Introduction

Thank you for the opportunity to testify today.  My name is Anne Erickson and I am President and CEO of the Empire Justice Center. We are a statewide legal services organization with offices in Albany, Rochester, White Plains and Central Islip (Long Island).  Empire Justice provides support and training to legal services and other community-based organizations, undertakes policy research and analysis, and engages in legislative and administrative advocacy.  We also represent low-income individuals, as well as classes of New Yorkers, in a wide range of poverty law areas.

I am here today to share with you some of our state contracting experiences to give you a sense of the difficulties our organization has encountered with the process. 

Overview of Empire Justice State Contracts:

Empire Justice contracts with a variety of state agencies to provide various services. Currently these contracts include:

• AIDS Institute (AI)
• Banking Department Crime Victims Board (CVB)
• Department of Health (DOH)
• Department of State (DOS) 
• Division of Criminal Justice Services (DCJS)
• Division of Housing and Community Renewal (DHCR)
• New York State Office of the Aging (NYSOFA)
• Office of Children and Family Services (OCFS)
• Office of Temporary and Disability Assistance (OTDA)

These grants and contracts include competitively bid contracts as well as grants for which Empire Justice is specifically named in the state budget to provide particular services.
 
Under these contracts we provide a variety of services including providing legal advice, assistance and representation to:

• immigrant victims of crime in the Hudson Valley
• people who have been inappropriately denied or terminated from the federal disability benefits in the Greater Rochester area
• families who are saddled with subprime mortgages and are facing foreclosure in the Greater Rochester area and in the Capital District
• immigrant victims of domestic violence in the Capital District
• seniors and local offices for the aging on issues surrounding Medicare Part D benefits throughout upstate
• people living with HIV/AIDS in the Greater Rochester area

We are also funded by a number of state agencies to provide training, support and technical assistance in a number of substantive law areas to local legal services and other community-based organizations.  This support includes providing Mandatory Continuing Legal Education (MCLE) opportunities to legal aid and legal services attorneys so that they can both meet their MCLE requirements and to help ensure that they are as up-to-date as possible on all the laws, rules and regulations that will impact the rights and responsibilities of their clients. 

Under some of our state contracts, we provide support and technical assistance to local legal aid staff, child care providers, domestic violence advocates and staff, and other direct service providers as they seek to help clients with complicated problems or facing new and emerging legal issues that require specialized expertise.

My Particular Role in State Contracting

I became the chief executive officer of Empire Justice Center about seven years ago having served as the organization's legislative coordinator since 1989.  I believe we are an extremely well-run organization and we pride ourselves on effectively managing our resources, overseeing our projects, delivering high quality services, and meeting all deadlines as best we can.  We are extremely responsive to the state agencies we contract with and we have consistently done well in any programmatic or financial audits the agencies have undertaken.  We like to see ourselves as partners with the state agencies as we work to deliver critical services to those most in need.

I testify here today, not as an expert in prompt contracting law, but as frustrated executive who has entered into any number of state contracts in good faith, who has hired the best staff I can to meet those contractual agreements, and who lives in panic about being able to meet payroll because of the state's failure to timely process its contracts.

Indeed, in our 2008 audit presented to our Board just last week, our auditors noted two things in particular:

• A dramatic increase in our year-end receivables – approximately $1.9 million in funds we are due to receive but have yet to actually receive.  Virtually all of these funds are state funds we are owed by various state agencies.
• The elimination of any cash cushion we had built up over the last several years; any "cushion" was used to pay the state's expenses while we waited for the contracting process to grind on; in many instances, we are still waiting.

I would also like to note that I am testifying at the request of the Assembly Committee on Governmental Operations.  I do so in good faith and in the hope that my testimony will not result in retaliation and even further delays in the contracts that we are still waiting to have executed.

Our Experience with the State Contracting Process

Our contracting experiences with different state agencies range from very positive and fairly timely to absolutely abysmal, frustrating and confusing.   These experiences can change from year to year, with some agencies improving their processes and others falling further behind. 
 
To illustrate the types of problems – and granted, probably the most severe problems we have encountered – let me provide a time line for two contracts Empire Justice received in the last two state budget cycles.  The funding for the contract was included in both the 2007-08 and 2008-09 State budgets. 

There was a specific appropriation for Empire Justice in both budgets for $89,000 to provide a range of direct legal assistance to a very vulnerable population. This is funding we have received in the state budget in the same amount through the same agency each year since 2001.

