that he was receiving a full-time salary at the library. None of the spending or additional income was disclosed.

Crowley says that increasing the disclosure requirements for board members and senior leadership of nonprofit organizations can help prevent misuse of city funds.

“We absolutely have a problem with the amount of disclosure we’re getting from charitable organizations,” Crowley said. “The services they provide are often sorely needed and done in good faith, but we have to make sure that our city’s funds are not being stolen. All that we are asking for is a greater level of transparency.”

The bill garnered support from some advocacy and good-government groups, including Common Cause New York and Citizens Union of the City of New York, which praised efforts to increase oversight of city spending by nonprofit organizations.

“We do not see compliance with this request as burdensome, particularly in light of unfortunate past problems of self-dealing and fraudulent conduct involving charities in New York City,” Prudence Katze, research and policy manager at Common Cause New York, said at the City Council hearing held in late September.

However, despite the bill’s goal of creating more transparency at city-funded nonprofit organizations and preventing future scandals, many in the human services and arts nonprofit sectors are arguing that the amendment is both impractical and redundant.

Testifying at the hearing, Michelle Jackson, associate director and general counsel of the Human Services Council, called the amendment “an unfunded, unworkable mandate that would compound the already high administrative and financial burdens on nonprofit organizations.”

Jackson cited the many reporting requirements that already exist for New York’s nonprofit organizations, including audits on every city contract, reporting to the IRS and state attorney general’s Charities Bureau and VENDEX questionnaires, a filing requirement for vendors with more than $100,000 in business with the city. She also argued that requiring government approval of every related-party transaction would “grind the work of nonprofits to a halt.”

“There is no funding to support the expansion of these requirements,” Jackson added.

Laura Abel, senior policy counsel of the Lawyers Alliance for New York, testified that the vast majority of the disclosures that the city desires are already included in federal tax disclosures, as well as reporting required by the state. Abel also argued that in addition to presenting an undue burden to the city’s nonprofits, no infrastructure exists within city government to carry out the additional oversight.

“More than 2,100 nonprofits receive city funding,” Abel said. “Without an enormous infusion of resources, city personnel will not have the time to assess and approve appropriate transactions with each one in a timely manner.”

The legislation also faces opposition from within city government.

Almost immediately, the de Blasio administration questioned whether the bill would effectively realize increased oversight. “We do not believe this bill is the right approach to our shared goal of ensuring transparency for nonprofits and look forward to working with the council on determining the best way to achieve this goal,” a spokesman for the administration said in a statement after the hearing. 

Rosenthal, chairwoman of the Contracts Committee, to which the legislation was presented, also voiced her concern.

Some nonprofit groups have suggested alternative approaches. Jackson, for example, said that the responsibility rests with the city to invest in enforcement, which would cover all entities that receive government funding.

“Rather than adding forms to the hodgepodge of existing reporting requirements and imposing additional approval requirements on nonprofits, the city should develop a robust enforcement framework that puts both nonprofit leaders and government officials on notice that there will be meaningful consequences for unethical or illicit behavior,” Jackson said.

Crowley told City & State that one question that can be resolved is where to place the increased oversight.

“Should it be an extension of the Department of Investigations? Ultimately, tens of millions of dollars are being given out, and we do not have the same oversight over that money that we do over various city agencies,” she said. “That needs to change. We need to know that all of our city spending is ethical.”

Though she expressed confidence that concerns could be adequately addressed by tweaks made through the natural legislative process, Crowley declined to specify a timeline for that process.

“We haven’t had a chance to meet with the administration yet; we haven’t yet met with the interested parties who testified at the hearing,” she said. “Nothing is perfect in the beginning, and that’s why we have the democratic process.”