CoffeyWritesImpact

A few months ago in my class about the scope and sector of the nonprofit landscape, we began learning about how grant and public contract applications work. Coming from Florida, it was incredible to learn about the large scale of city and state grants in the Northeast… until I discovered that many of these grants and contracts take years to pay out, require nonprofits to take out loans, and have generated millions of dollars in annual interest costs for organizations. There must be a better way.

Background

While nonprofits have been dealing with this issue for a while, it recently re-entered the news cycle in mid-2025, when a report titled Nonprofit, Nonpayment: An Analysis of Payment Delays for the City’s Human Service Contractors was released. The article was overseen by the city comptroller and found delays with nonprofit funding, with the HPD (Housing Preservation and Development) agency, for example, averaging 765 days to process the first payments for their contract.¹ It is important to note, however, that these numbers are not limited to just nonprofits, but all service providers. Continuing, around $680 million in these all-encompassing invoices were for 2024 or prior, and the average first payments to human services providers took over six months to begin.² Revisiting the second item on the list, many of these contracts are for essential human services. These organizations provide medical care, disability support, food assistance, and many other life-saving programs; but unfortunately, lack of timely funding can cause significant programmatic delays.

This problem is not unique to the city of New York, but to the entire state as well. In a May report entitled Nonprofits in Peril, it was discovered that the state owes nonprofits around $650 million.³ The most obvious question, in my opinion, is: where does this delay come from? According to the comptroller analysis and further reports, the slow movement is due to contract modifications, bureaucratic steps that require checks at each level, and paperwork requirements that have been newly instated to prevent fraud.⁴ While these safeguards are important, they can unintentionally slow progress. Also, an interesting fact to note is that the city has been working with nonprofits since 1909 (with the establishment of the New York Foundation),⁵ making this long partnership a benchmark of our community. It just needs to be updated.

Current Problems Facing the Sector

Even more-so than in the for-profit business world, bankruptcy can have catastrophic social consequent for the community. The work is simply too vital to stop while waiting for funding. As a result, nonprofits are often forced to take out loans and deprioritize payroll so that services can continue. These organizations are tax-exempt and are receiving verifiable money from the city and state, but the loans are still interest bearing. Consequently, banks have made a multimillion-dollar business collecting nonprofit loan interest, directly taking away programmatic funding. Nonprofits are forced to pay hundreds of thousands of dollars in interest expenses, shut down, or default on their loans because of years-long accounts receivable.⁶

Work to fix these issues has been ongoing for some time, with former Mayor Adams announcing an increase of $5 billion for advanced funding for nonprofits in 2026.⁷ Other main options included awarding a percentage of the contract immediately, establishing a Department of Contract Services, and creating a better process to deal with modifications done on an annual basis.⁸ Additionally, in the fall of last year, Adams announced a “speeding-up” program, with 100 nonprofits that receive grants of $25,000 or less getting their money in half the time.¹¹

What Is Being Done Now

Then, in December of 2025, the city’s Nonprofit Services Executive Director, Michael Sedillo, held a Q&A session where he clarified several misconceptions. First, the backlog has actually decreased by 52% within this past year, showing a significant improvement in late payments.¹² Second, while the current overall $2 billion backlog may seem steep, it encompasses both unpaid invoices and cumulative contracts to all providers, and is a sign of positive trends, as it was $11 billion in 2022. Additionally, the city is using an application called ContractStat to help verify payments and performance indicators. Clearly, the city is aware of the issue and is working diligently to find solutions.

In that conversation with Sedillo, he explained to me that the initiatives are going to continue to be strong, with each city agency now having Chief Nonprofit Officers who report directly to City Hall. Furthermore, Sedillo mentioned a bill that recently passed through City Council that begins nonprofit contracting on a quarterly advance basis for the Department of Homeless Services and the Office of Criminal Justice (Int. No. 1392-A).¹⁵ If all goes as planned, the process of paying nonprofits should continue to be streamlined. With people like Sedillo, who fight for the timely distribution of city-allocated funding for nonprofits to perform essential services, there is a strong chance of overcoming this hurdle.

Outside of city-based funding, there have also been attempts to address the issue with state grants and contracts, with one possible solution taking the form of legislation. State Senator Shelley B. Mayer passed Bill S7001 in the New York State Senate, and Assembly Member Amy Paulin sponsored it in the Assembly. The purpose of this bill was “to make changes to the prompt contracting law to help address not-for-profits’ largest challenges with state funding … changes include clarifying language in the existing law, expanding the use of written directives, mandating and increasing the interest rate on late payments for the city, and more.”¹³ Unfortunately, Governor Hochul vetoed the bill, believing it would result in fraud, improper vetting, and fiscal harm to the state.¹⁴ However, when it comes to human services, timeliness will always incredibly valuable, meaning these delays will continue to negate social impact.

After contacting her office, “nonprofits provide essential care in every corner of our state,” said Assembly Member Amy Paulin. “Legislation A.7616 would give them the timely and predictable payments they need. By reforming the Prompt Contracting Law, it would strengthen the stability of these organizations and ensure they are not forced to cut services or close their doors because of bureaucratic delays. I’m committed to advancing reforms that allow nonprofits to focus on serving the New Yorkers who depend on them.” Clearly, Paulin will continue to work to streamline state funding.

