Healthy Solution for Nonprofits When it Comes to Bookkeeping
By Elizabeth Kim

Silicon Valley/San Jose Business Journal

May 15, 2009

The Health Trust Chief Financial Officer Ira Holtzman and his staff of 17 provide financial services to 24 nonprofits that outsource their accounting.

The Health Trust’s goal is to make Silicon Valley the healthiest region in America, but that doesn’t stop with the physical health of local residents — the group is making a difference in the financial health of other nonprofits as well.

Five years ago The Health Trust launched its Financial Administrative Support Services program, which now helps two dozen nonprofit clients who don’t have the resources to do their own in-house accounting.

“We’ve used them since January of this year, and I can’t say enough about them,” said Pat Mitchell, executive director of San Jose-based Silicon Valley Faces, which fights racism and offers victim advocacy. “The benefits are tremendous. You have a specific point person you can connect with every day — multiple times a day if needed — with expertise in the ins and outs of nonprofit financials.”

FASS program has 24 clients with budgets that range from $100,000 to $35 million, with asset sizes up to $50 million.

FASS is headed by Campbell-based Health Trust CFO Ira Holtzman and includes 17 staffers, two of whom are certified public accountants.

The Health Trust CEO Fred Ferrer said FASS billed more than $700,000 of work last year, but ended up with a $27,000 loss. The FASS budget amounts to only a fraction of The Health Trust’s total budget of about $15 million. But this year the program expects to turn a profit, as clients are added.

Ferrer said that according to The Health Trust’s latest client satisfaction survey, 89 percent of FASS clients said they were able to cut costs, 97 percent said they became more financially accountable, and 77 percent said FASS put them in a better position for fundraising.

Clients are billed on a sliding scale depending on the amount of work they need done and, in some cases, their ability to pay.

“It’s not a profitable venture to us, but it does help us bring down our overhead,” Holtzman said. “We have a large, diverse staff, so we can back up our people” and make sure there’s no break in services.

“It’s all about strengthening nonprofits,” Holtzman added. “Not-for-profit books are unlike for-profit books, and most outside accountants don’t understand this.”

When the idea of outsourcing financial services was first broached, Holtzman said, his initial reaction was, “You’ve gotta be out of your mind — we’ve got our own compliance issues and you want me to take on somebody else’s headache?”

But after mulling it over for two days he said, “OK, let’s do it. It’s the right thing to do.”

The service frees nonprofits from day-to-day financial worries so they can focus on providing direct services to the community, he said.

“It’s one of the best decisions we ever made,” said David Gonzalez, executive director of Santa Clara County’s Friends Outside chapter, which has about a $1 million annual budget and provides support and services for the families of incarcerated people. “We can ill afford the sophisticated fund accounting software that the Health Trust uses. It’s really important for us to bill appropriately.”

Gonzalez said FASS costs “less than two-thirds” compared to having it done in-house.

Another problem small nonprofits face is they can’t afford the high-level accounting which The Health Trust provides.

“We get an analyst that is far more skilled and experienced than one we could hire ourselves,” Gonzalez said.

A sampling of Health Trust’s 24 clients:

• San Jose State University Tower Foundation

• The Tech Museum

• Via Services

• School Health Clinics of Santa Clara County

• Silicon Valley Council of Nonprofits

• Loaves & Fishes

Elizabeth Kim can be reached at 408.299.1835 or ekim@bizjournals.com.