Commentary: Seizing the opportunity to improve contracting

The City of New York is currently migrating human services budgeting and invoicing into Procurement and Sourcing Solutions Portal (PASSPort) from HHS Accelerator (Accelerator). In the short-term, nonprofit organizations and agency fiscal staff are anxious that this transition could lead to payment delays which they  don’t have the financial resources to endure. In the long-run, however, this transition is a significant opportunity to streamline the administrative-heavy and complicated budgeting and invoicing processes, realize cost savings for the city and nonprofit providers, increase nonprofit cash flow and more efficiently manage contracting risks. 

Background 

Launched in 2013, Accelerator managed human services contracting through four modules:  Prequalification, Sourcing (RFP releases and responses), Document Storage, and Financials  (budgeting and invoicing). Accelerator was the precursor to the citywide PASSPort, which was introduced in 2017. The Mayor’s Office of Contract  Services (MOCS) began transitioning Accelerator modules to PASSPort with the migration of the Sourcing module. This first migration process involved years of development including design  sessions with providers and agencies.  

In 2020, MOCS migrated Accelerator’s Prequalification module to PASSPort, seizing the  opportunity to remove dozens of non-essential questions, eliminate duplicative requests for  documentation and establish a revised process that was easier for nonprofits of all sizes and  contracting experience to complete and maintain.

The Document Storage and Financials modules are the final two Accelerator functions that will  be decommissioned and migrated to PASSPort starting with the Financials module this month. By way of background, the Accelerator Financials module manages budgeting and invoicing for  human services contracts. Once an organization is awarded a human services contract, they  must submit a budget through Accelerator Financials for the contracting agency to approve. Budget approval is often a lengthy back and forth process, as the agency may inquire about all  aspects of the proposed budget in addition to alignment with the contract requirements. Only  once the budget is approved, and the contract registered, can the organization receive its  annual contract advance and begin to submit invoices for expense reimbursement. For a multi-year contract, the budget must be approved each year before invoicing can begin. 

Human service delivery is paid on a reimbursement basis – the organization incurs expenses  before payment is received. With delays in contract registration and further delays with budget  approvals, nonprofit organizations can go months self-funding services performed for the  government. It is not an option to pause services while waiting for the contracting process, as 

lives, families and the city are relying on continuous program delivery by nonprofit organizations.  

Invoice submission, review and approval also occurs through Accelerator Financials. Each  contracting agency has its own requirements for invoice submission and the accompanying  back-up documentation, which can be voluminous. The invoice approval process mirrors the  budget approval process – lengthy and consisting of multiple requests for revisions.  

At the end of the fiscal year, budget and invoice review begins again through a contract audit.  The budgets and invoices that were reviewed and approved during the fiscal year are then re-examined during the audit. 

Currently Accelerator Financials manages approximately 5,000 Fiscal Year 2023 contracts,  accounting for more than $8.7 billion and 1,200+ providers.  

Managing the immediate transition risks 

The city began the transition from Accelerator to PASSPort earlier this month. Nonprofit organizations have been informed that certain budgets and invoices will need to be  re-entered in PASSPort if existing data cannot be migrated. City agencies are waiting to learn  what information will be available in the new system and whether they will have the data  necessary to report to their funding sources. The limited visibility around the transition has  fueled anxiety about delays in payments that threaten the sustainability of organizations and  the city’s nonprofit safety net. Anticipating the concerns, the city should be recognized for  offering mid-year cash advances to support nonprofit liquidity and cash flow. However, this information is not widely known and many nonprofits have not yet received the advance. With  more demands than ever on nonprofit partners, focus on payment continuity and  communication is essential. At the same time, nonprofits should prepare for hiccups in  reimbursements and paperwork – which is common in a technology migration of this size –  including advising their Boards of potential financial risks. 

Fiscal Year 2025 opportunity to improve financial management of city contracts 

Millions of dollars are left on the table every year by cash-strapped nonprofits in large part  because of the struggle to navigate the city’s budgeting and invoice systems. Nonprofits are  challenged to produce the volume of documents needed to justify even the smallest expense,  like a $100 office supply purchase on a multi-million dollar contract. They also struggle to keep track of the different budgeting and invoicing requirements at each agency, or get stuck in a doom loop of multiple back and forth revisions. 

