Context of Measurement

Transcription

1 OUTCOME BASED MEASURES What You Need To Know! Patrick D. Pilch National Healthcare Advisory Leader The BDO Center for Healthcare Excellence & Innovation 1 Context of Measurement 1. Preserve its tax exempt status 2. Demonstrate compliance with foundation grants, regulators and missions 3. Identify essential component of an effective measuring and monitoring program 4. Define examples of the right data and objectives of the program 5. Define examples of the right outcomes and how to measure 6. Discuss what data to collect to how to measure and create informative insight 7. Implement and maintain an effective and useful program 2 1

2 Webinar Agenda What is Measurement? 3 What is Measurement? Modern Management Science can traced back to the founding of the United States with a focus on workers and output in a primarily agrarian economy. The Veteran in a New Field, 1865 Winslow Homer ( ) 4 2

3 What is Measurement? The Industrial Revolutions of the late 1700s and 1800s led to machines improving productivity and lowering costs. The demand for factory labor required in a way to control or manage both workers and processes. Workers How to get more output at a low cost Child Labor Process - Assembly lines form Source: todayinlaborhistory.wordpress.com/2012/09/15/september / 5 What is Measurement? Frederick Taylor, the Father of Modern Management Theory Work focus on the how work is done How work is done is measured Precursor to Six Sigma 6 3

4 What is Measurement? Age of Outcomes Define the desired outcome Assess (Measure) current state to determine gap Create and implement the plan Measure Monitor 7 Why Measure? Comment is free, but facts are sacred. - C.P. Scott, Editor of the Manchester Guardian, 1921 Delivered Everyone is entitled to his own opinion, but not his own facts. - Senator Daniel Patrick Moynihan Delivered 8 4

5 Why Measure? It s a Big Sector The nonprofit sector comprises 5.5% or nearly $1 trillion in 2014 Nearly 14 million people work in the nonprofit sector Qualitative impact on lives Source: Urban Institute s Center On Nonprofits and Philanthropy 9 Why Measure? Longevity does not guarantee sustainability 10 5

6 Why Measure? Being nonprofit does not mean tax exempt status is guaranteed 11 Why Measure? But we are different Our mission is different We are a vital asset 12 6

7 Why Measure? Strategic Regulatory Pressures Improvement Initiatives Address Quality 13 Why Measure? Evidence shows that the sector is relatively Darwinian: approximately 60% of all nonprofits disappear within ten years of their founding. In addition, there is tremendous overlap in the sector. Consider these facts: there are over 900,000 active charities in the U.S. Yet according to the National Center on Charitable Statistics, there are only 1,000 different types of nonprofit programs. Source: Jed Evans, Nonprofit Business Intelligence How to Measure and Improve Nonprofit Performance 14 7

8 Why Measure? Financial / Budgeting Model needs to be tight, informative and aligned with mission Don t be the 60% Your mission and message is competing for attention Clear, Consistent and Strong Messaging 15 Why Measure? Affirm this Mission A mission statement provides a road map to the future state and aligns the Board, Management and Staff around the mission. 16 8

9 Why Measure? Board Governance Fiduciary duty Faithful to the Board s Mission Duty to maximize impact Preserve financial and staffing resources while improving performance margin Attract and retain the right funding / governance structure 17 Why Measure? Affirm the Mission Are the efforts consistent with the purpose and spirit of the Mission? Is our Mission viable and can its impact be measured? Cost per Impact Metric 18 9

10 Why Measure? To Measure and Improve Performance Add appropriate additional services Benchmark and Continuous Improvement Set strategic goals Allocate budgets Promote success and brand 19 Why Measure? Tools We Use 20 10

11 Why Measure? Manage budgets efficiently (of course) Look at trends in costs and understand where resources are being deployed Measure where and how grants and other funds are being deployed Demonstrate to funders where the monies are being invested and measure the impact 21 Why Measure? Demonstrate to regulators where the monies are being invested and used in line with funding O N E T W O Tax Exempt Proper use of government funded initiatives 22 11

12 Why Measure? In healthcare, clinical outcomes drive financial results and are required to corroborate to regulators and payers Example: HAI are a component of reimbursement and clinical outcomes. In social services, services provided need to be demonstrated and proven Example: Reduce smoking among a specific population (i.e., teens) 23 Why Measure? Demonstrate Adherence to mission and community needs requirements Measurement of Outcomes (Financial and Performance Impact) drives value of your organization 24 12