The Required Timeframes

"The time frame for prompt execution of legislative initiatives is 120 days from the date the NFP (not-for-profit) is identified to a state agency. As such, OSC will require that the agency date stamp the receipt of the Local Grant Awards Form(Legislative Initiative) and continue to include it with the contract transaction."  Bulletin G-229, Operational Impact of the Prompt Contracting Law, issued December 17, 2007 by the Office of the State Comptroller.

The Actual Timeframes 2008-09

The state budget was signed into law in April 2008. These funds were not subject to the cuts imposed in August 2008 when the Legislature revised the overall state budget.

• April 2008 – Budget enacted and the contract period for provision of services begins on April 1, 2008.
• June 2008 – We receive the award letter from the state agency, dated June 18, received June 23.
• July 2008 - We receive our initial contracting package from the state agency and return the completed package on July 7.
• December 2008 - We hear nothing from the state agency until five months later when on December 8 we receive a completely new application package for the same funding "for the period April 1 2008 through March 31, 2009.  "December 2008 - We inquire about the change and are told that the package that had been sent to us by the agency, the same package we have completed every year, now somehow does not give the agency enough information to process the contract. No further explanation.
• December 2008 - Eight months into the contract period, we complete and return the new package on December 21, 2008.
• January 2009 - We are asked to slightly revise our budget on January 8 which we do and return it on January 9. 
• February 2009 - We receive the contract back for execution which we promptly sign, notarize and return on February 23. 
• March 2009 - We submit paperwork requesting the allowable 25% "advance" on March 2; the contract term ends March 31, 2009.
• March 2009 – We are informed that the contract has been reviewed but is missing the signed Waiver of Interest form; the agency agrees to continue processing the contract on March 12.
• April 2009 – We're told that the contract was sent by our contract managers to "central processing" on April 1 – the day after the contract period ended.
• June 2009 – After constant inquiries, we are informed on June 8, 2009 that the contract is not yet approved. It is now June 15, 2009 – we still do not have a fully executed contract – without which we cannot voucher to get paid for the work done under a contract that ENDED three months ago and almost a year to the day of being notified of the award.

Lest you think that this is an isolated event in a particularly challenging year – let me assure you – it is not.  This is a way of business for some agencies.  The following is the time line for the same contract in the 2007-08 budget cycle.  From our experience, the "process" is one of constant ping-ponging – returning contracts for minute changes which cause weeks or months of additional delay; lack of clarity of where in the process we are at any moment, making it impossible to determine when the process might be completed so we can get paid for our work; lack of information with the state agency going silent for months on end; and seemingly deliberate attempts to not move the paperwork in a timely and organized fashion.

The 2007-08 "Process"

• April 2007 - The state budget containing an appropriation naming Empire Justice to receive $89,000, passes the Legislature and is signed by the Governor.
• June 2007 – Empire Justice receives the initial funding notice from the state agency on June 12, 2007.
• July 2007 - We submit the completed application on July 25, 2007.
• October 2007 – Having heard nothing from the agency, we contact our grant manager during the third week of October to inquire about the status of our contract and are told by agency staff that the contracts are in the agency's own budget office.
• We talk to staff in the agency's budget office and are told that the contract is actually at the Attorney General's (AG) office.
• We reach out to the AG's office and staff there indicate that they are not holding any contracts. 
• November 2007 - We called the state agency to relay the message we received from the AG's office.
• November 2007 - The state agency responds on November 27, 2007 that our prior year contract (April 1, 2006 – March 31, 2007) was approved on November 19, 2007 [1]  but that the agency's database now has no record of our 2007-08 funding – the funding and contract package we had been working on with this same agency since June. 
• We send the agency the award letter they had sent us on June 12, 2007 to prove that they did indeed have information on this contract.
• December 2007 - We receive the completed contract package on December 10, 2007.  We submit the signed and notarized package on December 12, 2007.
• February 2008 - We finally receive the fully executed contract on February 5, 2008 with less than two months remaining in the contract period. We can now voucher for the prior year's work.
• March 2008 – Contract period ends.

We consistently carry this contract over the entire contract period, without a single payment from the state. We pay our staff, our rent, and all other expenses.  We deliver services and help those in need as expected under the contract and award letter.  We submit and often re-submit every document requested.  And still we wait.

