The following is a conversation between Allison Sesso, Executive Director of Human Services Council, and Denver Frederick, Host of The Business of Giving on AM 970 The Answer WNYM in New York City.
Denver: In New York City, the voice of the human service community is quite simply the Human Services Council. They help lead the sector on issues of the greatest importance. And no matter what the economic climate or who is in office, this is challenging work. And here to discuss it with us is Allison Sesso, the Executive Director of the Human Services Council.
Good evening, Allison, and welcome to The Business of Giving!
Allison: Thank you so much for having me!
Denver: What kind of services are we talking about here, Allison?
Allison: It’s everything that supports well-being for New Yorkers. It’s from childcare to mental health services, substance abuse, after-school, senior care, help after a disaster happens like Hurricane Sandy. So, it’s everything that supports the human needs of New Yorkers.
Denver: About how many organizations are part of the Council?
Allison: There’s about 170 in our membership, which collectively provides about 90% of the services in the city.
Denver: Walk us through the process of how the government goes about providing human services to communities.
Allison: Government doesn’t really directly provide services to communities; it is my members that do that work through a contracting process with the government. The government puts out what’s called a Request For Proposals; the nonprofits review that Request For Proposals, and they bid on those contracts. And then, they get paid, or underpaid, I should say, for the provision of services to New Yorkers that are in their communities.
Denver: In aggregate, how large are those contracts, put together?
Allison: There are about $6 billion that the city spends on those services. It’s pretty significant, which I think a lot of people don’t recognize just how much of an industry it is.
… the institutions themselves are mirroring their clients in that they are financially strapped. They live payroll to payroll, just like the individuals that they serve live paycheck to paycheck, and one event can really undermine them.
Denver: What is the current state of the human services sector in New York?
Allison: Not great, unfortunately. As I described it, the institutions themselves are mirroring their clients in that they are financially strapped. They live payroll to payroll, just like the individuals that they serve live paycheck to paycheck, and one event can really undermine them; we’ve seen nonprofits go under. Twenty percent of human service organizations are insolvent, and I would say another 40% to 50% really don’t have reserves of more than three months on the books. And so, they are in a very cash-strapped situation, and it’s because of the way government contracts with them, unfortunately.
Denver: We’re in a pretty good economic climate, I think about 4.2% unemployment here in New York City. On the other hand, we know the great divisions that are going on and how many people are being left behind. What would you say about the demand on these agencies right now? Is it about the same as it’s always been, more or less?
Allison: I’ll definitely say it’s more significant. There’s no question that money is being funneled up to the more wealthy. There’s lots of evidence of that. And so, it’s harder and harder to make it, which means that people rely more and more on these services. The government…I think New York City really wants to buy more of these services. I think that that’s great, and that’s a great trend, but they need to pay for the full cost of it.
Denver: Well, speak a little bit more about that. You’re saying that these agencies, when they contract for these services, are underfunded by the government. How large is that? Why is that happening?
Allison: On average, they only pay 80 cents of the actual cost of the services. Why it happens? Nonprofits are community-based institutions – they have missions, and there’s no one else that’s really going to bring their services to scale. And so, when they see a government contract, they evaluate it and they determine whether or not they can afford to take that contract, and essentially, they have to fundraise privately in order to take that contract.
Denver: That’s difficult.
Allison: Yes. And so, they have to throw parties. They have to have boards that have a lot of money that can make contributions. They have to go to private philanthropy, go to banks, go to different places to try to raise the money in order to take that government contract and do that work in the community. And so, that, unfortunately, makes it a very difficult operational challenge for many of the nonprofits operating in the city.
The program funds are not sufficient, and at the same time, government has traditionally not recognized the indirect costs and the importance of that. Indirect costs really pay for the institution to exist. It pays for research, it pays for the HR department, it pays for management. It pays to make sure that the nonprofit is operating efficiently.
Denver: Is the government failing to pay the cost of the program? Is that part of it? Or are they failing to pay all the indirect costs and the overhead that are part of it….
Denver: So it’s a combination of the two!
Allison: The government pays, again, about 80 cents of the actual cost. The program funds are not sufficient, and at the same time, government has traditionally not recognized the indirect costs and the importance of that. Indirect costs really pay for the institution to exist. It pays for research, it pays for the HR department, it pays for management. It pays to make sure that the nonprofit is operating efficiently.
