Lane County, UO look at helping small nonprofits

Presenter: As social services rely more and more on small nonprofits, Lane County commissioners hear from the UO School of Planning, Public Policy and Management on how to help nonprofits with their administrative burdens. On June 12, County Administrator Steve Mokrohisky:

Steve Mokrohisky (Lane County, administrator): This is the sixth year now that we’ve had this Policy Lab program running. And the idea behind it, from Lane County’s perspective was, you know, we’re dealing with these real world challenges every day, big challenges that we’re trying to solve in the community.

And we have this university right down the street, our neighbor, with incredibly talented faculty, staff, and students. And we wanted to create a connection between those two, right: How do we tap into the knowledge and thought leadership and research capabilities and analytical capabilities of the students and faculty at this top-tier university to help us solve some of the challenges that we have in our local community?

[00:00:56] Presenter: From the UO, Ben Clark.

[00:00:57] Ben Clark (UO PPPM): I really look forward to this day every year. It exemplifies what the School of Planning, Public Policy, and Management really strives for, is giving our students the hands-on experience to be able to excel in their careers. And I hear that from people around the country saying, ‘Wow, this is really amazing,’ what we’re able to do, and I really thank you for your continued support in this.

[00:01:19] And the Policy Lab has evolved to be a convener for the thought leaders around the state coming here to Eugene, bringing the latest and greatest of a wide range of policy and management issues that face local governments around the state, and that’s really through the support of Lane County that we’re able to do that.

[00:01:36] Presenter: While one capstone project team looked at helping governments prepare for long-term disaster recovery, another team worked on supporting the small nonprofits. Commissioner Heather Buch:

[00:01:47] Commissioner Heather Buch: We have a lot of federal money coming in and a lot of little teeny-tiny nonprofits up river who were thinking about how they were going to get services on the ground, but zero capacity to do the things that we’re talking about here with back-end services.

[00:02:03] They have part-time staff, but people want full-time jobs, and there just isn’t the same level of capacity or maybe education needed to complete all the different back-end management programs.

[00:02:20] And then you have to add the layer of compliance for large governmental grants that are astounding. And all they want to do is get services on the ground to people that need them.

[00:02:33] This is the same story for any nonprofit that’s really working in our community. I think it’s really critical for them to be able to get the services on the ground and not have to worry about all the office work and compliance issues.

[00:02:47] Presenter: Presenting for the UO nonprofits team, Emily Severeid:

[00:02:50] Emily Severeid (UO PPPM): My name is Emily Severeid and we’ll be presenting a model to increase administrative capacity for Lane County nonprofit organizations.

[00:02:58] Nonprofit organizations struggle to further their missions while carrying out administrative duties, which include things like human resources, payroll, technology, financial management, and compliance-related tasks.

[00:03:11] These all are things that we’ve been hearing from our nonprofit stakeholders that we’ve engaged with throughout this project. And so we wanted to focus on different administrative support models to consider what might be the best option here in Lane County.

[00:03:23] Four different models really kick-started our research process in this project: the digital transformation strategy; the centralized services model; the cross-sector alliance model; and finally, the fiscal sponsorship model.

[00:03:36] Presenter: After talking with local nonprofits, they focused on centralized services. Josh Pugh.

[00:03:41] Josh Pugh (UO PPPM): We contacted 43 representatives within Lane County. We were able to complete 34 interviews, both conducted in person and virtually. We then moved into doing two focus groups with twelve nonprofit representatives to understand specifically what cost structures, what location of services they needed, what in terms of contract flexibility they needed.

[00:04:00] So we really focused on that centralized services model. I just really wanted to understand: How can we customize a model that will really impact our local nonprofit organizations?

[00:04:09] Presenter: Cody Aucoin:

[00:04:10] Cody Aucoin (UO PPPM): We first really wanted to get a gauge by asking, how many hours per week are you spending on administrative duties? And found that 42 percent of small nonprofit organizations and 93 percent of large nonprofit organizations spend 21 plus hours per week on administrative duties.

[00:04:28] And for our focus group findings, two primary concerns were addressed: Contract flexibility, right? So if I’m a nonprofit representative, do I have a clear exit strategy from this contract, can I review it regularly, am I somehow trapped in it, you know, I’ve had bad experiences with contracts in the past, so on and so forth.

[00:04:45] And then cost structure. So am I paying for a service package, some services I’m using, others I’m not, or can it be more so of an a la carte, like I’ll choose that service and maybe this level of that one, and it could be more so catered to me.

[00:04:57] Presenter: Josh said the team saw the most promise in centralized services, and looked more closely at two different approaches.

[00:05:04] Josh Pugh (UO PPPM): One is the management service organization, and one is the professional employer organization. Both act as an external third-party organization that provides these administrative services for nonprofits.

[00:05:15] The main difference is that a professional employer organization (PEO) implements a co-employment model, which is where they are the entity of record for tax purposes for nonprofit employees. This allows them to not only do taxes, payroll, and other back-office responsibilities—it also allows them to pool employees across organizations so they have access to better benefit packages, which is something that our small nonprofits in our community mention is a big plus for this model and something that they struggle with.