In another instance with a different agency, we saw our funding cut in one year's budget and called the agency head to find out why.  We were told none of the funds had been spent, we were not vouchering and so it was determined that the funds could be cut and we could rely on a re-appropriation of prior year funds.  Turns out, the prior year contract had yet to be executed by the agency's staff and so we couldn't voucher even though we were providing services all year.  We were able to resolve the budget issue, but ended up taking a cut in the program – all because the contracting process was so delayed from the prior year.

The delays and constant requests for new, different, more or even the same information that has already been transmitted has put a tremendous added burden on our administrative staff -- administrative costs that we are not allowed to charge to the grant.  Indeed, a number of my staff now have an added job responsibility: to bug state agencies for contracts.  I too have spent tremendous time tracking down contracts, calling state agency staff, begging them to move our paperwork to the next level, calling the State Comptrollers office, checking in with the Attorney General's office – all to get a long standing contract with the state executed so we can then begin the payment process.

We recognize that this past year was particularly challenging for many state agencies, given mid-year cuts in many state contracts and the general crisis surrounding the state budget.  For example, one state agency with which we have a long standing contract processed the 2007-08 contract in a relatively timely fashion: we were notified of the grant and submitted our contract package on July 18, 2007.  We had a fully executed contract by the end of September 2007.  In contrast, that same agency started the 2008-09 contract process with us on July 23, 2008 when we submitted our initial contract package.  They returned the package as approved in September, we signed, notarized and returned it on October 1, 2008 – but it wasn't returned as fully executed until February 20, 2009.

The delays this year have been staggering, but delays were clearly at issue prior to this past year. 

Recommendation: Create an open web-based system that allows non-profits access to a database that will allow us to check the status of pending contracts.  This will significantly reduce the administrative time we now spend bouncing from person to person, agency to agency, trying to determine where in the process our contracts are.

Waivers of Interest

"Chapter 292 of the Laws of 2007 added amendments to Article 11-B. The amendments prohibit state agencies from generally requiring not-for-profit (NFP) organizations to waive claims for interest that would otherwise be due….." Bulletin G-229, Operational Impact of the Prompt Contracting Law, issued December 17, 2007 by the Office of the State Comptroller.

Waiver of Interest forms are still included as a routine part of every contract package we receive.  Honestly, we generally sign them so as not to delay the process any further. 

The agency noted in the contracting timeline above, approved a 2006-07 contract in November of 2007 – eight months after the contract ended -- and approved our 2007-08 contract in February of 2008 ten months after the contract started --  has to my knowledge never made an interest payment on this contract as penalty under the prompt contracting law. 

In fact, in all our contracting relationships with the state we have had any number of extremely delayed contracts.  We have been paid interest a total of four times in recent years:  $11.34; $13.46; $73.00; and $31.32.  And with these payments it is not even made clear which agency is paying for which delayed contract.  We did track one payment down: the $31.32 was paid to us in early 2008 for a contract delayed in 2006. 

Clearly these are not penalties that will change the process in any way.  Agencies hold up hundreds of thousands of dollars in payment and pay nothing in penalties.

It is also not clear who is responsible for enforcing these provisions, but as a contractor we feel both helpless and somewhat intimidated as these agencies still have such control over our finances.

This year, for our 2008-09 contract described in detail above, I refused to sign the Waiver of Interest form.  It did indeed delay the contract even further, as my staff and I went back and forth with the agency staff as they tried to get us to sign it.  The form they put in front of us had the "reason for the retroactive start date" filled in as "late notification of grant award."  The form would also have us attest that the department "had met the timeframes" required by the state's prompt contracting law. Since it was March of 2009 when we were having this exchange, I pointed out that the agency had notified us in June 2008  – fully nine months previously – about the award. 

As far as I could tell they had failed miserably to meet any of the time frames of prompt contracting. I told them that I could not and would not in good conscience sign such a misleading and inaccurate form.  On March 12, 2009 department staff agreed to process the contract without the waiver and promised to let us know "if it becomes an issue."  As noted, it is June 15 and we still do not have the fully executed contract.

Recommendation: If the state of New York is going to have a prompt contracting law, there must be an overarching process for enforcing it.  Payment of interest is one such enforcement tool but the level of penalty seems to be meaningless and it is not at all clear that even that is being used very effectively. Penalties should be increased and enforced.

