If you’ve been to the grocery store lately, you may have noticed a sneaky little phenomenon called inflation taking place. Prices for everyday items are increasing while salaries cannot always keep up. The term recession is being thrown around, which adds additional stress to everyone’s financial situation. We’re all feeling the effects, and P&R is no exception.
As public sector professionals, you want to do your best with the money you have and maximize every constituent dollar in an ethical way. That’s why understanding how you invest money in programs is vitally important. One way to do this is by developing a financial sustainability strategy, which can help you tell your financial story to stakeholders at any level of your organization.
What is financial sustainability?
Before we get into the nitty-gritty of financial sustainability, let’s start with the second half of the concept, which is at the root of what we’re talking about here: sustainability. According to Investopedia, sustainability refers to the ability to maintain or support a process continuously over time (Investopedia, 2022). In business and policy contexts, sustainability seeks to prevent the depletion of natural or physical resources, so that they will remain available for the long term.
Now let’s tie in the finance component: it’s a practice that allows you to tie your finances to community impact to build upon your agency’s foundation. You will be able to meet the needs of today without compromising future needs (Chapman, 2008).
According to Jamie Sabbach, P&R Thought Leader and Public Speaker, financial sustainability means having the money to do what’s critically important for your community for the long haul, doing better with what you have rather than expecting to get more of what may not exist, and being thoughtful about the investment choices you make.
In addition, Nick Venditti, Amilia’s Director of Cost Recovery Consulting, says that financial sustainability has different meanings in different contexts. “It’s a way of making sure that you can keep writing cheques and keep operations afloat, while progressing forward.”
Financial sustainability is one way that you can operationalize sustainability; that is, put it into practice and turn the concept into measurable observations (such as dollars saved or increase in programs).
What are the benefits of leveraging this concept?
✨ Financial sustainability allows you to protect programs that serve the public, by evaluating your offerings to ensure that your community receives the maximum benefits, while removing those that don’t
✨ Financial sustainability has an impact on social equity, so you can ensure that everyone has access to the same offerings and quality of life
✨ Financial sustainability provides clarity on what it actually costs to run things, which helps you make the most out of your funding or grant money and justify the price charged
✨ Financial sustainability helps you allocate resources, which is particularly important in the current economic climate – and allows you to operate with a business mindset
✨ Financial sustainability allows you to learn about how data moves around in your organization, giving you a greater understanding of operations and more efficient management
✨ Financial sustainability data helps you make decisions that aren’t arbitrary, and tell stories with transparency and confidence – the real value comes from the real-time look at how you are doing
How do people get empowered to be fiscally responsible?
As a publicly financed department, you provide basic services in exchange for tax dollars. These dollars are then used to cover gaps between expenses and revenues. You are stewards of other people’s money, but there can often be misconceptions around how those funds are used. How do you make decisions about that and set goals while growing your community? Enter: cost recovery!
It’s 2022, and more and more communities are leveraging technology as a tool for growth and engagement. There are ways to take advantage of software solutions to make decisions, and we have just the right thing to help: our new CostRecTM platform! We believe that financial sustainability and resiliency for P&R agencies is fundamental to their community impact.
We’ll be officially launching it soon, but for now, here’s a teaser of what it does according to Nick: “It’s a highly specialized calculation tool for P&R agencies to run a cost-of-service analysis. By that, I mean they will understand what it costs to run every program they have, and how much financial support each service requires from taxpayers. That second part, the financial support needed from taxpayers to keep each program alive, that’s the key element we’re trying to clarify. Connecting taxpayer financial support to P&R services can be ambiguous and difficult, so we’re trying to demystify that and provide clarity.”
Often organizations have created a financial sustainability strategy or Cost Recovery Strategy that dictates the level of taxpayer support for service categories. The tool clarifies how each service type compares to your financial strategy’s goals for those services, so you can adjust your offerings as needed.
For example, according to Nick, “If a competitive swim program is receiving a high level of financial support from the general fund [taxpayers], and that doesn’t align with your financial sustainability goals, you will be able to visualize it, communicate it, and generally be equipped to have a conversation on how to bring this program to a financial support level that aligns with your expectations.”
Stay tuned for more info on CostRec coming soon!
Aside from technology, another way we can educate folks is by offering them the opportunity to watch webinars, join forums, and attend events such as the upcoming NRPA conference (if you’re attending, don’t miss our friend Jamie’s talk where she will share the story of Napa, California and their journey with financial sustainability).
Ultimately, creating opportunities for P&R professionals to talk to each other will open their eyes to the fact that financial sustainability work and data is not that scary! By embracing FS as something that’s fun and where we face reality, we’ll be able to balance short term satisfaction with long term consequences.
Financial sustainability and cost recovery are only going to be more and more essential as our economy evolves. Reading this article is an amazing first step toward becoming more educated on the topic!