05/21/2008 02:46 pm ET | Updated May 25, 2011

Pork at City Hall

At a time when corporations are laying off employees in droves, economists are pointing to a downturn in the city's economy, and the Department of Labor is posting its latest statistics on employment, the only place that does not seem to be trimming the fat is down at City Hall. "Discretionary funds" are the order of the day and it doesn't seem to hurt if you're related to a member of City Council, since you may just get a bigger slice of the pie.

Careers in the nonprofit world have typically been viewed as alternative choices or "second acts" - the path chosen after you've made your mark in the "real" (read corporate) world. Listen to most executive directors or founders of startup organizations as I did several weeks ago at a panel on philanthropy and capital growth, and their personal stories and career trajectories share a common thread. They spent 20-odd years in the corporate world and, having amassed a certain degree of wealth or financial security, they feel inspired to "give back" (I should point out here the panel was comprised of men) and the chosen outlet is via the nonprofit world. But obviously not all nonprofits can trace their provenance to such sources. In recent weeks, allocation of resources has given a totally new meaning to "discretionary funds."

The concept of 'discretionary funds' is neither new nor novel. Typically, City Hall has a pot of funds that is distributed to council members, for use by community programs they consider worthy. According to reports, last year the mayor's office turned over $360million to the Council to finance discretionary spending by council members. This spending is supposed to be done in consultation with the Council Speaker. But intent and actuality don't always intersect and here's how it can pan out.

In Brooklyn, Erik Dilan funneled $187,000 into a nonprofit run by his wife and two aides of Councilman Kendall Stewart have been charged with embezzling $145,000 from a nonprofit funded with council money. In the Bronx, Councilwoman Maria del Carmen Arroyo put $82,000 into a nonprofit that employed her sister and nephew. A group by the name of The Upper Manhattan Council Assisting Neighbors received $669,000 in discretionary funds this past fiscal year. According to reports $406,000 of that amount was sponsored by Manhattan Councilman Miguel Martinez alone. The councilman's sister, Maria, has been a member of the nonprofit's board since 2005 and is listed in the city's records as the group's secretary.

Even Council Speaker Quinn has acknowledged that some of the council's 'discretionary funds' were assigned to fictional nonprofits to hold the funds for later distribution to real groups.

Last Wednesday, the School of Public Affairs at Baruch College hosted a timely panel discussion entitled Declining New York Revenues: What to Do? Members of the panel included Charles Brecher, Citizens Budget Commission; Ronnie Lowenstein, Independent Budget Office; and E. J. McMahon, Empire Center for NY State Policy, Manhattan Institute. When the floor was opened up for questions by attendees, Michael Meyers, of the New York Civil Rights Coalition was among the first in line.

Mr. Meyers was curious about the change in the tone of the rhetoric on the part of the panel. According to Mr. Meyers, "as soon as the panel's discussion turned away from poor and working people (who were depicted as overly dependent on government services and programs, during which the focus was on "fraud and abuse" in Medicaid and such, including belt-tightening measures), and the conversation turned to "perks" and "discretionary funds" of those in government (the City Council, and the Mayor of the City of New York, the very officials the members of the panel were supposed to watchdog and criticize), the language changed from fraud, waste and abuse to pork." Moreover, "there was no discernible tone of disgust or resentment of these slush funds, no indignation about how taxpayers' funds have been squandered by people who were supposed to be fiduciaries, and no demands for accountability much less resignations."

In a follow-up email exchange with Mr. Meyers yesterday, I asked about oversight measures that can be put in place and what models exist in other cities that can be adopted. Mr. Meyers wrote, "The problem with some of the watchdog groups in this city is that too many of their leaders are identified with or too cozy with the elected officials and/or their surrogates. There is that usual problem of 'in and out' of government. Where do public officials go after their service in government? Some go straight to the private sector and others head up or get on the boards of 'googoos' (good government groups, e.g. Henry Stern). From these sectors civic groups draw their governing bodies. One should look at the governing boards of groups like Citizens' Union and see how many former staff of public officials or ex-public officials serve."

Mr. Meyers speculates that there may also be circumspection on the part of some civic groups because this mayor will be a major funder when he gets out of office (assuming Bloomberg, Inc. does not already fund them). According to Mr. Meyers, "There is a general reticence about offending funders, some of which are close to the Mayor and to elected officials, even if the watchdog groups don't receive government aid."

Mr. Meyers offered an explanation for the tepid reaction to the revelation of slush funds in the city. He continued, "Ordinarily in a system of checks and balances, a mayor who cares about the people's purse would have expressed outrage. Now with the revelation about his own slush fund (albeit smaller than the Speaker's), we understand why Mayor Bloomberg's criticism of Christine Quinn's slush fund and of her implausible explanation for not having ended it when she discovered, was so muted."

The administration indicated there will be changes to the way business is to be conducted in the future. The administration said it would strengthen the vetting process for all contracts; budget documents would identify the council member associated with each item granted by the mayor; and the city will seek guidance from the Conflict of Interest Board.

Council Speaker Quinn has also outlined proposals to increase oversight in spending. Her proposals require all contracts over $10,000 to be screened by the mayor's office of contracts; hiring of an independent compliance officer; and the creation of a researchable database that could be reviewed by the public.

Nevertheless, it remains to be seen if there's a reduction of waste in City Hall after these new measures are adopted and enforced.