[00:05:41] And so, the first approach that we looked at was a partnership with the Lane Council of Governments (LCOG). They’ve been in our community for decades, providing administrative services for park districts, school districts, other public agencies. After talking with some of their staff, they expressed their willingness and interest to provide these services for nonprofit organizations in our community.

[00:06:00] This would be implemented right away, as they already have the infrastructure in place. Nonprofit organizations would just need to approach the Lane Council of Governments to engage in a contract, and then these services would be able to be provided.

[00:06:13] The next partnership was with ADP TotalSource. They are a private, for-profit, national PEO. They have major clients such as Amazon, Dell, and other large nonprofit organizations like Goodwill. They are, like I said, a private PEO. We were unable to get some information on their cost structures and some of their contract information. We had heard that some organizations we looked at in the community partnered with ADP and they have had success.

[00:06:39] The third partnership was with the Nonprofit Association of Oregon. They are a statewide membership driven organization that supports nonprofits across the state. They’re actually piloting a PEO model in January 2025. It’s just a pilot program for now, so there’s going to be restrictions on who is going to be able to benefit from that pilot program, as well as potential restrictions in size and other logistics.

[00:07:03] And then finally, our fourth approach was having Lane County create their own PEO. This didn’t have to be Lane County, but other entities within Lane County. This could be easily customizable and individualized for Lane County. However, just like starting your own business or organization, there are very high startup costs, and long-term maintenance resources.

[00:07:21] Presenter: The group recommended focusing on LCOG and the Nonprofit Association of Oregon. Gianna Linares:

[00:07:27] Gianna Linares (UO PPPM): The first one that I’m going to talk about is partnership with LCOG. They’re a little bit different from a PEO. They are a management services organization, or an MSO. And some of their distinct benefits is that they can cater to organizations of any size, whether that be one employee or 20 employees.

[00:07:45] And then another one of their benefits is they’re already up and running, and are cultivating these partnerships with organizations in the community.

[00:07:52] One of their biggest drawbacks is that since they’re not a PEO, they’re not able to offer benefit solutions. Those benefit solutions were one of the most appealing aspects of the PEO model when we were talking to nonprofit representatives in our interviews and focus groups.

[00:08:08] Our second pathway is going to be a partnership with NAO. They are a PEO, professional employer organization. They do offer those robust benefit solutions, and they also offer more tailored services to nonprofit organizations, more of an a la carte style, so the organizations can be picking and choosing services that they are needing. And then one of their drawbacks is going to be their size limitations currently in the pilot phase.

[00:08:37] They are likely not going to be able to cater to organizations that have 10 employees or less. And then even when they scale up this program, it’s likely that they’re not going to be serving organizations of five employees or smaller. And they are not offering these services yet, so there’s likely going to be kinks that need to be worked out.

[00:08:58] Presenter: Gianna pointed out that nonprofits often are allowed only 10% of a grant or overall budget for administrative costs. Their actual costs are higher. Reimbursement is too slow, and reporting is an enormous burden.

[00:09:12] Gianna Linares (UO PPPM): Nonprofit representatives are going to be advocating for increased overhead thresholds, hopefully from 10% to 15%; aiming to shorten the reimbursement cycle from what the standard is right now, 90 days, to trying to cut it back to 60 days; and then finally, reporting requirements, being very burdensome to their administrative functions and trying to streamline those, simplify them and just make them overall straightforward.

[00:09:40] Some next steps: LCOG and NAO should have a conversation. They are looking to serve the same people. This conversation has been going on for a very long time. They are looking to do the same thing, essentially. They should consider continuing an advisory group, ideally with all the stakeholders that were involved in this project.

[00:09:59] They’re also going to need to finalize their funding decisions. There’s still conversation going on right now about if and who is going to be able to fund that pilot project. There are interested funders. Some nonprofits have also talked and asked about: Are they going to receive support for those initial startup costs?

[00:10:17] There’s clearly still a lot of work that needs to be done. There needs to be a conversation around, are we aiming to have this be short-term or long-term administrative relief and overall industry change.

[00:10:28] Presenter: Commissioners applauded the quality of the work. Commissioner Pat Farr:

[00:10:32] Commissioner Pat Farr: Around 10 years ago, we conducted work with nonprofits to ask: What is it that you need? How can government and other agencies help you? And came up with similar conclusions to the ones that you achieve today, potentially a PEO, local PEO. And the startup administrative costs were formidable, and also the ongoing administration is formidable, added expense that nobody seemed to have any resource for.

[00:10:57] And your suggestion that LCOG is willing to do it, I’m encouraged by that, and bravo for digging deep into that because they do have the resources, they have the facilities. The only thing there is that you say that perhaps fewer than 10 employees wouldn’t be able to use their services without adjustments. And quite often it’s the nonprofits with fewer than 10 employees that need the services the most.