But I will say, and I give a lot of credit to the de Blasio administration and the Speaker Corey Johnson, in the last budget that was agreed to in June – this had a lot to do with our advocacy – they did finally agree that they are going to pay the indirect rates and what they really are for individual institutions in the city of New York. And so, that is a huge step forward. We do not have that same commitment from the state. I would say Governor Cuomo has largely ignored this sector in terms of his investment in it and that there needs to be that same change that we’ve seen at the city level happen at the state level.
Denver: Congratulations. That is real progress.
Allison: It’s huge. It’s game-changing.
Denver: Speaking about this 80% rate, when the city contracts with a business, do they pay that same 80% rate, or do they pay the full freight?
Allison: They pay the full freight for the most part. I think that the situation is that nonprofits don’t really have any other buyers of these services. It’s really one market – the government is the only one that’s buying homeless shelters. No one else is buying them. No one else is really buying the substance abuse services in the same way. There are only so many private buyers of those kinds of services.
So, I think that that’s part of the problem – that it’s really a one-market buyer. And so, the nonprofits, if they want to do services to scale—again, like I said earlier, $6 billion the city spends on that. The philanthropic dollars just can’t make up that difference in terms of scale.
Denver: And I think it probably hurts in a way that they’re so mission-oriented, that they care so deeply about the people that they’re serving—
Allison: Correct. That they put their own well-being aside.
Denver: They put their own well-being – “We’ll figure it out later because these people really need our help.” Are more of them beginning to stand up and say “No mas”?
Allison: Yes! Absolutely. I like to think I had something to do with that because I’ve been really – through our work at the Human Services Council, we’ve been pointing out the risks that nonprofits take on when they take on these contracts. We’ve been trying to get boards of directors to pay more attention and to ensure that the nonprofits are thinking about the operational challenges because they are real, and to say “no” to contracts that are not paying the full cost. Because, frankly, it’s hard to advocate on behalf of institutions that keep raising their hand for contracts that are underpaid.
But I will say that I’ve seen a number of nonprofits really scale back and think about which contracts they’re going to say “yes” to. I know that there are many that have turned back contracts and not put their hat in the ring for different RFPs that have come to the street, which is not a good sign for government in terms of having a lot of people compete for these contracts. There is the argument that somebody will pick it up. But you don’t want just somebody to pick up the contract; you want a quality, good provider to do the work on behalf of the city, not just somebody who’s willing to do it.
Denver: A corollary of this would be the speed of reimbursements because when a nonprofit goes about and provides the work, provides the services, they probably expect to then go to the mailbox and see a check there.
Allison: It doesn’t work that way.
Denver: It doesn’t work that way. Well, how does it work?
Allison: Unfortunately, it’s sort of like, “Let me underpay you, and then let me wait nine months to give you that underpayment.” So, it’s awesome. The nonprofits are routinely paid nine months to a year sometimes late on the work, and they have to provide the service. They can’t not begin the work because, oftentimes, they’re already doing the work, have the employees, and so a lot of these Requests For Proposals are just continuing that work.
So, you may have a childcare center; your contract is going to end, and then the government puts out a new Request For Proposals. So you bid for it, hoping that you’ll get it, and then you will continue with the employees you already have in place. So if the government takes forever to actually officially say “yes” to that contract for you – the new one – and then get it through the process, you’re continuing to pay those employees and continuing to deliver those services without having the actual money in hand… which forces you to go to the bank, take out loans; and then that increases your costs further because you have to pay interest on that.
…transparency is not the same as a deadline.
Denver: That’s right. So, what’s the problem with the city? Why are they taking nine months? Is there a procurement process that’s all messed up with no timelines? What’s going on?
Allison: There is. There are no official timelines; only the Comptroller has a 30-day deadline to actually approve contracts. There actually is legislation proposed by Councilmember Helen Rosenthal and by Councilmember Ben Kallos that would create timelines, which we’re supportive of. And I will again give credit to—at the Mayor’s Office of Contract Services, they are coming up with a system that will create transparency in the process, which I think will help tremendously. But it is not yet implemented. And so, once it’s implemented, I expect things to get better, but we’ll see. And transparency is not the same as a deadline.
Denver: That’s right. You can see clearly that they’re nine months late.
Allison: Yes, exactly. You know who to blame, maybe more readily, right?
…the nonprofits have been hobbling along in this environment for a long time, and they have had to make very difficult decisions in order to survive; and that comes out.
Their biggest costs are the costs of their employees. You’re essentially buying services that are provided by people.
