Commission to Examine Nonprofit Human Services Organization Closures

Full Report

Executive Summary

Report Brief

Standards of Excellence in Nonprofit Financial Management

Nonprofit Financial Stability KPI Recommendations


Report Information

The Future of the Human Services Sector Video


ABNY Panel Discussion


New York City Council Oversight Hearing: Challenges Facing Nonprofits in City Contracting 4/4/16

The New York City Council Committee on Contracts held an Oversight Hearing on Monday, April 4, 2016 on Challenges facing Nonprofits in City Contracting. Read HSC's testimony here.

Watch the hearing here.

For more information from the hearing, click here.

Commission Report Press Release

The Human Services Council, a leading advocate for nonprofits providing human services, today released a report calling for urgent reforms to prevent a looming crisis in the sector, which is responsible for delivering essential government services to 2.5 million New Yorkers each year. The report, New York Nonprofits in the Aftermath of FEGS: A Call to Action, identifies chronic problems and offers solutions for strengthening the nonprofit human services sector...Read the release here.

Commission History

The Human Services Council (HSC) led Commission to Examine Nonprofit Human Services Organization Closures was created in February 2015 to examine the growing closure trend among nonprofit human services providers. Chaired by Gordon Campbell of NYU’s Robert F. Wagner Graduate School of Public Service, former government official and nonprofit executive, the Commission is made up of seasoned nonprofit human services executives, members of the HSC's Chair's Cabinet (a group of close advisors to HSC), and other experts with unique perspectives and knowledge around nonprofit management and oversight.

This Commission will examine the recent closure of several nonprofit human services organizations in an effort to understand the contributing factors from management and oversight to challenging fiscal environments. Lessons learned will be extrapolated and used to inform the development of several sets of recommendations aimed at various audiences, including nonprofit human services managers, nonprofit human services boards, government funders, philanthropy, and auditors.

Over the course of several months, the group will evaluate the financial details, management decisions, government contract terms, and accountability systems of these organizations to gain a full picture and understanding of what caused them to close. They will also examine existing oversight approaches, including those required and those considered best practices, investigate the financial and other management decisions made, and identify funding and other systemic issues contributing to financial problems.

The work of the Commission will be carried out by five Committees which will examine internal conditions at nonprofits to identify risk factors and indicators of operational excellence and explore the relationship between service providers and government, including the nature of service contracts:

    1. Leadership/Management (capabilities, practices, systems) – Michael Zisser / Katie Leonberger
    2. Oversight (auditors, compliance officers, board) – Joanne Oplustil / Julie Floch
    3. Infrastructure (technology, information systems, real estate) – Dianne Morales / John MacIntosh
    4. Financial conditions (including government funding) – Phil Gartenberg / Hilda Polanco
    5. Relationship of Nonprofits and Government Funders – David Garza / Linda Manley

We are grateful to all the Commission members for agreeing to dedicate time and resources to this effort and are proud HSC is playing this important leadership role on behalf of the sector.

Commission Participants

Chair: Gordon Campbell, NYU Robert F. Wagner Graduate School of Public Service

Douglas Bauer, The Clark Foundation
Ian Benjamin, RSM US LLP
Antony Bugg-Levine, Nonprofit Finance Fund
Joel Copperman, CASES
Don Crocker, Support Center|Partnership in Philanthropy
Fred Davie, Union Theological Seminary in the City of New York
Sean Delany, Lawyers Alliance for New York
Julie Floch, EisnerAmper
David Garza, Henry Street Settlement
Eric Goldstein, UJA-Federation of New York
David Hansell, KPMG
Jack Krauskopf, Baruch School of Public Affairs
Thomas Krever, Hetrick-Martin Institute
Katie Leonberger, Community Resource Exchange
John MacIntosh, SeaChange Capital Partners
Dianne Morales, Phipps Neighborhoods
Gail Nayowith, 1digit, LLC
Mitchell Netburn, Project Renewal, Inc.
Hilda Polanco, Fiscal Management Associates
Jim Purcell, Council of Family and Child Caring Agencies
Joanne M. Oplustil, CAMBA
David Rivel, The Jewish Board
Claire Rosenzweig, Better Business Bureau Serving Metropolitan New York
Phillip Saperia, The Coalition of Behavioral Health Agencies, Inc.
Allison Sesso, Human Services Council
Fred Shack, Urban Pathways
Michael Shaw, The Kresge Foundation
Marla Simpson, Brooklyn Community Services
Patricia Swann, The New York Community Trust
Kathryn Wylde, Partnership for New York City
Michael Zisser, University Settlement

