Comptroller: Nonprofits Vital to NYC
Conference Speakers Talk Reform, Upstate and Down

By Simon Eskow

NEW YORK—New York City Comptroller William Thompson said his office would reform its contract procurement process to help nonprofit organizations maintain their vital role in the city’s economy, which has only recently shown signs of recovery.

“We’re beginning to see the light at the end of the tunnel,” Thompson said, during the Foundation for Accounting Education’s Not-for-Profit Conference in January. “Clearly people have reason to believe that hard times still exist, but the budget crisis is coming to a close.”

But hard times have placed a double-edged burden on New York City’s nonprofits. As the federal government slashed its programs, creating a greater demand on the nonprofit sector, it also cut its direct contributions to nonprofit organizations, which rely on the government for 31 percent of their revenue.

The fact that nonprofits in New York serve 2.2 million people a day, while employing another half-million—14 percent of local employment—makes it essential to preserve the sector in belt-tightening times, Thompson said.

“Regarding nonprofits, ‘a likely prognosis is death-by-1,000-cuts,’” Thompson said, quoting a DePaul University professor. “We want to make sure this doesn’t occur.”

Thompson said that CPAs are integral to the health of the nonprofits they represent, and that the comptroller’s office is seeking ways to ease the financial burden on nonprofit organizations, specifically by reforming the city’s procurement process. Nonprofit contractors are often paid as much as 154 days late, Thompson said. Reform of the process might include employing new technology, creating timetables and charging penalties for late payments.

Reform

Reform became a recurrent theme among speakers who pointed out that the nonprofit sector continues to suffer from the headline news of accounting failures, such as those that have been seen among for-profit corporations.

“In the commercial world, they had Enron,” guest speaker Julie Floch said during a panel discussion. “In our world, we had the Baptist Foundation and the United Way. The question is: What led to that? Did management fail, did boards fail? Did regulators fail?” (The United Way has come under scrutiny in recent years for allegations of misused funds and questionable spending by former employees, while the Baptist Foundation case involved an investor-bilking scheme.)

Floch said that short of answering those questions, it is time to start educating practitioners and nonprofits on governance and accounting reform.

Assistant Attorney General William Josephson, of the New York’s Charities Bureau, followed up with a report on enforcement and reform legislation. Josephson said that in addition to the New York State Senate bill S4836-A—legislation introduced by Attorney General Eliot Spitzer last year to reform governance of nonprofit organizations—the Assembly will introduce its own bill in the coming weeks.

Josephson also said that enforcement efforts are working, pointing to arrests in mid-January of health-care workers at a nonprofit clinic in the Bronx for allegedly stealing from the clinic, and the indictment of a career criminal who had bilked money from the public through fraudulent charities.