Q&A
Use of city funds for executive compensation and indirect rates
1:05:11
·
3 min
Council Member Brannan inquires about the use of city funds for executive compensation at shelter providers, leading to a discussion on indirect rates and financial flexibility for providers. Commissioner Park explains the challenges in tracking specific use of indirect rate funds.
- DHS pays an indirect rate for oversight and overhead expenses
- The agency doesn't receive a breakdown of how the indirect rate is spent
- Commissioner Park emphasizes the need for balance between oversight and provider flexibility
- The discussion touches on the challenges of operating non-profit organizations and the importance of financial accountability
Justin L. Brannan
1:05:11
And do you have an idea of how many providers use city funds for executive compensation?
Molly Wasow Park
1:05:17
So as I discussed, we pay the the indirect rate that is used globally for for oversight, overhead expenses.
1:05:26
So we don't get by definition, we don't get a breakdown of how the indirect rate is spent.
1:05:31
So so, no, I can't answer that question.
Justin L. Brannan
1:05:33
Be helpful to to know how that indirect rate is spent?
Molly Wasow Park
1:05:37
I mean, really, by definition, it is intended for overhead and for a range of different costs that thing anything that isn't eligible for direct charge to a contract.
1:05:49
And I think it, is gonna vary, frankly, by a provider to provider, year by year basis.
1:05:55
Right?
1:05:56
You know, an organization that has, you know, a particular cost in in a given year, they may change how they're using their overhead.
1:06:06
You know, I there is a perpetual balance that I think this this ties also to to what we were talking about with with the need to balance, the level of review with the pace balance, the pace of invoice payment.
1:06:22
Operating an organization is challenging.
1:06:24
Right?
1:06:25
Situations happen.
1:06:27
Organizations need some level of flexibility to be able to run and to be nimble and to adjust on a day to day basis.
1:06:35
That level has to be reasonable.
1:06:37
I think looking at indirect rates and making sure we have really clear policies on what is and isn't okay as an indirect rate, what kind of approval has to be there, but also recognizing that, to the extent that, if we are signing off on every little dollar that the not for profit spends, that we are actually harming their ability to to operate.
1:07:04
So, we're perpetually seeking that balance.
1:07:07
If there are thoughts, recommendations that you have on how we manage that balance of of continuing to have our partners operate in a way that is that gives them the flexibility that they need while also getting, to the appropriate financial accountability.
1:07:23
You know, this is we aren't set in stone.
1:07:26
I think one of the things that you can certainly see in all of our in here in all of our testimony is that from 2,001 when this all when the DOI report started to where we sit today at the end of 2,000, 24 2021 to end of 2024, we've made a lot of changes and we have more changes in process.
1:07:44
So I'm certainly not saying that anything is set in stone, but I think, doing away with the indirect rate or requiring, you know, line item side off and the indirect rate would be create a lot of challenges for our not for profit partners.
Justin L. Brannan
1:07:57
And does DHS do do you have an idea of how much DHS spent in f y 24 in executive compensation?
Molly Wasow Park
1:08:05
No.
1:08:06
Because we don't pay executive compensation directly.
1:08:09
It is you know, we we pay indirect rates, and then within the indirect rate, that is, pieces of that is used on executive compensation.