I was also given the opportunity to speak with Jan Fisher, the Executive Director of Nonprofit Westchester and a member of the state’s Not-for-Profits Contracting Advisory Committee. She and others spent much of this year pushing for reforms such as this one, and unfortunately, it did not pass. Still, Fisher and the coalition of the Human Services Council, the New York Council of Nonprofits, the New York Legal Services Coalition, Nonprofit New York, and Nonprofit Westchester continue to work to advance nonprofit funding and reduce delays. Their website and call to action can be found here: https://npwestchester.org/nonprofit-contracting.

What Can Be Done

The most important step is for nonprofit leaders to stay involved with policymakers. Thanks to the work of Sedillo, Fisher, State Senator Mayer, and Assembly Member Paulin, it is evident that people in both the public and independent sectors want to improve the payment systems for nonprofit services. While those on the inside continue to fight for efficiency and transparency, it is also up to us to raise awareness and create multiple streams of revenue to support our organizations for years to come. Truly, the nonprofits with the greatest impact are those that possess longevity.

Outside of policy changes, there has also been discussion of public-private partnership solutions. Currently, major banks hold in excess of trillions in outstanding loans.⁹ Consequently, banks should be able to afford to provide interest-free loans guaranteed by the city or state to make up for delayed nonprofit funding. Additionally, tax-exempt nonprofit banks that do not charge interest on loans and instead earn commissions on idle account funds could present another possible solution. Essentially, tax dollars are being used to pay nonprofits, but because payments are delayed, that money is redirected as interest to banks. Basically, our tax dollars will indirectly pay for-profit banks, significantly diluting the amount of impact each hard-earned dollar has.

Returning to the central point of this article, the continued progress of systemic reform at the city level is promising. While the Governor’s veto was a setback for the state, reform is clearly possible based on the progress made with city contracts over the past year. If efficiency-based improvements are fully implemented, the current system, with adjustments, is certainly viable and replicable on state-wide level.

For many years, large granting foundations have been able to timely distribute funds to nonprofits, demonstrating that efficiency is possible with the right processes in place. Whatever changes occur, the transition will not be easy; however, with the current focus on filling city jobs¹⁰, the resources and manpower will exist to make progress. Whether through collaboration with banks, internal process reform, or continued backlog reduction, we must continue to update the current system to improve the speed in which positive social impact is created. Fortunately, leaders, such as the ones I graciously spoke with, provide optimism in a time of uncertainty.

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References

1. New York City Comptroller. (2025). Nonprofit, nonpayment: An analysis of payment delays for the city’s human service contractors.
https://comptroller.nyc.gov/reports/nonprofit-nonpayment/

2. New York City Comptroller. (2025). Nonprofit, nonpayment: An analysis of payment delays for the city’s human service contractors.
https://comptroller.nyc.gov/reports/nonprofit-nonpayment/

3. New York City Comptroller. (2025). Nonprofit, nonpayment: An analysis of payment delays for the city’s human service contractors.
https://comptroller.nyc.gov/reports/nonprofit-nonpayment/

4. Human Services Council of New York. (2025). Nonprofits in peril.
https://coffeywritesimpact.com/wp-content/uploads/2026/01/fb167-nonprofitsinperilreport.pdf

5. Newman, A. (2025, May 5). New York City owes nonprofits billions, and the bills are piling up. The New York Times.
https://www.nytimes.com/2025/05/05/nyregion/new-york-city-nonprofits.html

6. New York Foundation. (1909). Records of the New York Foundation. New York Public Library Archives.
https://archives.nypl.org/mss/18363

7. New York City Mayor’s Office. (2025, April 29). Mayor Adams announces unprecedented $5+ billion in advance payments to be made to city-contracted nonprofit providers, providing more upfront cash and contracts to providers than ever before. NYC.gov. https://www.nyc.gov/mayors-office/news/2025/04/mayor-adams-unprecedented-5-billion-advance-payments-be-made-city-contracted

8. Nonprofit Quarterly. (2025). New York and other states move to fix nonprofit contracting delays.
https://nonprofitquarterly.org/new-york-and-other-states-move-to-fix-nonprofit-contracting-delays/

9. New York City Council. (2025, April 30). Council advances legislation to address nonprofit contracting delays.
https://council.nyc.gov/press/2025/04/30/2856/

10. New York City Department of Finance. (n.d.). New York City Department of Finance. LinkedIn.
https://www.linkedin.com/company/nyc-department-of-finance/

11. New York City Mayor’s Office. (2025, August 21). Mayor Adams, Speaker Adams announce bold contract reform to help nonprofits get paid faster. NYC.gov.
https://www.nyc.gov/mayors-office/news/2025/08/mayor-adams–speaker-adams-announce-bold-contract-reform-to-help

12. Salazar, A. (2025, December 1). New York City has reduced its nonprofit contract backlog by 52% this year. City & State New York.
https://www.cityandstateny.com/nyn-media/2025/12/new-york-city-has-reduced-its-nonprofit-contract-backlog-52-year/409835/

13. New York State Senate. (2025). S7001: Relates to prompt contracting with not-for-profit organizations.
https://www.nysenate.gov/legislation/bills/2025/S7001

14. Central Current. (2025, December 5). Gov. Kathy Hochul again vetoes bill meant to reform nonprofit contracting with the state.
https://centralcurrent.org/gov-kathy-hochul-again-spikes-bill-meant-to-reform-nonprofit-contracting-with-the-state/

15. New York City Council. (2025). Int. No. 1392-A: Nonprofit contracting advance payment legislation.
https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=7681683&GUID=186BCDFC-ABCC-4A8B-B6AD-C26072052917