Denver: Speak a little bit more about the impact of all this, both the underfunding and the late payments, and the kind of stress that it puts on the organization, the people who work there, and the people that are being served.
Allison: Unfortunately, the nonprofits have been hobbling along in this environment for a long time, and they have had to make very difficult decisions in order to survive; and that comes out. Their biggest costs are the costs of their employees. You’re essentially buying services that are provided by people. So, they’re a huge employer: 80% of the workforce is women; a huge percentage are people of color and women of color—
Denver: Yes, 70% to 75% of this. Tremendous amount.
Allison: Exactly. And we underpay them. The benefits have gone down. It will be hard for us to find anyone that has a pension or any kind of investment in retirement, so I think that’s a real problem – like cans being kicked down the road. Increasingly, these nonprofits are needing themselves social services to make ends meet for their families.
And, really, I do think that there’s a point in which government needs to recognize the impact on the workforce, but also nonprofits need to evaluate their contracts and say, “We’re not willing to be a poverty employer.” So, I would point fingers in both directions on this. I do think that there’s a point that nonprofits have to say, “We are absolutely not willing to employ people at this level.”
And what happens is: you end up with huge turnover rates.
…turnover has real consequences.
Denver: I can imagine.
Allison: The thing is, if you have turnover rates – we’re not making jeans at these institutions – turnover has real consequences. You’re talking about people working in the child welfare field; I think there’s like a 30% turnover rate. Those are people that are foster children who have been separated from their families, and people trying to work one-on-one with those individual kids. Could you imagine, if you finally get the trust built, and then your caseworker leaves, and you have to start your story over? It’s like re-traumatizing people. It is so counterproductive. It is disheartening and hurtful. And I think the same thing for homeless providers. There’s just too much turnover within the institutions.
Another thing that’s happening, frankly, is because of this funding problem, a lot of nonprofits have vacancies for long periods of time, which means that the workers that have remained are only working that much harder and getting more burnt out. And what I’m seeing, frankly, is that a lot of those nonprofits are relying on those vacancies to make their books close in balance, which is a terrible, terrible trend.
Denver: Well, that population is the worst population to do this to – somebody who finally had built some trust and then to have them say, “Here we go again.”
Allison: I will say, it’s really problematic for me. I look at that Governor’s level, at Cuomo, and he has talked so much publicly about the imbalance of pay equity for women versus men, and how he’s doing all this stuff, yet he controls the salaries of a workforce that’s 80% women, and he has refused to give a cost-of-living adjustment, which is like 2%, 3% increase on a salary of like $30,000 to $40,000.
He’s refused to do it year after year and actually saved that money for the state. We’ve seen a $5 billion reduction in what the state has paid for human services since he’s been in office. It is insane how he talks publicly on the one hand about this pay disparity between women and men and how he’s going to do something about it, and yet time after time does not do anything about it when he has the opportunity. If he could just address the work, the cost-of-living adjustment as a small measure, but he doesn’t take that opportunity.
Denver: And as you know, Allison, in the workforce these days, people are looking for personal development and personal growth, so they’re not even dealing with these very basic issues. And I’m sure that these workers, that is the farthest thing from their minds and their organizations, in terms of: how do I grow my skills? They’re just trying to make it through every single day.
Allison: Yes. And they end up going to places like Starbucks to get other jobs, and that’s not where we want people who are caring, who want to care for people. We want to support them.
Risk is something that nonprofits absolutely need to pay attention to.
…every nonprofit should not only be thinking about the risks themselves, but they should be talking about the risks with their boards of directors. And boards of directors need to be asking questions about risk.
Denver: You touched on this a moment ago, but I had the CEO of the Open Road Alliance on the program recently, and she mentioned that there is one four-letter word in the nonprofit sector that we never talk about, and that is “risk.” Speak about risk management among your member organizations, why it is so important; and also: why do so many people stick their head in the sand and shy away from it?
Allison: I feel like that is changing, and I think we had something to do with it. Risk is something that nonprofits absolutely need to pay attention to. The government contracts that they sign up for are extremely risky in a lot of different ways – financially, operationally. There’s just a lot of different levels of who controls the actual clients coming to you, the intake. There’s a lot of different ways in which the contracts are risky.
I absolutely am a big proponent of nonprofits having their eyes wide open to what they’re signing up for, and we actually created a tool called the RFP Rater.
Denver: Great tool.
