City hearing on late nonprofit payments focuses on three council proposals as providers describe cash-flow crises

The New York City Council convened a hearing May 20 to examine long-standing delays in registering human-service contracts and paying nonprofit providers, a problem administration officials said they are working to fix even as providers and advocates described continuing cash-flow crises.

Council leaders held the hearing to review three pending measures — Intro. 12-47, Intro. 12-48 and Intro. 12-49 — that would speed cash to nonprofit contractors, create a department-level procurement office and require corrective action plans from agencies with many late-registered contracts.

The hearing, led by two committee chairs and the council speaker, featured testimony from the mayor's nonprofit and procurement offices, agency chief nonprofit officers and more than two dozen nonprofit leaders who described taking out lines of credit, cutting programs and struggling to make payroll.

Why it matters: human-service nonprofits deliver housing, meals, after-school programs, legal assistance and other essential services across the city. When contracts or invoices are delayed, providers say they must borrow or cut services; city officials say new technology, rule changes and staffing increases are reducing some bottlenecks but that substantial backlog remains.

Administration officials: scope and recent steps

Michael Sadillo, executive director of the mayor's office of nonprofit services, and Kim Yu, the newly appointed director of the mayor's office of contract services (MOX) and the city's chief procurement officer, described a complex set of causes for the recent crisis — a migration from legacy systems into the city's Passport procurement platform, a large increase in contracting volume tied to shelters and other services, hiring freezes that limited agency capacity and implementation of a $741 million cost-of-living adjustment (COLA) that produced many budget modifications.

"There are no quick fixes to the challenges we face. This is complex, demanding work, but I'm ready to roll up my sleeves and do the work," Kim Yu said in opening remarks.

Yu and Sadillo said the city has taken several steps in recent months: targeted backlog sprints that the administration said unlocked about $1 billion in outstanding invoices and more than $700 million in retroactive contracts; directives allowing partial payments on approved portions of invoices; and work to expand a Passport public dashboard and vendor reports so providers can see where their contracts and invoices stand.

Officials described a major new advance program the mayor announced the day before the hearing. The administration said it plans to advance roughly $5,000,000,000 to nonprofit contractors in fiscal year 2026, up from about $2.8 billion in the current fiscal year; officials said the amount announced is an aggregate dollar commitment and that the percentage advanced will vary across programs and agencies.

Provider testimony and the financial picture

Nonprofits said the city still owes large sums for services already delivered. Human Services Council executive director Michelle Jackson and others described member-level data showing hundreds of millions of dollars overdue. Jackson recounted that a sample of council members reported being owed $582 million; other figures cited during the hearing included a comptroller-released estimate and advocacy surveys reporting late-payment totals in the mid- to high‑hundreds of millions.

Several large providers described how late payments forced them to borrow and postpone investments. ‘‘Passion doesn't pay the bills,’’ Jackson said, summarizing providers' view. Reverend Terry Troya of Project Hospitality testified that his agency carried new family shelters for years without reimbursement and drew down millions on credit lines; he said the agency paid tens of thousands of dollars in interest. The Institute for Community Living said outstanding receivables had fallen from $60 million to $30 million after recent agency work, but that $30 million still posed an existential threat.

Key numbers from the hearing (agency testimony and provider statements): - Administration backlog totals cited in testimony: since January 2022 the overall contract backlog declined from about $11.3 billion to single digits, but had risen and fallen during the administration, with a recent figure of roughly $5.8 billion cited as remaining retroactive contracts and invoices. (MOX/ MOND testimony) - Advances reported: the administration said it advanced $3.1 billion in fiscal year 2025 (data capture in March) and referred to prior midyear advances for fiscal year 2024 totaling $1.85 billion, including a $673 million migration advance in April 2024; the mayor announced a plan to advance roughly $5 billion for fiscal year 2026. (MOX testimony) - Returnable Grant Fund (interest‑free loans): administration testimony said $30 million is currently available; officials and providers discussed both expanded eligibility and administrative hurdles in applying. (MOND / MOX testimony)

Bills and council aims discussed at the hearing

Intro. 12-47: would direct the Procurement Policy Board to adopt rules requiring disbursement of 80% of a fiscal year's contract funds for nonprofit contracts upon registration by the comptroller, with a recovery process if services are not delivered. The administration said advances can help but cautioned that advances are not a "silver bullet" and raised operational and fiscal questions about automatically advancing 80% for all contracts.

Intro. 12-48: would create a Department of Contract Services, elevating MOX to a charter department and concentrating procurement duties (the bill would make the commissioner the city chief procurement officer). MOX said it supports the bill's goals but is reviewing structural and drafting issues and expects to work with the council and the law department.

Intro. 12-49: would require agencies with significant numbers of retroactively registered contracts to submit annual corrective action plans explaining causes and remediation steps. MOX and MOND expressed support in spirit and said they already work with chief nonprofit officers at agencies on action plans, but questioned how the bill would define retroactivity and how to treat discretionary contracts that are retroactive by design.

What providers want and what the administration says it will do

Providers urged immediate relief: larger and faster advances, a substantial increase in the returnable grant fund, expedited invoice processing, and honoring accepted indirect cost rates (ICRs). Several providers said they had been owed money for multiple fiscal years and had taken out interest-bearing loans or lines of credit to stay afloat.

Administration officials described concrete operational changes already underway — more Passport functionality, additional MOX help‑desk staff and improved ticketing, OMB exemptions for some procurement positions from the hiring freeze, a partial-payment directive, and weekly coordination meetings convened by the deputy mayor. They also invited further council partnership and said they would provide requested breakdowns and data to the council after the hearing.

Questions left open

Council members asked for specific data the administration pledged to produce or clarify: a citywide time series of outstanding balances, a breakdown of how much of the remaining backlog is attributable specifically to nonprofit human-service providers, details on staffing levels across agency procurement units, and more transparency on how the $5 billion advance will be allocated across programs.

Ending

The hearing ended without formal votes on the three council bills. Council staff and administration officials agreed to continue the technical discussions and follow up with requested data. Committee chairs said they would move forward with bill drafting and oversight while monitoring implementation of MOX and MOND directives intended to reduce registration and payment delays.