Other Resources

Risk Management for Nonprofits Report

Seachange Capital Partners and Oliver Wyman has recently released a report on Risk Management for Nonprofits; a great complement to the recent HSC Commission report - New York Nonprofits in the Aftermath of FEGS: A Call to Action.

The report – which includes a comprehensive, bottom-up, financial analysis of New York City’s nonprofit sector – describes concrete steps that they suggest nonprofits can take to reduce their risk of failure. It draws upon best practices developed in the for-profit sector, insights from the financial analysis, and interviews with leaders from a dozen distressed nonprofits, as well as a smaller number of groups that appear to have developed best practices. The report complements the broader HSC Nonprofit Closure Commission report that highlighted inadequate risk management as one of three major challenges facing nonprofits.

Read the report here.


The unintended consequences of ethics reform - 8/30/16

Without question Albany needs to make ethics reform a priority, which is why the goals of the recent anti-corruption bill signed by Gov. Andrew Cuomo should be supported. At the same time, it’s important that we appreciate the unintended consequences this new law will have on nonprofits and think about how to reduce the growing compliance and financial burdens too many organizations face... Read more here.

Nonprofit heads say city failed to address cost 'crisis' - 6/20/16

De Blasio's $82.1 billion budget, adopted last week, did not provide the $25 million nonprofits had wanted to help pay for the increased cost of supplies and repairs, equipment, technology, food and rent. “The administration has not done anything to address the fact that there is a major crisis in the nonprofit sector,” said Allison Sesso, executive director of the Human Services Council, an agency that works with government on behalf of other nonprofits...Read more here.

Nonprofit Funding Boost, Pre-K Pay Parity Left Out of City Budget - 6/14/16

In the weeks leading up to Wednesday’s budget agreement between Mayor Bill de Blasio and the City Council, a number of Council members decried what they said was underfunding of top Council priorities including summer youth employment, cultural institutions, libraries, senior services, and more. Consequently, the mayor conceded to most of those funding requests in the final deal. Most, but not all. Two major issues -- additional funding for human services nonprofits contracted by the city and funding to ensure pay parity for pre-kindergarten providers -- were absent from the deal, leaving Council members, advocates, and those at relevant organizations reeling...Read more here.

HSC Commission Report Panel at NYN Media's OpCon - 6/9/16

City Councilmember Helen Rosenthal, Allison Sesso, HSC's Executive Director, and Gordon Campbell, Chair of HSC's Commission to Examine Nonprofit Human Services Closures, spoke at NYN Media's OpCon on June 9. The panel discussed the recommendations from the report as well as HSC's upcoming RFP and Government Agency rater. Councilmember Rosenthal expressed her support for fully funding human services nonprofits for our work as well as the need to educate City Council about the importance of fully funded contracts...


NYN Media Podcast: Surveying the Nonprofit Operating Landscape - 6/9/16

For NYN Media's inaugural podcast, Lilliam Barrios-Paoli, Mayor Bill de Blasio’s former Deputy Mayor of Health and Human Services; Jeremy Kohomban, Executive Director of Children’s Village, which serves struggling families throughout Southern New York state; Susan Stamler, Executive Director of United Neighborhood Houses, which represents over 38 settlement houses in New York City; and Lewis Zuchman, Executive Director of SCAN NY, which serves high-risk families in East Harlem and the South Bronx, weigh in on challenges facing nonprofits in the human services sector. Whether it’s overbearing regulatory and reporting requirements, underfunded government contracts or a forced embrace of business models that emphasize outputs over life-changing outcomes, the panelists encourage the nonprofit sector to leverage the power of its voice to craft solutions and demand respect...Listen here.