Allison: It’s a great tool. It’s been in place about three years now, where we actually take government contracts; we rate them for risks, and we put that information out publicly so that the nonprofits can be aware of the risks, and that nonprofit boards are aware of the risks, and that the government is basically held accountable to the risks that they’re putting on the nonprofits as well. I will say we’ve been successful in a couple of the RFPs that we’ve rated. Government has actually pulled back and made adjustments to the contracts, which is a huge advocacy tool, and I’m really happy about that.
But I would just say: every nonprofit should not only be thinking about the risks themselves, but they should be talking about the risks with their boards of directors, and boards of directors need to be asking questions about risk.
Denver: They do not ask the hard questions, the board of directors.
Allison: They do need to. They’re responsible fiscally for those institutions.
Denver: I don’t think sometimes they get that sense. We were just talking the other day about boards and how they never come to an organization as a team. They kind of come as an individual who’s got a concern, maybe they’ll make a gift, but the idea of having them come together as a team and ask hard questions of the management… not in a belittling way, but to really, really ask those questions for the future success of the organization and stability.
Allison: Exactly. So they can understand what the risks are and what the opportunities are and help move the organization forward and onto solid footing.
It’s not about the institution. It’s really about the people. If we don’t have strong institutions doing the work, we will not have good outcomes for kids, for seniors, et cetera.
Denver: I’ve noticed over the last few years, the Human Services Council has become more assertive in advocacy. You’ve really stepped up those efforts. What prompted that decision? What are you advocating for at the moment?
Allison: I think there’s been a real recognition and frustration on the provider side of things, that we are not getting what we need from government. We’ve seen a lot of nonprofits go down. When one of the largest institutions – FEGS – went down almost overnight and went into bankruptcy, I think that really scared a lot of the institutions. They said, “Well, how did that happen?” Because I think before that, there was a sense that if you were small, that could happen, but if you were large, it could not. And that’s not the issue; the issue is the margins. Actually, if you’re really large, if you’re talking about 80 cents on the dollar, the amount you have to fundraise is even bigger. So, you have even more to pay attention to in terms of your private sector funds and how you run your operation.
So, there has been a real recognition as nonprofit institutions have been closing. There have been a lot more mergers. Our advocacy needs to step up, but we are to make sure that government is treating us right. And so, I’m happy that we’ve been leading campaigns to really push for what the sector needs and to, importantly, connect it back to the outcomes in communities… because that’s what it’s about. It’s not about the institutions. Who cares? FEGS existed; somebody else picks up the work. It’s not about the institution.
Denver: That’s a great point.
Allison: It’s really about the people. If we don’t have strong institutions doing the work, we will not have good outcomes for kids, for seniors, et cetera.
Denver: Too many institutions talk about the institutions and not enough about the people that they’re serving, and they would be better served if they did that in the communities. You’ve also crowdsourced feedback, right?
Allison: Yes. The nonprofits are seen as vendors of the government, and so we kind of did this almost like Yelp kind of approach where we ask the nonprofits to rate, almost like customers of government: What is your experience when you work with the government? Do you feel like that they’re treating you well when you have questions about your payments, or where your contract is in this crazy process? Or if you want to come back to the table and negotiate an element of your contract, do you feel like they’re working with you more as a partner, or are they treating you more like a vendor?
And so, we give government grades. We ask the nonprofits to grade each of the city agencies that they have contracts with, and then we give the agency a grade and put out a public report card, which is interesting. There hasn’t really been any F’s or A’s, but it’s really been in the like C-range, which isn’t great. And so, there is a lot of work to be done in terms of the government agencies and how they partner with and work with the nonprofits. But it’s interesting because city agencies, like the staff, they’ve told us straight up that they want to get an A and asked us, “What do we need to do to get an A?” And so that’s good. They’re paying attention, and it’s working.
Denver: Well, when your son starts bringing home a report card, and it has a C on it, you’re not going to be particularly happy, are you?
Allison: Correct. Exactly.
Denver: You won’t panic, but there’ll be no dessert.
As you know, Allison, it’s estimated about 50% of health outcomes depend upon social determinants of health. So, your organization has issued a report about Integrating Health and Human Services: A Blueprint for Partnership and Action. What were some of the key recommendations, and where does that stand?
Allison: So, I think that was our opportunity also to talk about what I’ve talked about today, that to connect the healthcare industry with the human services industry is, I think, good in terms of the idea of it. But you’re talking about a well-funded, very powerful industry – the healthcare industry – going to an industry that’s hobbling along because of their finances.
