It’s okay, take advantage of me . . .

Contract Surprise

In effect, that’s what many non-profit organizations do when they simply accept contracts where you could drive a semi through the gap between the cost to fulfill the expectations of the contract and the reimbursement being offered.  Somehow we get accepting an unsustainable funding model all tangled up with our sense of mission. (For more than 100 years, our mission has been to serve “the least of these” and since this is all the funder is willing to pay for this service, I don’t have a choice).

 You always have a choice.

 Now, I am not saying that you shouldn’t accept a contract unless it is fully funded. Many of the programs at our agency are underwritten in part by charitable dollars. That has been a conscious decision on our part, and our Board and staff see how that decision is carried out through an annual break-out of where our charitable dollars are going.  The choice you have is whether or not you are going to allow a single funding source to become such a dominant part of your revenue stream that they begin to dictate who you are and what you do.

 For example, a number of years ago we were in the same boat that many nonprofits remain in today, where one funder — usually a government agency — makes up such as huge percentage of your revenue (say 80 – 90%) that you don’t feel like you can push back when they start making totally unreasonable requests.  It’s easy to see how this happens . . . it is more efficient to work with one set of rules and expectations, one oversight body, one billing mechanism . . . right up to the point when you realize that your hands are tied. And when that happens, and said funding source then says, “By the way, we now have these 8 new requirements and we aren’t going to cover your costs to carry them out. In fact, times are tight so we are going to cut your reimbursement by 11%,” you really do have not options AT THE MOMENT, other than to begrudgingly say “Okay.”

 But not having options at the moment is not the same as not having options.

From my perspective, it is a stewardship responsibility to come up with viable options, and start laying the groundwork to make those options a reality. As I mentioned earlier, a number of years ago, one referral source accounted for approximately 85% of our fee-for-service revenue. Today, our largest referral source comprises less than 30% of our fee for service revenue. Our path to getting there wouldn’t be the right path for everyone. You have to consider the resources and opportunities that are unique to your organization. In this case, the how is less important that the what, with “the what” being revenue diversification.

 You and your board are the guardians of your mission, and the only way you can truly make decisions that are in the best interest of your mission is to ensure that no single funding source — government agency, donor, or otherwise —has so much control over your resources that you feel helpless to push back if necessary. Challenging those who help pay the bills takes courage, and you have to be willing to face the consequences  . . . but really, when you think about it, there are consequences for not pushing back too.

No one ever said non-profit work was for the faint of heart.  And personally, I’ve always preferred offense to defense. How about you?

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