Context:

New York City owes over $1 billion to nonprofits for more than 7,000 unpaid invoices, significantly impacting organizations that provide essential services to vulnerable residents. This backlog of payments is not due to a lack of funds but rather systemic delays in the contracting and payment processes, including late contract registrations and a problematic new payment portal. Nonprofits often resort to borrowing money to stay operational, incurring interest costs that the city does not cover, which can lead to reduced services or, in extreme cases, closures. Mayor Eric Adams has proposed increasing advance payments to contractors and implementing a new tracking system, while other officials suggest reforms such as partial invoice payments and the establishment of a new city agency to address these issues. These efforts aim to alleviate the immediate financial strain on nonprofits and address the underlying inefficiencies in the city's payment system, although significant reforms are still needed for a long-term solution.

Dive Deeper:

• The city of New York owes over $1 billion to nonprofits for more than 7,000 unpaid invoices, impacting organizations that provide critical services such as shelter, food, and legal aid to vulnerable populations.

• The delays in payment are not due to financial constraints but are attributed to systemic issues in the contracting and payment processes, including late contract registration and a flawed new payment portal.

• Nonprofits often have to borrow money to continue operations while awaiting payment, leading to significant interest expenses that the city does not reimburse, thereby reducing funds available for direct services.

• Some nonprofits have been forced to scale back services or even shut down due to delayed payments, while others are reluctant to bid on city contracts due to the financial risks involved.

• Mayor Eric Adams announced plans to increase advance payments to contractors and introduce a tracking system for better accountability, though these measures are seen as temporary solutions without deeper systemic reforms.

• City Comptroller Brad Lander and other officials have proposed reforms, including partial invoice payments to prevent small disputes from delaying entire payments, expanding grants and bridge loans, and addressing issues in the PASSPort payment system.

• The City Council has introduced legislation to mandate upfront payments, create a new agency for contract services, and require corrective action plans for late contract registrations, aiming to improve the payment process and support nonprofits more effectively.