Schweickert & Company — Insurance for Nonprofits & Social Service Organizations

Collaborative Risks

There are over 1600 nonprofit organizations in Orange County filing a 990; 400+ in Human Services, 350+ in Education, and 200+ in Health…with gross receipts of $5 Billion per year, and gross assets of $6 billion. Still, there are needs unmet — 25,000 homeless in Orange County, arts programs being cut, shortage of childcare assistance funding, etc. It’s because even the deepest wells run dry. With limited funds available, funders want to be more than “a charitable checkbook”…they want to see serious results from their contributions. Times have changed, and smart donors are hip with the times.

When I was in grammar school, our desks were arranged in rows, one behind the other. I competed for the A+, so the teacher could hold it up in front of the class and announce my success to my peers. In high school, I worked to throw the curve on an exam. (I was just a bit competitive.) Nowadays, my own kids come home with a “piece” of a group project that they are “collaborating” on… My son is a great artist, so he contributes the design and any three-dimensional materials. (Thank God he hasn’t been asked to do the writing!) Together, the group comes up with a terrific final product, EFFECTIVE for classroom use.

Donors and funders understand this concept of COLLABORATION. Since they can only fulfill the requests of about 10% of their applicants, collaborations are looked upon with increasing interest, to help funders avoid duplication of services and to maximize effectiveness. Many of our experienced nonprofit old-timers have been successful in pooling their expertise and resources to attract and streamline donations and serve our community with increased effectiveness. Some are simply sharing information, staff, consultants, copiers, and offices, while others are coordinating programs and seeking funding together. Some even involve strategic restructuring — joint ventures or mergers, sometimes birthing completely new organizations. Sharing ideas and expertise helps nonprofits bear fruit in serving our communities. Competition is out; Collaboration is in. From the wise Thomas Jefferson, “He who receives an idea from me, receives instruction himself without lessening mine; and he who lights his taper at mine, receives light without darkening me.“

Following are several tips that will help you as you consider collaborative projects:

Risk Management: Questions to address before forming a collaboration: Why are you considering the collaboration? Is the collaboration consistent with your mission? Who are your competitors? How will this collaboration affect your reputation/current support? How will this affect your staff? Do you have the time/resources for this collaboration? How will you evaluate the outcome? What are the best and worst possible outcomes? What if you end up doing most of the work, but you have agreed to split the funding? What do you do when it comes time to renew the program next year? Click for free publication: “Collaboration Risks: Partnering with Confidence and Success” from Nonprofit Insurance Alliance of California.

Insurance: When undertaking a new collaborative project, it’s important to let your insurance carrier know. Not all projects are easy, or inexpensive, to insure. BEFORE offering the program services, decide who is insuring this project. One nonprofit’s carrier may be more flexible with including additional programs in the current coverage. Don’t assume that the other partner has you covered. Work out the insurance arrangement, waivers, “additional insured”, “hold harmless agreements”, etc, ahead of time.

Legal/ MOU’s: From Stephen Nill, Charity Channel: “Memorandums of Understanding form the basis of the collaboration between grassroots organizations. MOU's are contracts, creating important legal rights and duties between the parties. Because of the potentially significant impact on the organizations involved, it is wise to have them reviewed by legal council competent in the law of tax-exempt organizations. Counsel will, in addition to reviewing the language for clarity and compliance with federal, state and local laws, want to make certain that the collaboration comports with the organizational purpose as expressed in the charter and application for tax exemption. It is also important that MOU's be considered at the board level, be formally voted on, and be recorded in the minutes of the organization.”

If you have any questions about your insurance coverage, please contact me...Until then, BE PREPARED, and BEAR MUCH FRUIT!

Schweickert & Company
15 Peters Canyon Road
Irvine, CA 92606
Direct Phone/Fax: 714-689-1772
Email: Laura@schweickert.com