NYC’s Network of Nonprofit Vendors Lack Oversight for Better Accountability

Common to other U.S cities, New York City has shifted “much of the day-to-day work of running the city” to a vast network of private nonprofit human services contractors, creating what Crain’s New York called New York’s nonprofit “Shadow Government.” According to some experts, the emergence of these nonprofit networks emerged as “city governments began spending more on social services during the 1960s, and nonprofits presented themselves as appealing nonunionized workforces capable of administering these new programs cheaply.” Over the years, these vendors which began as “modest neighborhood shelters and treatment centers have evolved into sprawling networks of well-funded facilities,” some with sizable real estate holdings. But “despite their altruistic mission statements” they have become “savvy political players” that hire lobbyists, shell out campaign donations, and hire former government officials to win favor with the city government to maintain their contracts. However, despite controlling “billions of dollars in taxpayer money under contracts that span decades,” these organizations operate with very little public scrutiny, “[business] structures that can’t be easily reformed by lawmakers, and leaders that can’t be voted out of office.” However, since these vendors operate outside the government, the city has limited powers to conduct oversight; and a series of proposed reforms in 2021 by the Department of Investigation that would guard against nonprofit corruption remains in limbo. As a result, the intended cost-savings benefit to the city has not always materialized. “The city’s spending on contracts will reach $23 billion in the coming fiscal year, including $7.2 billion alone for social service contracts — an increase from $4.5 billion in 2018” according to the reported results of an analysis by the Citizen’s Budget Commission.

Crain’s New York identified and profiled 14 nonprofit organizations that have secured contracts with the city “adding up to $1 billion or more in taxpayer money — over terms ranging from 1 to 42 years, revealing that while many are well regarded and seen as effective, “others have come under criticism for doing subpar work, spending city money on personal expenses, steering subcontract to entities their leaded control, maintaining near-monopolies over certain services, and paying large salaries.” Scrutiny by watchdogs like city and state comptrollers have revealed that “employees of Bowery Residents’ Committee,” whose mission is to end homelessness, “spent taxpayer dollars on movie tickets and a ‘booze cruise,’” while Acacia Network Housing, whose mission is to provide transitional, supportive, and affordable housing options,” hired a for-profit security firm controlled by its CEO,” and Samaritan Daytop Village, was found this year to have overbilled the city by more than $500,000 over two years.” Although many are likely to agree that “the nonprofit sector can work more nimbly than slow-moving bureaucracies,” critics call it a “privatization of public services” and further point out that “unlike city agencies whose performance is monitored in the mayor’s annual management report, nonprofit vendors are not held to any standard set of benchmarks.”

Source:    https://www.crainsnewyork.com/politics-policy/new-yorks-nonprofit-shadow-government