Make Progress or Make Headlines: Lessons of FEGS

The recent and sudden demise of FEGS got the attention of many different players — other nonprofit agencies, members of Boards of Trustees, heads of public agencies and banks — though each for different reasons. 

In time, we will learn more specifics about the closing of this agency with a long tradition of helping people in need. With this information in hand, my hope is that we can learn what can be done to strengthen nonprofit agencies that provide critical services in our community on behalf of the State and localities.

My fear, unfortunately, is that New York State will instead place more burdensome regulations on the nonprofit sector — as they have done in the past — rather than find ways to strengthen it. Below are two of the most recent examples:  

Executive Order 38 

In 2011, the New York Times publicized through a series of articles that top staff at a nonprofit agency in New York City were paid close to $1 million each in salary, along with years of excessive perks. In response, Governor Cuomo stepped in and issued Executive Order 38, capping the salaries of nonprofit executives and mandating caps on an agency’s administrative costs.

While this step made for good headlines, the implementation of this order has been more complicated than sending a man to the moon. Besides just picking an arbitrary salary figure and then exempting certain nonprofits (like hospital CEOs), it has been nearly impossible for the State to determine which costs apply towards an administrative cap. 

Given that the salary information of top nonprofit executives has been reported to the State for years, why didn’t the State act specifically on information that was already received from agencies the government suspected of excessive compensation? Instead, burdensome reporting regulations have been placed on the entire nonprofit industry, simply causing confusion. 

New York State Justice Center 

As a result of several high profile incidents in facilities run by the Office for Persons With Developmental Disabilities (OPWDD), it was discovered that a small group of employees had performed so egregiously that they had put the lives of clients at severe risk.  

Rather than taking steps to fire these employees, the State transferred them to other State-run facilities where many — unsurprisingly — repeated dangerous behavior with other clients. In some cases, this behavior resulted in the unfortunate and completely avoidable death of very vulnerable individuals. 

In response, Governor Cuomo signed off on legislation to form the New York State Justice Center in 2013. While the basis for setting up the Justice Center was to insure timely and consistent investigations of abuse and neglect in State-run and -licensed facilities, this stated goal has yet to be achieved. 

At this writing, it currently takes 10 months to 1 year for the Justice Center to come to a decision on a reported incident in what has proven to be a highly inconsistent system. Once again, the State could have fine-tuned a system by addressing obvious and specific gaps; instead, the whole system was turned on its head, with dubious results. 

Refocusing the Relationship Between Agencies and Government

New York State and local governments need to revisit their relationships with the nonprofit human service sector. In many instances, this relationship has continually grown because nonprofit agencies provide less expensive and higher quality services than the government itself can provide. 

It seems, however, that the government is more likely to regulate what agencies do than support them in doing work that the government — and the larger community — relies upon.    

The overwhelming majority of nonprofit agencies do what is required of them while prioritizing the best interests of their clients. These same agencies have been stripped to the bone over the years due to inadequate public funding. 

Indeed, by not providing basic cost of living increases to agencies that depend almost entirely on public funding, the government has forced agencies to cover the ever-increasing costs of health insurance, rent, utilities, insurance, repairs, and so on.

Ultimately, this leads to many agencies incurring deficits they cannot pay back, cutting back on staff they desperately need, suspending pension contributions, and withholding raises from their staff (who are paid far less than public employees).    

Rather than devoting its time and energy to another round of burdensome regulations that make for nice headlines (and little else), the government needs to focus its efforts on strengthening the fiscal condition of agencies that habitually — and under increasing financial stress — do the work that government needs to get done. 

Gerard McCaffery is President and CEO of MercyFirst, one of New York’s leading nonprofit human service agencies.