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Finance must be everyone's business

December 1, 2007
by Gary A. Enos, Contributing Editor
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In successful behavioral health agencies, the entire staff views the mission through a financial prism

“People depend on us. we are the safety net and the last stop on the train for many of the people we serve. our financial insolvency would serve no one.” —gary bembry

Photo of Gary Bembry by Tim Ludvigsen
For successful community behavioral healthcare organizations, the term nonprofit by no means connotes a lack of attention to finances. Nonetheless, some agencies do try to remove nonprofit from everyday parlance, fearing its widespread use could cause staff to become complacent about the steady revenue stream needed to fulfill every community agency's service mission.

“People depend on us. We are the safety net and the last stop on the train for many of the people we serve,” says Gary Bembry, president and CEO of Lakeview Center in Pensacola, Florida. “Our financial insolvency would serve no one.”

Behavioral Healthcare interviewed Bembry and Jerry Mayo, CEO of Pine Belt Mental Healthcare Resources in Hattiesburg, Mississippi, to explore the priorities of two community behavioral healthcare agencies that have received credit from leaders around the country for strong financial management practices. Both Bembry and Mayo are former chief financial officers of their agencies and are glad they now can leave that position in others’ capable hands as they engage in strategic planning and other executive duties. Most importantly, though, each says he spends little time on financial matters today because attention to financial management permeates his entire organization.

“Beginning in 1999, we articulated a new way of doing business,” says Mayo, who became Pine Belt's top administrator a year earlier. “Staff members know that we're a business from the time we interview them.” He adds, “I don't have to worry much about finance in my job because the others here are fairly obsessive about it.”

Orchestrating Growth

Change is something that Lakeview's managers embrace, and this attitude has been instrumental in the organization's long-standing ability to overcome financial challenges as they emerge.

Lakeview was founded in 1954 as the Escambia County Child Guidance Center, and until around 1997 considered community behavioral healthcare services as its core business. Since then, the organization's annual budget has grown from $35 million to around $125 million, and the number of employees has more than doubled to about 2,200. The growth largely has come from two new operations that have diversified the organization well beyond traditional behavioral healthcare: vocational services and child protective services.

Vocational services now comprise about one-third of Lakeview's mission. The agency connects individuals with a variety of disabilities to work opportunities, with a large contract with the U.S. Department of Defense enabling Lakeview to offer vocational services in five states and the District of Columbia. In child welfare, Lakeview is one of 22 lead agencies in Florida that operates privatized child welfare services on a regional basis. In a four-county area the agency performs every function subsequent to a child's removal from the home, including casework, foster home placement, and adoptive services.

The diversification of operations allows Lakeview to tap into a variety of funding streams and not be overly dependent on any one revenue source. While child protective services rely solely on state funding and vocational services nearly entirely on federal money, behavioral healthcare services have a more diverse mix of government and patient funding. Overall, Bembry would like to see the organization become less reliant on government payers in coming years.

With the different revenue sources for Lakeview's various divisions come different expectations for each unit's financial performance, and Bembry acknowledges that this can generate tension in an organization. While the state of Florida finances child protective services on a cost basis and therefore leaves no capacity for additional revenue, the other divisions may be expected to generate additional revenue for the larger operation.

“There is a constant need for communication and education with staff around these issues,” Bembry says. He adds that it is important for organizations to acknowledge that competitive differences among divisions may arise, but that the overall mission of the agency must remain in the forefront. “Our mission is to help people overcome life's challenges,” Bembry says.

Conservative Approach

Bembry explains that about 90% of the revenue Lakeview earns supports client services, with about 6 cents of every dollar allocated for administrative support and the remaining 3 to 4 cents devoted to “investing in the future.” The organization takes a careful approach to investment that is reinforced at every level of the agency, starting with the board of directors.

The board does not allow staff to move forward with a new initiative unless it has the cash to finance at least half of the project without borrowing. This has been a long-standing policy at Lakeview. “The board realizes that we have to operate like a business,” Bembry says. “The 50% requirement is so old that no one even remembers when it started.”

Bembry says the agency has become adept at paying attention to all three of the critical financial statements for nonprofit businesses: the balance sheet, the income statement, and the cash flow statement. Many nonprofit agencies don't spend enough time studying and managing cash flow in order to be able to withstand unexpected challenges, he says.