New York, NY – $470 Million City Error Puts Charities in Chaos

New York, NY – Mayor Michael R. Bloomberg prides himself on running an administration skilled at untangling the bureaucratic maze of one of the world’s great metropolises.

But a mistake in how the city planned to distribute $470 million for programs for children – ranging from family counseling to AIDS education – has left charities across the city in chaos.

At the Jewish Child Care Association, plans to recruit 30 foster families to care for sexually exploited or severely disabled children are in limbo.

“It’s just a devastating blow,” said Richard Altman, chief executive of the association. “It essentially leaves us in no man’s land.”

Social services advocates said they could not remember a time of such widespread confusion in the world of child welfare, and some called the error one of the biggest blunders of the Bloomberg administration.

The distribution of money was the focus of intense scrutiny even before the city acknowledged its error. The city solicited proposals for its pot of $616 million last year as part of an attempt to restructure the child welfare system and re-evaluate contracts, some of which had originally been issued nearly a decade ago.

After an evaluation that ended in April, nine providers were told they would be denied money, and 63 were told they would get awards, for a total of $470 million. An additional $146 million was unaffected by the city’s error.

When officials at the Administration for Children’s Services received a complaint – city officials declined to say from whom – about how the money was distributed, they discovered that evaluators had bungled how they judged proposals. They had failed to give adequate weight to the community ties of groups vying for funds.

John B. Mattingly, commissioner of the Administration for Children’s Services, said the agency was redoing the entire process after rescinding three-quarters of the awards announced in April. He said his staff was working to minimize the consequences and was extending existing contracts.

The city “came forward immediately and admitted the mistake,” Mr. Mattingly said in a statement. “We are working with all of the providers to assist them during this transition.”

A spokesman for Mr. Bloomberg said the more than a dozen staff members at the city’s child welfare agency involved in the mistake had been retrained in evaluating proposals but would face no disciplinary action.

The mistake could severely hamper the ability of dozens of charities to plan for the year ahead and might endanger the financial stability of smaller groups.

Some organizations have been forced to rein in visions of expanding foster care programs and extending service to more struggling families. Others were in the midst of phasing out programs because they believed they would not receive city money.

At the Harlem Dowling-West Side Center for Children and Family Services, a charity that coordinates foster care and adoptions, layoff notices went out to 12 staff members, including case workers and supervisors, when the center learned in April that it would lose a $1.3 million city contract from its $13 million budget. Staff members had been working swiftly to close as many cases as possible and refer families elsewhere.

Dorothy Worrell, the organization’s executive director, has halted the layoffs for the moment, but she said the uncertainty was hurting morale among workers and families.

“We actually interrupted families’ lives and said, ‘Hi, I’ve been working with you for ages and you’ve shared your most intimate details with me, but I’m going to hand you off to someone else now,’ ” Ms. Worrell said. “That’s an unsettling thing to have to do.”

Nonprofit groups are facing an added degree of stress because the city has not yet indicated when it will complete the re-evaluation, or for how long existing contracts will be extended.

“We have no idea what the city is going to do,” said Mr. Altman of the Jewish Child Care Association. “I can’t really tell my board of directors with any kind of certainty what our programs are going to look like going forward.”

Mr. Altman’s staff had begun recruiting foster parents and interviewing workers for a new program for victims of sex trafficking and medically fragile children. The program has now been shelved.

For some groups that were told in April that they would lose lucrative contracts, the confusion has brought relief – albeit temporary.

At Safe Space, a nonprofit organization that offers programs for at-risk youth, the city’s decision to extend contracts means a planned 45 percent cut to the budget at its branch in Jamaica, Queens, will be delayed.

“From the perspective of the families, that’s not a bad thing,” said Christine Molnar, president and chief executive of Safe Space.

But Ms. Molnar said there would be damaging effects, including difficulties in securing lines of credit without a new city contract to serve as collateral.

“I need to have working capital to be able to draw on to pay bills on a regular basis,” she said. “I can’t afford these hiccups in revenues.”

One of the nine organizations that had been denied city financing, Little Flower Children and Family Services of New York, an 80-year-old Roman Catholic foster care agency, sued the city last month after it did not receive an award. It accused officials of emphasizing the quality of proposals over groups’ experience.

Now that the city has decided to redo the process, Little Flower has withdrawn its suit.

Proposals are evaluated based on three criteria: experience, organizational capacity and the quality of the proposal. Ties to the community are supposed to be considered for each of the criteria, but the city’s reviewers erred by considering community connections a separate category.

Comptroller John C. Liu, whose office approves the extension of the existing contracts, has called on the mayor to offer more details on how the error occurred.

Alan van Capelle, deputy comptroller for public affairs, said, “We’re just deeply troubled” by the size and the magnitude of the error. “The care of children can’t take a pause for bureaucracy,” he added.