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Case Study Finance Management

Spotlight on Success:

Interim Financial Leadership Leads to Lower Risk, Lower Expenses and Increased Income

Case Study #5 CFO and Financial Management Services
How a Philadelphia, PA non-profit reduced risk and increased its assets by utilizing our Chief Financial Officer services.

For over 20 years a social services organization provided outstanding services primarily to low-income individuals with complex medical, emotional, social and financial challenges.

The Problem:
While every effort had been made to provide outstanding social services, managing the business of the non-profit had been a secondary priority. Over time the organization found it didn’t have enough cash in its accounts to keep up with vendor invoices. Management believed this was primarily due to slow payments from city, state and federal funders. Finance and accounting staff had to spend a lot of time explaining to vendors why their bills were not being paid and this distracted staff from their primary job. Further complicating matters, the accounting and finance teams didn’t always work well together.

After over 10 years with the same Executive Director, the organization appointed a new leader. The new Executive Director knew the internal operations of this organization were not matching its external commitment to excellence and something had to change. That’s when he reached out to us to learn more about our Chief Financial Officer services.

The Solution:
The Executive Director engaged us to provide interim financial leadership. As we dug into the numbers and the underlying challenges, it became clear the organization’s financial challenges were deeper than just a payment timing issue. A key error had been made in the accounting for a newly built housing project which created an inaccurate representation of the organization’s income. An error of over $1 million allowed the Board of Directors to believe the organization was running a surplus. In reality, it was overstaffed for its current level of contracts and had higher expenses than current funding allowed.

As we studied the numbers and the related contracts we found additional opportunities to protect and improve the organization’s finances. For example, a quick review of insurance coverage revealed that the organization was paying twice for redundant insurance on their primary office space, yet did not have sufficient coverage for the newly built residential housing complex, leaving them at substantial risk.

One of the most rewarding findings was discovered while reviewing the agency’s workers compensation coverage. When the agency was founded in the mid-1980’s, they provided Home Health Care, a relatively risky line of work. As a result, the agency was paying a high rate on its workers compensation insurance at an annual expense of roughly $80,000 for its 85 employees. Over the years, their services gradually shifted away from Home Health Care to almost solely office and desk-based social services. The change was so gradual that no one on the management team thought about the potential impact on workers compensation insurance. By asking the state to conduct an audit of the organization’s coverage, we found that they were overpaying by $72,000 a year. With the audit, the state agreed to refund overpayments for the previous three years – a total of $216,000! This was equal to roughly the entire private donations made in a year. . . and it allowed the organization to catch up on all its past due vendor invoices.

Today, the Finance and Accounting teams are working well together again and the internal practices have been restored to match the quality of the external services. Our Chief Financial Officer services provided the interim financial management this organization needed to be able to continue to provide for the community.

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