Admin Costs

October-November 2016 (Opinion)

Downsizing your Admin Function?

Many of our clients are unhappy about the extraordinary amounts of money they are spending on administrative functions, which in small organisations can be the biggest salary expenditure item. This means that a large portion of the funds an organisation receives are not going directly into the organisation’s mission but seem to just ‘disappear’ with no visible benefit.

It is often only when organisations are seriously downsizing the admin function, for example trying to run it with volunteers instead of paid staff or not replacing an administrator that has left, that they suddenly find things falling apart. It usually seems to work alright for a few months, maybe even a year, until the organisation finds it no longer has financial information at hand for funding applications, accounting and auditing bills have skyrocketed, and IRD penalties are piling up.

And these are not the only costs. Stress piles up as deadlines, such as for filing to Charities or getting funding applications in, become harder to meet, funders demand accountability reports that are overdue, and more time has to be spent chasing things up.

To be sure I’ve been seeing the other extreme as well: large amounts of administrator time spent on entering tracking information that is not being used, overly involved monthly accruals, and monthly financial reports that are so complex that they are not being understood, and therefore disregarded.

The consequences of too little administrative effort are much direr than of too much, however. Many organisations are trying to save costs in order to maintain the same service levels even when funding or income is declining, and the ‘invisible’ administrator is a popular target. While administration has to be efficient, like everything else, it generally doesn’t lend itself to big cuts. Big changes in this area almost always initially require more time to be spent to get new systems established before savings can be made.

As the compliance environment also becomes ever more tight I would urge organisations to place a high priority on financial skills when recruiting new staff that are required, as part of their job, to do bookkeeping, accounting or financial management. Good knowledge in this area is too often overlooked by Boards and Committees when recruiting managers or coordinators especially, but increasingly, and in the face of skyrocketing fees by commercial accountants, this is becoming a survival skill to have for any not-for-profit.

Harald