So, the recommendations really focused on the investments that need to be made in the human services side, and also again highlighting some of the risks that the nonprofits have to be aware of when they’re contracting and thinking about connecting with the healthcare sector. It’s things like: create IPAs for human services so that they’re able to collect their services, kind of like the individual doctors have, so they can connect to the managed care organizations in the hospitals. It’s things like: invest in the technology needs of the nonprofits. They cannot easily transfer data between a hospital system based on what they have in place now. So those are the kinds of recommendations that we put forward.
For me, I love the idea in theory of these things connecting, and I think we are doing some real evolution in our state around this; I give credit to the Department of Health at the state level in pushing these things forward. But they haven’t focused enough on the CBO needs, and they need to make more investments there. For me, it’s another market that the nonprofits could be connecting to.
However, I don’t want the nonprofits to make the same mistakes they’ve made with the government and take 80 cents on the dollar and take big risks. They need to really understand what their full costs are when they’re agreeing to do health services. It’s not so easy for them to do the innovative thinking that’s required when they’re going to come forward with an idea to the hospital or to the managed care organization about how their services would actually impact health in a way that actually they can show data on in a short period of time.
Denver: Well, getting back to indirect costs, it’s good to see that IT is moving from being considered the overhead right to being part of program and strategy and getting out of that column, which is allowing these organizations to invest.
Let me ask you about disasters. Do you do anything with your agencies in the event of a disaster to have them prepared?
Allison: Yes. Human Service Council is an association of providers, and we think about risks for those institutions. When a disaster happens, like Sandy, which is I think just seven years ago, we have to shift as an institution because we can’t be doing advocacy for cost-of-living adjustments or more indirect rates in that moment. Government is not paying attention. Government is focusing on the major disaster and trying to fix it and trying to help communities recover.
So, we are really trying to figure out how to make sure that we connect our members to government effectively in those moments so that the government can leverage the relationships and the work that is being done in communities every day. The nonprofits that are doing childcare today, if their community gets hit by a disaster, they’re going to be doing other types of work. But there’s no guarantee that they’ll be funded for that kind of work. And so, we’re trying to figure out how can the contract shift that they might have for childcare with the Department of Education, for example. Can it shift? And can some of those dollars help support the shift in those employees’ work at that time, related to a disaster?
We have a thing called Human Services Alert, which is actually designed for nonprofit managers so that we can give them information. We are sourcing it from the places like the Red Cross, the Salvation Army, government, et cetera, philanthropy, to give that information to the nonprofits so that when they’re making decisions about what they should do, what risks they should take – because you’re taking a risk when you’re deciding to do something different in a disaster, and you don’t know where the money is coming from – that you have as much information about what other people related to the disaster are doing in that moment, and can make more educated decisions about what you might do.
Denver: That’s great. It’s so important to have those things pre-baked because when a disaster comes, no one’s going to be talking to anybody. You just have to swing into action.
Allison: Exactly. The chaos is inevitable, but you could have a little bit more controlled chaos when you do preparedness.
Denver: Let me close with this, Allison. If you were Mayor for a day, or maybe you prefer to be Governor for a day, and could implement one thing that would have the greatest positive impact on the members of the Human Services Council and the individuals and the communities they serve, what would that be?
Allison: I would make sure that there’s transparency in the cost structures that are put out in RFPs, that there is a clear explanation as to why we came up with certain costs, and why the government has priced the service at the price that it’s at, so that we could actually close that gap between the 80% and the full cost of services.
Denver: Just talking to one another… a narrative that we could understand would make a big difference.
Well, Allison Sesso, the Executive Director of the Human Services Council, I want to thank you so much for being here this evening. If there was an action that listeners could take that would help with some of the challenges that so many of these agencies are now dealing with, what action would you like to see them take?
Allison: I think people should think about what institutions are operating in their communities and to get involved, to think about being on the board of directors, making contributions to those organizations and, frankly, talking to their city council members about the value that those institutions bring.
Denver: Great. Well, thanks, Allison. It was a real pleasure to have you on the show.
Allison: Thank you so much for having me.
Denver: I’ll be back with more of The Business of Giving right after this.
The Business of Giving can be heard every Sunday evening between 6:00 p.m. and 7:00 p.m. Eastern on AM 970 The Answer in New York and on iHeartRadio. You can follow us @bizofgive on Twitter, @bizofgive on Instagram and at www.facebook.com/businessofgiving.