13 What to Measure? Determine what are your key drivers (Market or Funding): Grants and Donors requirements Regulatory requirements Determine what are your key drivers (aligning with the Mission): Improving performance margins Expanding capacity and capabilities Determine what are your key drivers (Management Processes): Improve operating performance Improve training and service delivery Improve processes to create a measurement as to improvement or deficiency from benchmarks 25 What to Measure? Look internally Think about impact from an improvement in management effectiveness Staffing Model Is it working? How are we retaining / recruiting / training our staff? What about quality? What is quality to us? What are good examples from other nonprofits or industries? 26 13

14 What to Measure? Financial Sustainability Is your organization financially viable? Are your funding and revenue sources diversified? Is the mix between public and private funding sources diverse and reliable? 27 What to Measure? Who and how do you serve? What are you known for in the communities you serve? Are you known?? Is the community engaged in volunteering pursuits? What about the brand? Does your organization have a good value/ reputation real or perceived? Can you recruit volunteers to survey? 28 14

15 What to Measure? What are the requirements of our grantors, donors and funders? Consider partnering with your grantors to co-create a cost per impact metric. 29 Measurement and Monitoring Committee (Staff, Board, Users of Services and Management Possibly Grantor) Clear Roles and Requirements Communicate Vision, Mission and Process Document and Track Impact Progress and evolve programs and measurement Inculcate into culture Continuous improvement and learning 30 15

16 Examples of Specific Areas for Measurement Community Needs Executive Compensation Budget / Cost per Impact Staffing Mix & Compensation Revenue / Funding Mix Tax Exempt Status Tax Exempt Status & Governance Mission & Investment Management, Governance & Financial Sustainability Financial Sustainability 31 Measurement and Monitoring Program Determine what outcome or outcomes to measure 32 16

17 Drivers and Inputs Input Costs Mission Population Served Resources Regulations Grantor / Funding Requirements Desired Outcome Why Investment and Operational Viability Needs Capabilities Compliance Compliance Attainability 33 Examples What are measurable outcomes? Reduction in teenagers drinking alcohol Greater access for seniors to clinical services Reduction in adult illiteracy Job training and reclamation to the work force Percentage of Funds received directed to impact mission Volunteer and Community Engagement Grant funding Patents Rankings 34 17

18 Components of an Effective Program Clear Vision and Mission Mission Continuous Improvement Funders / Regulators Governance Strong Leadership Communication Strategy Brand Management & Staff Engaged Impact Quality 35 Thank 36 18

19 Lumsden McCormick s 21st Annual Exempt Conference November 6, 2015 Internal Controls for Small Nonprofits Presented by Kelly S. Mathews Chief Operating Officer Sr. Vice President, Financial Management Group kmathews@nycon.org Community Focus Statewide Impact National Network What Is Internal Control? A process, effected by an entity s board, management & other personnel, designed to provide reasonable assurance regarding the achievement of the following objectives Accurate & reliable financial reporting Operational effectiveness & efficiency Compliance with laws & regulations Safeguarding of assets 1

20 Accurate & Reliable Financial Reporting Accounting information systems Software adequacy Access controlled by management with limited board member access Adequacy of format Comprehensive, concise, understandable Orientation process for board members Timeliness of reporting Internal to management & the board External to funding sources & regulators Operational Effectiveness & Efficiency Programmatic efficiency & quality services Adequate staffing levels Qualified fiscal staff Minimal or no duplication of duties Well-articulated management structure Clearly written & legally compliant personnel policies Clearly written job descriptions 2

21 Compliance With Laws & Regulations Federal, state & local reporting requirements Pre-qualification Board composition Funding source requirements Labor laws Quality assurance Client/consumer protections Corporate Compliance Safeguarding of Assets Protect assets from misappropriation Protect assets from misuse 3

22 Five Components of Internal Control 1. Control environment sets the tone of an organization influencing the control consciousness of its people. It is the foundation for all other elements of internal control. 2. Risk assessment the entity s identification & analysis of risks to achievement of its objectives Five Components of Internal Control 3. Control activities the policies & procedures that help ensure that management s directives are carried out Top-level reviews Information processing controls Physical controls Segregation of duties 4

23 Five Components of Internal Control 4. Information & communication the identification, capture & exchange of information that enable people to carry out their responsibilities 5. Monitoring a process that assesses the quality of internal control performance Management & supervisory activities Comparisons of budget to actual Reconciliations of account detail to the G/L Five Components of Internal Control For effective internal control, all five components must be in place & operating However, highly effective monitoring activities can offset certain shortcoming in other components 5

