Daniel W. Elliot, CPA

 For those who have worked for government organizations at various levels, you may have heard the term ‘use it or lose it’ in the context of spending unused funds at year-end. The concept is you are given a budget for the fiscal year, and if you lapse funds, they will be returned to the Centre never to be seen again. In fact, some managers fear the following year budget will also be reduced because if you did not need that much last year, you probably don’t need that much next year either. Unfortunately, the above mentality leads to questionable decisions such as purchasing frivolous goods or services, as well as ‘business retreats’ on cruise ships. However, when  ́March Madness ́ is used to stock up on necessary items such as office supplies, rations for kitchens, or fuel for vehicles and equipment, it is generally acceptable. However, if the value of these types of ‘inventoriable’ items becomes excessive, accounting policies may require you to move the value of the product o...

  As I attempt to finalize the new year budget, I recall the number of scenarios which can make the task daunting.   Working in the Social Services field of the not-for-profit sector, over 70% our costs are salaries and benefits, and ensuring these are well forecasted is critical otherwise affecting decision making therefore representing a significant risk to the financial health of the organization. You would think working in a unionized environment where salaries and benefits are clearly defined would make the task of forecasting and managing salaries fairly straightforward; however, a number of factors complicate this. First, not all benefits are available to all employees, or available right away; for example, the Health and Dental portion have a three month wait period, where the pension match wait period can be as much as six months. Each of these two packages cost over 9% of eligible salaries for the employer portion. The variance of forecasting full offering versus an ...

  While almost every financial professional will tell you to diversify your portfolio, both investment and service or goods offerings, there are times where this can lead to higher Administration and Management costs in both for-profit and not-for-profit organizations. Most of us have heard the term ‘Span of Control’ being how many staff one person can effectively manage, a common quote being 5-7. This topic has such a high ‘It Depends’ factor, in my opinion this ratio is only valid for introducing the concept. Let’s consider a few examples. One program with 100 delivery officers may require one Manager and 7 assistant managers as Span of Control can be stretched from the commonly quoted 1:5-7 ratio to 1:15 if all persons are performing similar tasks requiring similar qualifications. Contrast this to an organization with 100 employees, 6 major areas, and multiple programs with distinctively different occupations and skill requirements. For example, an Assistant Warden Management Se...

  Federal, state/provincial, and municipal governments exist to enact and enforce laws which strive to ensure we remain a civilized society; they are also there to provide centralized common services and assist those who are legitimately in need.   In developed nations it is common to have a centralized pot of funds which members of society contribute to provide services such as civil protection including military, police, border, prisons, fire-rescue and healthcare. In addition to these public safety services, is infrastructure such as roads, water, and sanitation. Although there are many debates regarding providing the above more efficiently through forprofit sector, we will assume it would still require a central authority to collect and distribute funding to provide such services regardless of who in the end is delivering. In addition to civil protection and infrastructure, is social programs which is providing support and services to those members of society who are leg...

  Although there are significant differences between forprofit and not-for-profit entities when it comes to program and financial management, there are many similarities: First, forprofit delivers goods and services to make money for investors, where not-for- profit is there to deliver a good or service without an expectation of profit. However, they are both being paid for a deliverable, and if they do not meet expectations, payers may send their money elsewhere. Similar...but different. Second, from a financial management perspective, the requirement for not-for-profit organizations to have subledgers for each program is critical as funders expect you to manage and report on how you use their money; however, in forprofit, many organizations also do this in order to keep track of departmental or customer project costs. Examples include law or accounting firms who keep track of client revenue and expenses, and manufacturing firms who monitor revenue and expenses when constructing a...

  Before we start allocating funds and preparing to deliver our programs, we need to have a conversation about administration versus program delivery costs. While I appreciate the fact donors want their funds allocated to boots on the ground service delivery, there are costs to get there, and everyone needs to pay their fair share.   The first thing we need to do is clearly establish the difference between ‘program delivery’ costs and ‘administrative’ as many providers and funders battle over the fine line between the two. Believe me when I tell you, the line is fine.   An extreme view is ‘all costs are program related.’ Why do I say this? Simple, all costs occur for no other reason than delivering the program; for example, human resources personnel recruit, select, train, and pay staff who deliver the program, and if not for the program, neither the staff nor the human resources officer would exist. Accounting personnel collect contract payments, service fees, and do...