NYC Responds to Charity’s Collapse With New Nonprofit Committee

More than a year after the sudden collapse of New York City’s largest social-service nonprofit, Mayor Bill de Blasio’s office has created a new forum for charities and city officials to “identify challenges as they arrive,” says Richard Buery, deputy mayor of strategic policy initiatives.

The Nonprofit Resiliency Committee, led by Mr. Buery and another deputy mayor, will bring together government representatives and about 60 nonprofit leaders quarterly to discuss how the mayor’s office and charities can strengthen nonprofits’ program design, administrative processes, and organization infrastructure. The first meeting was held September 29.

“We, like a lot of cities, really rely on the strength and vibrancy of the nonprofit sector to deliver core services to families,” Mr. Buery says. “Nonprofits are under a lot of pressure. Some are market pressures, and some are really exacerbated by ways nonprofits and government partners do business together. We want to make sure we’re doing everything we can to make sure the sector has the fiscal strength it needs.”

Nonprofit Meltdown

The implosion last year of the Federation for Employment and Guidance Services, or FEGS, which had more than $200 million in government contracts, shocked the city and prompted debate about weaknesses in the contracting system that many believe contributed to the charity’s demise.

The FEGS story, Mr. Buery says, is “a good example, cautionary tale, of what can happen when things go awry in these areas.”

In response to the collapse, the New York charity membership organization Human Services Council released a report that found government contracts cover only about 80 percent of the costs of running programs, according to Allison Sesso, executive director of the council. She says it’s risky for nonprofits to take contracts that leave them on the hook for raising the balance, and it undermines their ability to provide high-quality services.

In fiscal year 2013, the city spent 33 percent of its contracts budget, or $5.5 billion, on nonprofit human-service providers.

Ms. Sesso, who participated in the new committee’s first meeting, is optimistic about its potential — “cautiously, of course,” she says. “I am very excited that they’re coming together and showing some leadership.”

She appreciated the tone of the first meeting, which established the committee as a place to build relationships and serve as a “safe space for people to talk about what they’re experiencing,” she says.

SeaChange Capital Partners, a nonprofit merchant bank, also released a report after FEGS shuttered. It echoed the findings of the Human Services Council and also emphasized the importance of financial risk management at nonprofits.

John MacIntosh, a partner at SeaChange Capital Partners who is not a member of the new committee, called the effort “terrific.”

“I don’t see this as a panacea but as a good first step in at least having a dialogue, at least at the city level,” he says.