Push Continues for Budget Boost to City Contracted Nonprofits - 5/27/16

On a hot and sunny day, dozens of nonprofit workers took to the steps of City Hall to call on Mayor Bill de Blasio to fund a 2.5 percent increase for the administrative costs of nonprofits that contract with the city. Forty-seven of 51 City Council members have signed on to a letter to de Blasio asking him to baseline the increase, an additional $25 million annually, into the budget as the city moves toward adopting a new spending plan...Read more here.

On the Brink—Providers Under Pressure - 5/25/16

In January last year, on the back of a $19 million loss, New York’s largest nonprofit human services provider, Federation Employment and Guidance Services (FEGS), abruptly shut its doors. FEGS was a $250 million nonprofit organization that provided essential services to 120,000 New York households for more than 80 years. And while it hasn’t been the only nonprofit to go bankrupt in recent years, the collapse of an organization at this scale sent shockwaves through the nonprofit community and proved that there remain persistent, systemic issues that threaten the stability of the entire sector...Read more here.

PhilTV: Funder Advocacy Is Powerful in Conversation on NP Sector Sustainability - 5/24/16

With the high-profile collapse of FEGS last year, New York's nonprofit sector has been seriously investigating and documenting what went wrong, with an eye toward changing harmful funding practices that contributed to its, and others’ demise. Nonprofit and foundation leaders are now actively working on issues such as full-cost budgeting, OMB Guidance on Indirect Costs, funding for the increased minimum wage and a host of other interrelated topics...Watch the panel here.

Weighing the Risks…Before It’s Too Late - 5/11/16

Too many nonprofit institutions across the country are facing major financial hurdles that put their survival in jeopardy, but too few have systems in place to know just how close they are to the brink.The loss of a major contract, a series of emergency building repairs, or a bad bet on Medicaid Managed Care could easily send them over the precipice and deprive hundreds of individuals, if not thousands, of services on which they depend...Read more here.

Nonprofits still facing challenges in city contracting process - 4/12/16

If we were looking up the phrase “procurement reform” in the dictionary, the definition would be the Human Services Council Report, “NY Nonprofits in the Aftermath of FEGS: A Call to Action.” New York City spends roughly $4 billion on human service contracts. These nonprofit groups take care of our seniors, children, and disabled. The Federation Employment Guidance Service was a $200 million social service umbrella agency that went bankrupt a year ago, and the Human Services Council – a consortium of nonprofit providers for city services – initiated a task force to determine why. The report identifies multiple problems and prescribes three critical steps for reform. While the report is a “call to action” for all levels of government – city, state and federal – the New York City Council Committee on Contracts is focused on procurement reform on the city level...Read more here.

NYC Service Providers Getting Squeezed by Problematic Government Contracts - 4/11/16

Human services nonprofits in New York serve the city’s most vulnerable populations through critical programs like foster care, homelessness services, after-school programs, mental health care, childhood education, senior care, job training, and food pantries. But, reports the Gotham Gazette, “many of these organizations are faltering due to problems with the ways in which government approaches contracting.”...Read more here.

City Approach to Nonprofit Contracting Questioned - 4/6/16

Human services nonprofits serve the city’s most vulnerable populations, providing a range of critical programs like foster care, homelessness services, after-school programs, mental health care, food pantries, and more. But, many of these organizations are faltering due to problems with the ways in which government approaches contracting...Read more here.

Council Hearing Examines Nonprofit Financing Concerns - 4/4/16

City Councilwoman Helen Rosenthal held a hearing on Monday to discuss the financial viability of the human services sector, admittedly “not a sexy topic,” she said, but one that needed to be addressed in light of the growing number of nonprofits facing insolvency...Read more here.

NY City Council Reexamines Nonprofit Contract Policies - 4/4/16

In response to calls from New York City nonprofits to revisit procurement policies that they say have contributed to a “harsh and threatening” operating environment, the City Council’s Committee on Contracts held an oversight hearing on Monday to discuss potential improvements to how the city does business with nonprofit human services providers...Read more here.

The Financial Health and Viability of Human Services Nonprofits - 4/2/16

Two recent reports have given us an important perspective on this critical situation in a timely, comprehensive and professional fashion. It would serve nonprofits well to reflect on and understand the implications of these reports and to use them in advocating for the construction of a service sector that responds to the shortcomings, pitfalls and risks that are faced today...Read more here.