The varying fiscal requirements of each contracting agency has also increased costs and taxed  resources for nonprofits. Organizations report that they must develop agency-specific expertise  which limits cross-training, challenges the recruitment of fiscal staff and requires more staff  than would be necessary in a standardized system. 

The current budgeting and invoicing systems also compound the cash flow worries for our city’s  nonprofit safety net. Not only are the budget and invoice approval processes slow-moving, a  hold up with even one invoice or single budget modification can put a stop to submission and 

review of all invoices. At this rate, a provider can quickly begin to feel the financial squeeze. It’s not long before the communities they are serving feel it, too. 

Hyper-detailed line item budgets and heavily scrutinized invoices are intended to limit opportunities for foul play. This is an understandable concern, especially when taxpayer dollars  are on the line. However, the timing for these activities – in the middle of an active contract - creates cash flow challenges for nonprofits, threatens the continuous delivery of services and  creates administrative and financial barriers to contracting for smaller organizations.  Moreover, the work is duplicated during the post-contract audit, which is an additional  administrative burden for nonprofit organizations that must produce the information again and  host the agency on-site at their places of business. 

Win-win solutions for the city and nonprofit organizations 

The transition of Accelerator Financials to PASSPort provides an opportunity to streamline the  budgeting and invoicing processes to realize greater efficiency, create cost savings, support  nonprofit cash flow and make it easier for all nonprofits and city agencies to do business with  each other. Rather than simply migrating the existing budgeting and invoicing approaches from  Accelerator to PASSPort, the city has the opportunity to develop a simplified approach that is  informed by the end users – agencies and nonprofits. Accelerator Financials was established in  2013, surely there are many opportunities for cost and time saving reforms today – 11 years  later.  

In fact, a streamlined practice for human services budgeting and invoicing in PASSPort already  exists. Redesign work began in 2021 with the launch of Accelerator Financial design workshops,  attended by nonprofit and agency fiscal staff. New approaches were co-developed and primed  with the design team that is currently supporting this migration and PASSPort development. 

For example, more simplified budget categories is an area for reform. By way of illustration,  providers are currently required to break down utility expenses into nine costs, including telephone land lines, mobile phones, internet connectivity, bundled communications, electric, water/sewer, oil-heating, gas-heating and security systems. If, for example, the winter is colder than expected or a new city-contracted offsite program requires additional mobile phones, the organization must  submit budget modifications for the impacted utilities, and all invoice payments – across the  entire contract – are paused until the modifications are approved by the contracting agency.  Providers and agencies both have questioned the necessity of this level of detail.  

Another area of opportunity is to build on the recommendations of the Joint Task Force to Get  Nonprofits Paid on Time. In their Action Memo to Mayor Adams and Comptroller Lander, the  task force suggests that Comptroller audits focus on the “small number of vendors that raise  legitimate concerns …” Budgeting and invoicing could be similarly designed. Instead of slowing  down budget approvals and expense reimbursements for all contracted nonprofits, the city could focus its attention on the “small number” of high-risk providers. With vendor information  that exists in PASSPort disclosures, performance evaluations maintained in PASSPort and  annual contract audits, the city has a range of information to identify which contract budgets and invoices may require more information and intense reviews during the contracting period. 

All other contracts could have a more simplified budgeting and invoicing process, with more in depth reviews taking place during audits, to allow for steady cash flow and operations.  

While it’s concerning that nonprofits and city agencies have told me that they worry the new PASSPort financials system will at a minimum be as complicated as Accelerator and possibly even more burdensome with less functionality, the technology is adaptable and there are opportunities for enhancements.  In Fiscal Year 2025, the city is planning to increase PASSPort budgeting and invoicing functionality for human services. Now is the time to start designing for greater efficiency and ease of use, as well. By convening nonprofit organizations, agency fiscal staff and agency audit  staff – all together – the city can re-engineer human services financial management and oversight to make it easier, more efficient and less expensive for all nonprofits and the city to do business together. It’s a strategy that has precedent in prior system migrations,  procurement reforms and with the Nonprofit Resiliency Committee.  

Providers and agency staff came together in 2020 to streamline and standardize invoicing  review. This was intended to be a first step in a larger shift that would realize more timely payments and an easier contracting relationship. With the migration of Accelerator Financials to PASSPort, ensuring nonprofit partners navigate the transition with financial sustainability is  paramount while also seizing this significant opportunity to invest in lasting and transformative  budgeting and invoicing reforms. It’s a win-win for the city-nonprofit partnership.