Non-profit salary and benefit ratios a key dashboard metric

This column will continue my attempt to convince tax-exempt organizations that traditional monthly financial statements, without dashboard analysis, are a failure in terms of management and board communication, transparency and accountability. My earlier columns were devoted to the extraordinary benefits that can be derived from the development and effective use of dashboards. I believe that developing or enhancing dashboard reporting for your organization should focus on the following eight quadrants:

• Balance Sheet Financial Ratios
• Operating Ratios and Performance Indicators
• Salary and Fringe Benefit Ratios and Metrics
• Billing, Program Revenue and Units of Service
• Human Resources – Recruitment, Retention, Turnover, and Vacancies
• Regulatory and Corporate Compliance Reporting
• Cash Flow and Capital Purchases
• Projected Actual to Budget Variances and Action Steps Required

The columns referred to above focused on Balance Sheet Financial Ratios and Operating Ratios and Performance Indicators. This column will address the following:

• Salary and Fringe Benefit Ratios and Metrics
• Billing, Program Revenue and Units of Service
• Human Resources—Recruitment, Retention, Turnover, and Vacancies
• Salary and fringe benefit ratios and metrics

The third of our eight dashboard quadrants may be the most important of all, since 65-75 percent of expenditures for most tax-exempt organizations fall into the salary and benefit categories.

The dashboard information selected for each quadrant must be tailored to your organization. The suggestions made in this column are not intended to be all-inclusive. In fact, it would be surprising to me if your organization’s Management and Board would not ask for additional data elements as well as eliminating one or more of my suggestions.

In the area of Salary and Fringe Benefit Ratios and Metrics, I believe the following dashboard data points are appropriate. Each of the following can be compared to your annual budget expectation.

• Number of full-time equivalent (FTE) employees. If appropriate, you can provide both full-time and part-time employee statistics.
• Total payroll incurred / accrued during the month. This information may be more useful if presented by program service area / department as well as administrative functions.
• Total fringe benefits, which would include health insurance, workers’ compensation, and employer retirement cost.
• Overtime hours paid and total dollars expended.
• From the information provided above, the dashboard quadrant can include the following valuable information:
• Fringe benefit costs as a percentage of salaries.
• Health insurance costs per FTE.
• Retirement costs per FTE.
• Workers’ compensation costs per FTE.
• Employee incentive costs can be presented if your organization has a monthly, quarterly, or annual policy of lump sum payment distributions to reward desirable performance and/or achievement of performance goals.

Gerald Archibald is a partner serving both of our Rochester, NY, and New York City offices.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.