The other day I read about a new report by New York State Comptroller Thomas DiNapoli (with the help of the New York Council of Nonprofits) that found that 87 percent of nonprofit contracts with state government (of more than $50,000) were not approved prior to the nonprofits’ beginning their work. On average, new contracts were approved nine months after the contract start dates and renewals were five months late on average. New York State is essentially relying on nonprofit organizations being so committed to their mission that they will risk their financial health to continue providing services without contracts. Indeed the entire system appears to depend on this commitment.
The only thing about this report that might surprise CDC and non-profit leaders is the fact that a state agency finally documented the problem. All mission-driven organizations confront this challenge all the time – how to balance money with mission. We must often complete substantial work on a project or program before receiving a fee or reimbursement and those payments rarely cover the full cost of delivering the service. Cash flow becomes a chronic challenge and organizations are unable to build up a health reserve fund. The resulting impact on fiscal health can be severe as the Non Profit Finance Fund recently documented in a report on CDC Fiscal Health that was completed as part of the Community Development Innovation Forum.
Reversing these trends is a primary goal of the Community Development Innovation Forum. We have recently re-activated a group of stakeholders to develop recommendations for how the real estate development finance system can be reformed to better enable non-profit developers to achieve their missions in a financially sustainable manner.
In the meantime, I have some very good news to report about a recent policy decision that moves us in the right direction. On April 6, at MACDC’s annual Lobby Day, Massachusetts Secretary of Housing and Economic Development Greg Bialecki, announced that he would forward commit $600,000 in FY 2011 funding for the small business technical assistance program so that he could double the size of recent grants to CDCs and other nonprofits and extend the term of their contracts by 6 months. By providing greater funding certainty and stability, the state will strengthen its organizational partners, promote longer term planning, enhance professional and program development and help leverage more private and federal money – without costing the state any extra money.
The Secretary’s announcement was in response to problems this program has had in past years when uncertainty about the state budget would cause substantial delays in the RFP and subsequent funding decisions. Groups sometimes had to wait several months into the fiscal year before learning whether they were going to be funded again and at what level.
Secretary Bialecki’s creative solution was made possible by a generous commitment from Mass Development to provide $600,000 in funding to the program in FY 2010 and now FY 2011. Since these funds are not contingent on legislative approval of the state budget in June, the Secretary had the flexibility to think outside the box and create a solution that will benefit the state, the grantees and most importantly the small businesses that this program seeks to support. Now that is the type of Innovation that is worth celebrating!