[00:11:17] You’ve really brought forward a presentation that really could provide solutions for the future. Pooling resources, the way LCOG does so well, the way an educational service district does the same thing, provides to smaller districts things that they can’t internally provide. And that really is the drawback to performing your duties to, whether it’s grant administration, whether it’s hiring, the hiring process alone.

[00:11:38] Also: Pooled resources such as supplies that each agency needs and uses and you buy them retail, it’s expensive. You buy ’em in a pooled fashion, you can draw on it and get more. Anyway, I’m, I could go on for a long, long time about this. If I had stars, what’s the maximum, five? You got it. Thank you. Bravo. Well done. Thank you so much.

[00:11:57] Presenter: Commissioner Heather Buch.

[00:11:59] Commissioner Heather Buch: Nonprofits, in some cases, were a little bit skeptical of working with other nonprofits in order to make this happen because they have individual proprietary ways in which they do business and the way in which they provide services to the community and aren’t always necessarily in a realm to be willing to share that and feel trusted in doing so.

[00:12:25] This work is really, really important. And so I’m hopeful that with the county’s backing, and maybe with a 2.0 of your body, that we might be able to continue this conversation and see what happens.

[00:12:41] Presenter: Commissioners David Loveall and Ryan Ceniga appreciated the analysis, and asked whether the costs would be sustainable and whether nonprofits would work together. Josh Pugh.

[00:12:52] Josh Pugh (UO PPPM): In terms of the financial and long-term cost savings, the hope that there are some initial funders within the state, Oregon Community Foundation, the NAO, that has some donors and partners to hopefully offset those initial costs for a PEO model.

[00:13:08] And then hopefully, the goal is for these local nonprofits to save resources, be more efficient, and then that cost savings can push them forward into engaging in those contracts and those cost structures.

[00:13:18] Presenter: Cody Aucoin:

[00:13:18] Cody Aucoin (UO PPPM): There honestly might be a loss of perceived autonomy, especially for some of those really small organizations, right, if they’re wanting to offload or outsource some of their administrative duties onto a body of technical experts.

[00:13:32] And it’s hard to tell in the future whether a centralized services organization can even offer those services to, we’ll say, organizations with zero to five employees. And so we mentioned this in our final report (in hopefully a tactful way), but that might be very small nonprofit organizations considering collaborations or even mergers, which I know is sensitive, but at least considering that at a sectorwide level.

[00:13:55] Presenter: One commissioner praised the work and pointed out that these problems are rooted in the very origin of nonprofits. Commissioner Laurie Trieger:

[00:14:04] Commissioner Laurie Trieger: This is my world, worked in nonprofits for about 25 years before taking office. I also was part of the NAO, the Nonprofit Association of Oregon’s work group many years ago looking at exactly these issues, centralizing services, consolidating bulk buying of, you know, health insurance, if you will, basically creating an entity in order to realize those kinds of savings. So it’s really exciting to see that taking the next step and actually perhaps going somewhere.

[00:14:30] Two pieces that really stood out for me, which is the reporting challenges (which is different than the applying for funding, than the reporting on funding) and the administrative overhead, the percentage that a lot of funders will allow for nonprofits to claim.

[00:14:45] And the onus isn’t really always on the nonprofit, right? It’s often on the funding entity or the oversight agency where they are establishing systems and parameters that create a bar that the organization just can’t meet. Really, it’s a systems issue.

[00:15:00] And this idea of a centralized or consolidated services I think is exciting because it’ll give insight to some folks to the challenges of running a nonprofit which will just expand the table for who might want to advocate for these systems changes. So that’s really important, that systems approach, because funders really need to change.

[00:15:19] I sit on a board of a statewide funding organization that is really transforming how we do philanthropy and creating the lowest possible bar to accessing funds, but also really focusing on delivering funds to community organizations that are led by folks most impacted by the problem that they’re there to address.

[00:15:40] And so, I’m going to go deep here and kind of philosophical, because the reason, particularly on the social service side, the reason the structure is sort of the way it is, is they started as sort of volunteer—You know, usually the men would go to work and do important things and the women would be bored and they’d create these organizations to do good deeds, right? To hand out food and clothes and for free, right?

[00:16:02] So the genesis of nonprofits kind of comes out of an idea that there should be free labor provided and that that deserves a different sort of treatment. And as disparities have grown in our society, the need for those services has increased, but that foundation of it being led by volunteers and therefore doesn’t need the same kind of structural and systemic supports is kind of the root of the problem. And I think because, again, organizations often spring up from the community that needs the thing that isn’t being provided, and so even our whole definition of what does professionalism look like is pretty, referential to a very traditional model.

[00:16:40] So I think this is really important work because it really gets at those structural and systemic problems and has an opportunity to really make a big impact.

[00:16:49] Presenter: Lane County calls on the UO to research a long-standing problem: How to support the administrative burdens of small nonprofits as they become critical components of our social service ecosystem, especially during long-term recovery from disasters.