A National Imperative: Joining Forces to Strengthen Human Services in America (Jan 2018)

grievances resulting from the provision of services. However, when the government fulfills its responsibility to provide these services by contracting with CBOs, CBOs are not afforded the same level of immunity. As a result, when something goes awry in this very difficult environment – when a client is harmed or harms someone else – a CBO can find itself facing a series of lawsuits and multi-million dollar claims. CBOs with larger funding streams or endowments can become targets for these types of lawsuits. “The cat is out of the bag,” explained a Pennsylvania-based CBO executive. “Tort lawyers smell blood in the water, and my insurance premiums have gone through the roof.” Indeed, growing litigation risk has made liability insurance much more expensive for CBOs, with many seeing premiums doubling or even tripling over the last several years, according to a leading provider of liability insurance for human services organizations. Facing greater costs in this area, CBOs have less flexibility to use funding in more productive ways. Policy uncertainty that can impact demand for human services and tax treatment of charitable donations. The supply of and demand for human services is directly linked with other policy areas such as healthcare, education, and taxes. Changes in these policy areas can have significant impacts on funding available to and costs incurred by human services CBOs as well. In the National Imperative Survey, about two-thirds of public agency leaders and human services CEOs indicated that changing healthcare policy was a major challenge to the stability of the human services ecosystem. About 30% saw tax policy as a major challenge. As of this report’s publication, there remains considerable uncertainty as to how potential regulatory changes at the federal level in particular may impact CBOs and the broader human services ecosystem. In addition to potential changes in healthcare funding and delivery, changes to rules around itemized deductions for charitable donations, in particular, could have a major negative impact on CBO philanthropic funding levels. 20 Assessing the financial impact and risks of RFPs and contracts. Human services CBOs are mission-driven organizations. Their dedication, however, sometimes leads them to sacrifice financial stability in order to fulfill their missions. As a public agency leader described, “Some organizations are too focused on just winning the contract. They aren’t honest with us or themselves about whether it’s a good fit. They underestimate their costs and take on more than they can handle.” In the National Imperative Survey, a number of human services executives noted that CBOs should be much more selective about accepting contracts that aren’t economically viable, and much more willing (and better armed) to negotiate for economically viable terms, where those are not initially offered. Survey respondents remarked: “Don’t accept contracts unless you are adequately reimbursed.” “Stop performing services for unreasonably low payments.” “Stop starving ourselves to death by saying yes to contracts that don’t cover costs!” While the temptation to “chase revenue” will always be there, CBOs need to stop pursuing RFPs when there is either lack of clarity around the full costs to deliver the services, or when the contract does not fully fund the indirect and direct costs required. Initiatives such as the recently-introduced “RFP Rater”, CHALLENGE #4 Underdeveloped financial risk management capabilities

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