The change in accounting standards will cause two surprises for nonprofits.

Audit costs are likely to increase up to 20%.

Your audit will cite internal controls and other processes in your organization which it had previously ignored in prior years.

To control your audit costs, be better prepared to provide your auditor the financial material in an organized manner. Your organization will be billed for each minute. Your mess is billable for them and they are not required to tell you how to decrease your costs.

Second, make sure more employees are trained on your internal control processes. The more you can document the checks and balances the better for management and the board to show their fiduciary responsibility.

An Association is usually incorporated as a 501 (c) 6 organization. It works on behalf of its members. The strength of an Association is based on its membership. The larger the membership, the more success the Association will have in producing greater results. A nonprofit or individual should pay a membership to join an Association if there are clear and measurable benefits to being a member.

The most simple measure is, “Will my organization save money or obtain additional funds by the actions of the Association?” Group purchasing is the quickest and easiest way to see results immediately. These actions create more funds by decreasing costs.

Property insurance, health insurance, dental insurance, visioin insurance, utilities, billing services, retirement plans, human resource services, accounting services, consulting services, development services, office supplies, security, bottled water, food, equipment, web services, information technology services, banking services, audit services, construction, and employment assistance programs are just a few examples where group purchasing can decrease costs.

The other part of an Association’s effort is lobbying and clearly educating elected officials. A key role they play is providing a clear voice on the economic impact of their member organizations and the criticial areas of concerns.

So take advantage of Associations where it makes sense. Make sure you never pay more than it costs your local, state or federal government for a service or product.

1. Identify the true costs of providing the services to obtain the outcome objective

2. Describe the specific services that costs are covering

3. Do not blend services that require a different outcome or rate

4. Know what your peers are charging for the services

5. Know what capacity the configuration of expenses will support

6. Know what percent of billable units each staff person has generated

7. Create a private rate and public rate

8. Utilize a sliding fee schedule for programs

9. Track all free care units

10. Track all services provided by volunteers

11.  Have a mixture of purchasers

12.  Have a single point of intake to maximize referral to services

Contracts are only as good as the language in them that specifies expectations, with a timetable.

The more generic the terms of the contract, the more likely there will be two unhappy parties.  The more generic the terms, the more difficult it is to enforce or to perceive grievances.

Contracts are only as good as their oversite.  If over time a practice is allowed and the contract receives positive reviews or is renewed as is, it becomes by default the expected service of the contract.  Thus, making it much harder to reestablish previous conditions at the same price.  In keeping a contract, it is critical to communicate changes in writing in order to continue to forge lasting relationships.  It matters how long you have funding and when you want to make changes.  Make sure the funder and the organization are on the same page.

Do not let the passing of time create the opportunity for not knowing the original intent.  Keep in tune with the purpose of the funding.  Communicate results with funding sources.

Say What You Mean!!!

Mean What You Say!!!

Insurance companies calculate the likelihood that an organization will file a claim.  They calculate how likely it is that an individual will file a claim. 

Federal and state authorities are responsible for certifying the safety of a bridge.  When a bridge is considered not sound, they weigh the likelihood of its failure.

The FDA calculates the acceptable risk to any individual, if the greater public would benefit over a few. 

Whether going to the beach, going boating, driving a car, traveling via a plane, taking a shower, sitting in the sun, skiing, eating foods, etc.; each action requires a level of risk.

Death and injury are never positive outcomes.  The human body is not invincible.  Even sitting still in one location and being frozen in fear of risk is unhealthy.  Each individual’s genetic make up, environmental conditions, and actions they take create the level of risk for any activity. 

So what can a person do?

Make yourself aware by being an informed consumer.

So what should an organization do?

Decide how to run the organization at a level of acceptable risks.  Plan ahead by creating a Risk Management Plan.  Having a plan lessens the likelihood that critical steps are not missed. 

Risk Management for your organization is not about predicting.  It is about having an ability to respond in an appropriate manner.  It is about appropriately training your staff on how to respond.  Your plan provides staff the base tool on which to be trained.

To the degree staff learn an organization’s risk management plan, they will learn valuable skills for helping their family members.

Risk is everywhere and should not paralyze an organization or individual. Be proactive, create your plan and review it with staff.