New York City’s nonprofit sector accounts for more than $118 billion in annual expenditures, including $33.6 billion in payroll expenses alone. With more than 600,000 employees, nonprofit organizations account for more than 18 percent of the city’s total private workforce1 yet they're struggling to stay afloat.
While the nation’s economy is in a state of recovery, nonprofits still face funding challenges, with surveyed organizations reporting that their top challenges are maintaining long-term sustainability and raising funds to cover overhead costs.2
In February, The Human Services Council released a report which shed light on these obstacles nonprofits face to cover costs when funding for programs and deliverables do not always cover the indirect costs (e.g. training, IT systems and payroll). How can an organization serve its constituents and community if it can't train the staff or even pay someone to provide the services? This report prompted The New York City Council Committee on Contracts to hold a hearing on the impact and consequences of government contracts that do not cover the full cost of programs.
"The nonprofit community in New York City employs hundreds of thousands of New Yorkers who are providing many services that we all rely on."
-Ian Benjamin, Board Chair of Nonprofit Coordinating Committee of New York
Leaders from 25 organizations testified at the hearing chaired by Council Member Helen Rosenthal. Board chair of the Nonprofit Coordinating Committee of New York, Ian Benjamin testified at the hearing, stating succinctly that, "Nonprofits throughout the sector... face the same challenges as they work to achieve their mission in an environment of reduced funding, rising need, increased regulation and administrative burdens. Much nonprofit funding 'comes in the form of government contracts or restricted grants that virtually guarantee a deficit'3 and private funding supply is fixed and not likely to be able to bridge the gap."
In this environment how can an organization sustain and grow while simultaneously managing ever-increasing need from the communities they serve?
There is a dangerous assumption that nonprofits should fill the financial gap by seeking other means of funding, be it through private funding and/or philanthropic grants. New York City Council Member Helen Rosenthal acknowledged the unfairness of how the government treats nonprofits stating: "the city would never say to a construction company, 'We're going to pay you $35 million. Try to get philanthropy, foundations, or other jobs that you do to pay for the remaining $5 million."4
Communities and government rely on the effort of the nonprofit sector. To prevent financial distress or insolvency which will inevitably hurt the economy and the community government must act now to cover true costs of programs and ultimately, keep the lights on.
1National Center for Charitable Statistics
2Strengthening the Nonprofit Ecosystem in New York City, Kate Rosman, Center for Economic Transformation
3Risk Management for Nonprofits, Oliver Whyman and SeaChange Capital Partners (2016)
4"City Approach to Nonprofit Contracting Questioned", Gotham Gazette