How to Keep Troubled Charities From Failing - 3/31/16

The bankruptcy last year of New York’s largest social-service charity, FEGS, sent shock waves through the nonprofit world. Nobody expected that a venerable, $250 million organization could go down so fast...Read more here.

What we learn when a nonprofit closes its doors… - 3/16/16

A year after the largest human services provider in New York City suddenly collapsed and closed its doors after 80 years, we can learn valuable lessons through two “post-mortem” reports...Read more here.

Second report in wake of FEGS collapse urges nonprofit boards to ‘do better’ - 3/15/16

Board members of the city’s nonprofits must take more responsibility and become better stewards of their organizations, says a new report released Tuesday, the second self-examination of the sector to come out in the past month...Read more here.

New report highlights nonprofit risk management in post-FEGS climate - 3/15/16

Late last month, New York’s nonprofit community turned its attention to the Human Services Council’s examination of the pressing challenges facing nonprofits in the state...After just a few weeks, another report has come along to pick up where HSC left off. “Risk Management for Nonprofits” – the result of a partnership between SeaChange Capital Partners, a merchant bank that focuses on the nonprofit sector, and Oliver Wyman, a global management consulting firm – acknowledges the same environment that HSC highlighted, but focuses its recommendations on point-by-point steps that nonprofits and their trustees should take to stay afloat in a turbulent operating environment...Read more here.

Another Voice: Reform is needed now for state's nonprofit sector - 3/15/16

In late 2014, the New York City social services mega-agency FEGS (Federation Employment and Guidance Service) suddenly closed, to the dismay of funders, service recipients, staff and investors. How could the failure of a $250-million social service agency occur overnight? Read more here.

Helping New York Nonprofits in a Time of Crisis - 3/14/16

It has been nearly a year since Federation Employment and Guidance Services (FEGS) filed for bankruptcy, leaving 120,000 New York households without essential services, 1,900 employees without jobs, and unpaid creditors holding more than $47 million in debt...Read more here.

NY1 Online: Panel Talks Lessons for Nonprofits After Collapse of Social Services Agency FEGS - 3/3/16

Errol Louis discussed the collapse of the social services agency FEGS, and the lessons for nonprofit organizations, with Allison Sesso of the Human Services Council; Gordon Campbell from New York University's Wagner Graduate School of Public Service; and Frederick Shack of Urban Pathways...Watch the panel here.

Social Bankruptcy in the Era of 'Too Big to Fail' - 3/3/16

Most New Yorkers are aware of the homelessness crisis because they see people sleeping on the sidewalks and read tragic stories of families in terrible shelter conditions. Largely unnoticed, however, is another crisis: the impending insolvency of many of the nonprofit human services agencies that we depend on to care for the homeless and 2.5 million other struggling city residents...Read more here.

Rush to the rescue of NYC’s nonprofits: It's a crisis moment - 3/2/16

Most New Yorkers are aware of the homelessness crisis because they see people sleeping on the sidewalks and read tragic stories of families in terrible shelter conditions. Largely unnoticed, however, is another crisis: the impending insolvency of many of the nonprofit human services agencies that we depend on to care for the homeless and 2.5 million other struggling city residents...Read more here.

The FEGS Autopsy: Bad Nonprofit Business in a Tough Operating Environment - 2/26/16

When the New York social services mega-agency FEGS (Federation Employment & Guidance Service) suddenly declared its closure at the end of 2014, onlookers were shocked and more than a little confused. How could the failure of the largest social service agency in New York occur overnight? Within a few months, we heard the Human Services Council was to do a forensic report on the causes of the $250M/year, largely government funded agency, and at least some of us have been waiting for its analysis with some curiosity...Read more here.

Nonprofit and government leaders grapple with post-FEGS realities - 2/25/16

One year after the shocking failure of FEGS, at a time when the human services sector is facing increasing uncertainty, leaders from nonprofits and government convened in lower Manhattan on Wednesday to assess the systemic threats to New York’s nonprofit providers...Read more here.

