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Serving the public is a business

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  The nonprofit and public service sectors are often misunderstood when it comes to their place in the business world and the transferability of the skills of those who work in the industry. When most people think of the term ‘business’ they associate it with buying, making, or doing something with the intention of selling it and turning a profit which they will either reinvest into another earning endeavor, or spend on either a life sustaining need, or a frivolous want. Businesses normally require an investor of sorts who uses either their own money or that of others, to purchase the necessary infrastructure and materials, and hope it ends well otherwise they are in trouble. However, there is another type of business which although does not include an investor who aims to earn a profit, still participates in making or doing something, the activities of which have financial implications. This is the nonprofit and public sector.  So, why do I consider nonprofit a ‘business?’ Simple: we
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Admin Allocation - 10% is a Myth

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  This week I am revisiting how Administrative Costs are allocated to the various programs of a nonprofit organization, and this is where the science versus art of accounting collide. Most program funders articulate a maximum percentage for administrative services typically at 10%. What can vary is what they consider as Administration versus Program Delivery. For example some will consider Information Technology as administrative costs where others consider it program delivery. Liability Insurance is another example. Some will allow 12% versus 10% but consider certain costs to be included in administration where others consider the same as program costs. Then there is accommodation costs: some are power users of office, service, and reception space, where others are not. This leads me to accounting school where we covered what are called Cost Drivers. Cost Drivers are factors which drive costs: for example square feet may drive janitorial cost where cubic feet may drive heating costs.
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Leadership 101 - What does ‘Accountability’ really mean?

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We often throw around words like responsibly, accountability, and answerability; however, many do not really know what these words mean therefore use them in the wrong context.  First of all, responsibility refers to performing a task, while accountability refers to the result. As an example, the First Officer of a ship may be responsible to steer the craft in the right direction, but the Captain who is sleeping in her quarters is still accountable when the ship is ran aground. It is said you can delegate responsibility, but cannot delegate accountability.    In the above example as the Captain cannot be awake on the bridge for days on end, it stands to reason she passed on responsibility to the First Officer but did not have the luxury of absolving herself of accountability.  Then there is the term answerability, which means you must be prepared to answer why something happened as it did, but often no real accountability exists. All this said, neither accountability nor answerability
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Cooking the Books

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We have all heard the term ‘cooking the books’ and when we do, it almost always has a negative connotation. However, there may be times where this practice has its place. Many nonprofit organizations operate multiple programs and programs within programs. Sometimes similar programs are funded by the same organization, where others although similar, have different funders. Where it starts to become grey is when one program is over running its budget while the other has a surplus, which leads to the temptation to play with the expenditure coding in order to balance the bottom lines. Although funders may frown on such practices, I can tell you there is some legitimacy to this. For funders who are now jumping up and down, please hear me out as I provide some examples. We had two similar programs each with their own contract and each funded the same amount. Carrying out the services were a full time program coordinator and a full time program delivery officer each working somewhat equally i
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Setting Priorities

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Let’s face it, there is never enough money; therefore, it’s about setting your priorities.   A common theme during my public sector career and now with nonprofits, is not having enough money. Many politicians, bureaucrats, and servants of the public have grand ideas of what they want to do including the services they want to provide; but it all costs money, and often more than we have.   The reality check: there will never be enough money to do everything you want to; you can only do what you have money for. Once you and your funders accept that, you can focus your efforts accordingly. Unfortunately, instead of accepting this reality, funders continue to push service providers to deliver regardless, and service providers bend over backwards to oblige. However, there comes a point where all parties have to face reality.   It is not that simple? Sure, it is.   Five step approach to allocating funding:   ·               List the objectives you want to achieve; ·              
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Funder reports

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  Reporting results is my favorite part of working on the nonprofit sector… no, it’s not actually… in fact, it’s my pet peeve.   The joy of multiple programs is multiple funders each with their own reporting requirements including level of detail, frequency, templates, portals, and restrictions. As the Director of Finance for a mid sized nonprofit, I have thirty programs funded by over ten major sponsors to contend with, and sometimes even the same funder has different requirements for each of their programs. Unfortunately, there are situations where certain funders assume they are the only program we are running; probably because they themselves despite having multiple deliverers, are only running one program. The result of this can sometimes lead to angst and increases administration costs of program delivery.   Before we get into the details of funder reporting, let’s have a discussion on why we are reporting in the first place.   When you tender a requirement for a contracted
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Send me more money!

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  Sound ridiculous? But what about when the funder is also the decision maker for the salaries of your unionized employees?  Being in the social services field, many of our contracts are for delivering services on behalf of the government, both provincial and federal. In our particular jurisdiction many of the employees of nonprofit entities have become members of the same bargaining agent as government workers which means our funders have also become the negotiator of how much we may in salaries and benefits. Unfortunately, these salary decisions extend to our other programs, regardless of who funds them. This incestuous relationship came to a head this year where employees were given a pay raise which included retroactive pay for the prior year as well as current, the compounded effect being 14%. Having to pay the raises was a contractual obligation on behalf of the nonprofits; unfortunately recovering these funds from the decision makers was the next challenge, and although they eve
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