NYC Council members, nonprofits blast cuts to initiative to help orgs with overhead

New York City Council members and human services providers decried this summer’s cuts to a program covering indirect expenses associated with their contracts during a Council oversight hearing on Wednesday.

Nonprofits have long complained that the city’s contracts fail to sufficiently cover all their expenses, particularly administrative and overhead costs. In response, the city launched the Indirect Cost Rate initiative last fall to help nonprofits cover indirect costs exceeding 10% of a city contract retroactively. But the City Council and Mayor Bill de Blasio negotiated a budget this summer that slashed $20 million per year from the initiative across various city agencies amid a worsening financial crisis.

As a result, nonprofits seeking an indirect cost rate exceeding 10% of a city contract will only see 60% of their funding request fulfilled. This has affected three-fourths of about 260 providers that have been approved under the initiative so far, officials from the Mayor’s Office of Contract Services reported during the hearing, leaving many of those providers to cover additional costs they accrued under the assumption they would receive full reimbursement retroactively. 

“What’s really troublesome about all of this is that it’s only the nonprofit sector that is expected to run its business not knowing how much money it’s going to get,” said Damyn Kelly, president and CEO of Lutheran Social Services of New York. After spending $21,000 to prepare to apply for the program, his organization was expecting to receive about $551,000 in additional funding, which would be used to cover additional staff training and rent. But it ended up getting approved for $204,000 less because of the city’s cuts. 

An additional 173 organizations have begun applying for the initiative for fiscal year 2021, which has a Dec. 1 deadline for nonprofits aiming to opt in. However, the city’s funding policy for the next phase has yet to be formulated.

“We don’t yet have our funding policy in place; providers are still coming into the process every single day,” said Jennifer Geiling, deputy director for policy and partnerships at the Mayor’s Office of Contract Services. “And again, it wraps at the end of this calendar year. And once we have the understanding of the full scope of providers, then we will be able to report out on what the policy is for funding for fiscal year 2021.”