24 Monitoring Information/ Communication Control Activities Risk Assessment Larger company Smaller company Monitoring Control Activities Risk Assessment Control environment The COSO acknowledges that the controls in smaller companies will be of different types than larger ones & at times the categories may not be distinguishable. Attaining Cost-Effective Internal Control for Small Nonprofits Obtaining sufficient resources to achieve adequate segregation of duties Recruiting & retaining personnel (or volunteers) with sufficient experience & skill in accounting & financial reporting Promoting board and management s attention & sufficient focus on accounting & financial reporting Recruiting individuals with requisite financial reporting & other expertise to serve on the board or finance/audit committee 6

25 This can be accomplished through Control environment Attaining Cost-Effective Internal Control in Nonprofits Effective ACTIVE board of directors Effective ACTIVE committee structure Effective ACTIVE management Compensating for limited segregation of duties Monitoring activities The Control Environment in Nonprofit Organizations Attention & direction provided by board Board has a clear charge Board meets regularly Background & independence of potential board members are checked Minutes are taken at board and committee meetings Board periodically discusses the effectiveness of internal controls 7

26 Organizational structure The Control Environment in Small Nonprofit Organizations Job descriptions & organizational charts Flowcharts or narratives to document the flow of transactions, controls & reporting responsibilities Management is aware of whether there is adequate segregation of duties Board is aware of organizational structure including authority, responsibilities & reporting relationships Role of the External Auditor The external auditor cannot be part of an audit or attest client s internal control The auditor cannot be a compensating control for an audit or attest client 8

27 High Risk Areas Cash/checks Receipts Contributions Other receipts Disbursements Payroll Vendors & others High Risk Areas Items that can be converted into cash Inventory In-kind contributions Equipment Financial statements 9

28 Receipts Restrictive endorsements Lock boxes Make all deposits intact daily Timely reconciliation between accounting & development/program departments For collections of currency, have two people count cash Disbursements - Payroll Separate Time sheet & salary approval Check preparation Check distribution Recording Reconciliation 10

29 Disbursements - Payroll Separate payroll & personnel functions Written approvals for new hires & terminations Written approval for all salary and benefit changes changes Periodic management review Disbursements - Vendors Separate Purchasing Who sets up vendors? Preparation of checks Approval for payment Recording Signatures Vendor complaints-we haven t received payment! 11

30 Disbursements - Vendors Control over checks Numerical integrity Physical security No checks payable to cash Review bank statements/cancelled checks Tighten controls over petty cash Timely reconciliation-complete back-up Cash/Reconciliations Minimal cash accounts Bank statement should be opened by someone outside of the receipts/disbursements functions who should examine the contents Cash reconciliations should be reviewed by someone outside of the receipts/disbursements functions 12

31 Financial Statements Separate preparation & review Make them understandable Make them timely Provide comparisons Prior year Budget Involve the board encourage questions Other Control Policies Code of conduct Conflict of interest policy Employee/vendor hotline Whistle-blower policy Enforce mandatory vacations Bond employees who handle cash Fiscal procedures manual 13

32 Fiscal Procedures Manual Contains the specific tasks, methods or steps that are conducted, within the policy guidelines, usually by staff, to carry out the fiscal operations of the organization Assumption should be that any qualified person could enter a fiscal position in the organization &, based on the documented procedures in the manual, be able to readily assume the duties Fiscal Procedures Manual Accounting entity flowchart Subsidiaries Office locations Satellite offices Organizational chart Board developed fiscal policies Fiscal job descriptions & employee listing Procedural flowchart 14

33 Fiscal Procedures Manual Daily general ledger duties Bank reconciliations Payroll, including paid leave time tracking Fixed assets Line of credit Petty cash Filing system Supply order procedures Fiscal Procedures Manual Accounting software Password protections Chart of accounts Record retention policy Computer security Budget Process Cost allocations Funding sources Program listings 15

34 Fiscal Procedures Manual Intercompany transactions Monthly reporting Audit procedures & preparation schedule Tax filings Bank accounts & insurance carriers Equipment maintenance & safeguarding Government grant information (grant years, subcontractors, voucher preparation, reporting requirements) When Fraud Occurs HAVE A PLAN! Make sure that occurrence communicated appropriately to: Board Management Staff Externally based on significance 16

35 Lumsden McCormick s 21st Annual Exempt Conference November 6, 2015 Internal Controls for Small Nonprofits Presented by Kelly S. Mathews Chief Operating Officer Sr. Vice President, Financial Management Group kmathews@nycon.org Community Focus Statewide Impact National Network 17