Wall Street Journal - Nonprofits Grow Wary of Financial Squeeze - 2/23/16

On Wednesday, the Human Services Council, a New York-based nonprofit trade group, is expected to release its recommendations for the organizations and agencies that have some part of the $5.8 billion in government-funded human-services contracts in the state this fiscal year...Among the report’s findings: Government contracts often don’t provide enough money to adequately fund the programs they are marked for, leaving nonprofits scrambling to bridge the gap—and many of them aren’t fully aware of their financial situation...Read the article on the Wall Street Journal here or a PDF version of the article here.

Politico - In the aftermath of FEGS, human service providers warn of crisis - 2/23/16

The collapse of the Federation Employment & Guidance Service a year ago sent shock waves through the New York nonprofit world, with executives wondering who might be next. FEGS, the largest human services provider in New York, was thought to be too big to fail and its bankruptcy, officially declared last March, highlighted how precarious the entire sector had become...Read more here.

N.Y. Charities Find Government Contracts Don't Cover Costs - 2/24/16

With the collapse last year of the large and mostly taxpayer-funded New York City charity FEGS, other area nonprofits are growing wary of the financial squeeze that can come with relying primarily on government human-services contracts, The Wall Street Journal reports...Read more here.

In FEGS’ Wake, Jewish Board Set For New Scrutiny - 9/22/15

Overnight, The Jewish Board — with a history going back to 1874 — mushroomed in size from a $175 million agency with 34,000 clients (12,000 of whom were children) to a $250 million agency with 43,000 clients. Its staff soared by 32 percent, from 2,500 employees to 3,300, and it became the largest human services agency in the city and the largest of the 96 agencies that comprise UJA-Federation of New York...a 20-member commission created by the Human Services Council, which represents all 180 human service agencies in the city, is now reviewing what happened to FEGS and the lessons learned. Its report is expected at the end of the year...Read more here.

Antiquated View of a Modernized Sector - 8/14/15

The conclusions Steven Malanga reaches in his piece “Charities on the Dole,” demonstrate a real lack of appreciation for the history and complex relationship between government and mission-driven social service organizations. The mere fact that he uses the outdated term “charities” to refer to these multifaceted organizations offers insight into his limited understanding of how these groups have evolved and operate in the 21st century...Read more here.

FEGS: Canary in the Coal Mine? - 4/7/15

Some people see FEGS as a poster child for the phenomenon resulting from government contracts that don’t cover the full cost of services, especially administrative costs. But was that really what led to FEGS’ downfall?Read more here.

Blue-Ribbon Panel Chaired by NYU Wagner Prof. Gordon Campbell to Look into Closures of Several Nonprofit Organizations - 3/31/15

Gordon J. Campbell, Professor of Practice at NYU Wagner and Director of the school’s Executive MPA Program, is among two dozen seasoned nonprofit human services executives who have been named to a blue-ribbon Commission of the Human Services Council (HSC) to look into the closures of several large nonprofit human services organizations in New York City. Campbell, with more than three decades of experience as a government official and nonprofit leader, will chair the new Commission...Read more here.

Special HSC Commission Will Autopsy Failures in NYC Human Service Groups - 3/13/15

To examine the reasons for the rash of high-profile closures among large social service nonprofits in New York, two dozen executives of human services nonprofits and other experts have been named to a blue-ribbon commission of the Human Services Council to determine causes of death...Read more here.

The Wrecking of a Blue-chip New York Nonprofit - 3/13/15

When Federation and Employment Guidance Services announced a month ago that it planned to close amid a $20 million revenue shortfall, the nonprofit world was shocked...Read more here.

PNY Members Named to Commission Examining Closures of Nonprofits - 3/10/15

Chaired by Gordon Campbell of NYU's Robert F. Wagner Graduate School of Public Service, former government official and nonprofit executive, the Commission is made up of seasoned nonprofit human services executives, members of the HSC's Chair's Cabinet (a group of close advisors to HSC), and other experts with unique perspectives and knowledge around nonprofit management and oversight...Read more here.

UJA Exec Named To FEGS Probe Group - 3/10/15

UJA-Federation of New York CEO Eric Goldstein is among the two dozen nonprofit human services executives and other experts in the field named to a blue-ribbon commission to examine the sudden shuttering of FEGS and other nonprofit human service providers...Read more here.