Inconsistent and Duplicative Requirements

In addition to contract delays, we are also struck – and frustrated – by the many variations in what could be standardized forms.  For example, we are required to fill out a Vendor Responsibility form in order to demonstrate our good standing, outline any other state contracts we currently hold and attest to whether there are any actions against us or if we've been barred from contracting by other agencies.   All appropriate inquiries – but all made on slightly different forms by every state agency.  In fact, when we completed a Vendor Responsibility form that we had downloaded from the website of the Office of the State Comptroller it was rejected and we were directed to fill out the agency's version instead.

Recommendation: The state should have a single Vendor Responsibly Form that all state agencies are required to use.  Vendors should be required to submit this form once and be required to update it annually and submit it to a centralized contracting clearinghouse.

Likewise budget forms and vouchering are inconsistent and frustrating.  We recently spent precious staff time – as did the state agency in question – going back and forth on whether budgets should be rounded to the nearest dollar.   First we were told to budget to the penny, which we did.  It moved up the chain in the state agency and we were then told to round to the nearest dollar, which we did.  In the process, we probably spent hundreds of dollars in our staff time and I can only imagine how much time and expense on the state agency side – for a twelve cent rounding question. 

Budget categories vary by agency: some want detail on every office supply others allow broader categories.  Some accept personnel lines that indicate staffing patterns – senior attorney, paralegal, secretarial staffing lines.  Others are now asking for actual staff names – which means if we have any change in staff over the contract period we will need to go through a budget modification process – costing us more in unreimbursed administrative time. 

Honestly, isn't the state contracting with Empire Justice to provide legal assistance? Does it matter if Mary Jones provides the service rather than John Smith?  Say for example, we agree in the contract to provide that assistance using three attorneys and two paralegal staff with the help of one part-time administrative assistant.  It is my job to then manage that work and fill those positions – and potentially to re-fill them should there be a vacancy.  The state's role is to ensure that the Empire Justice delivers the services; they should not be dictating or contracting with us for individually named staff.

Similarly on vouchering and payment, the variations can be mind-numbing and at times contradictory between state agencies.  The focus should be on performance and results.  A number of state agencies have moved in this direction, requiring contractors to provide a defined level of service for the level of payment under the contract.  Other agencies are sill focused on how much we pay for pencils.

Recommendation: The state should have uniform budgeting categories and uniform vouchering forms and processes.

Recommendation: The state should be clear that it is contracting for a define set of services – and should pay based on the delivery of those services, leaving the contractor to manage the budget lines within the overall contract.

What This Means to Empire Justice

The contract processing examples noted above reflect a single annual contract.  We have the same or similar problems with other state contracts, creating an almost impossible mission to continue to provide services, make payroll and pay our bills with very little cash on hand and an uncertain date for receipt of payment from the state.

This has forced us at times to use our line of credit to make payroll, while knowing we have close to a million dollars in outstanding state contract payments. This creates an immense amount of stress for our staff.  It undermines our ability to plan, and claims numerous hours in staff time that could be spent on more productively on other needs of the organization.

By using our cash cushion to make up for contract funds owed us by the state, we are also robbed of the interest we could be earning on those dollars in certificates of deposit, putting us at an additional resource disadvantage.

Conclusion

As I noted at the beginning of my testimony, I'm not an expert in the state's prompt contracting law, but I have become somewhat of a state contract investigator out of necessity.  The time I spend on these issues has grown considerably over the past few years.  I'm often tracking not just our own contracts, but the contracts of my legal services colleagues as they grapple with contract delays of up to, and in some cases over, a year.  Our finances are tenuous enough without having to carry literally millions of dollars in state obligations.

I will end with more recommendations:

Recommendation: If this time-intensive process is not streamlined, we will continue to spend precious resources on the contracting process.  Allow us to be paid for the administrative time we spend cashing down our contracts.

Recommendation: Train us in the non-profit world on the provisions of the prompt contracting law.  Walk us through the requirements so we know, for example, when we are required to sign waivers of interest and when we can and should refuse to do so.  Give us a clear avenue for reporting delays so that we can become part of an overall monitoring system and protect us from retaliation when we do so.

Thank you for the opportunity to testify here today and we stand ready to help improve this process in any way we can.

End Notes:

[1] Getting approval in November 2007 for a contract that ended March 31, 2007 is another indication of the on-going nature of these delays.