Nonprofit
Long Island nonprofit organizations turn to management service groups for financial and administrative work
Seven non-profit organizations for people with intellectual and developmental disabilities have come together under a new umbrella organization to curb administrative costs.
What began more than two decades ago as a slow process of resource sharing has grown in recent years into a new nonprofit umbrella agency called Kinexion, which became an official tax-exempt 501(3)(c) organization on New Year’s Day. Kinexion — known as a Management Service Organization (MSO) — has combined revenues of $250 million and 3,200 employees across multiple agencies who provide services to approximately 5,000 Long Island children and adults with intellectual and developmental disabilities, according to officials.
Experts say MSOs like Kinexion are enabling social services nonprofits, often overwhelmed with cash flow problems and administrative red tape, to offload that responsibility to a larger network with deeper pockets while focusing on what matters most — their programs.
Each agency contributes a part of their finances to the MSO so that there is “one finance office for all organizations,” said Walter Stockton, President and CEO of Kinexion. “All of the accounting, all of the payroll runs through a finance department.”
WHAT TO KNOW
Seven nonprofit organizations that support intellectually and developmentally disabled children and adults have come together under a new nonprofit umbrella organization, Kinexion, to cut administrative costs and form a new network of agencies with combined revenues of $250 million and 3,200 employees. providing services to approximately 5,000 people across Long Island.
Kinexion is a management services organization founded earlier this year that centralizes administrative functions for nonprofit organizations.
In health insurance alone, agencies under the Kinexion umbrella saved about 10%, or $2.7 million.
In this way, “the MSO can focus on those very services while the agency can focus on delivering program services. It enables efficiencies that we wouldn’t have had,” said Lisa Meyer Fertal, managing director of two agencies associated with Kinexion, East End Disability Associates in Riverhead and Independent Group Home Living (IGHL) in Manorville.
She took over the leadership of IGHL from Stockton last year when he joined Kinexion.
Other agencies that have joined the network include the Center for Developmental Disabilities in Woodbury; Maryhaven at Port Jefferson Station; the Association for Technology Dependent Children based in Hauppauge, better known as Angela’s House; the Head Injury Association in Hauppauge; and the New Interdisciplinary School in Yaphank.
These nonprofits gradually came to Kinexion over the years to save money and gain the expertise of a larger network that would consolidate their finance departments while allowing them to retain their individual identities as service providers.
Kinexion’s origins date back to 1999, when other struggling agencies with financial problems tried to share their deals with IGHL, said Stockton, who was IGHL’s managing director at the time.
Bob Policastro, founder and CEO of Angela’s House, said joining IGHL in 2002 “enabled us to survive economically because we were able to share administrative costs and were able to share human resources, accounting and purchasing to use.”
Stockton said there were no job cuts at the agencies. Some employees chose to leave, but all were offered other positions in existing vacancies.
Stockton said joint purchasing saves money and, for example in the area of health insurance: “The purchasing power that you have with 4,000 employees instead of 600 gives you better services at a much lower cost.” The cost savings in health care for the authorities were about 10% or totaling $2.7 million, Stockton added.
Management service organizations, said Ken Cerini, a managing partner of Cerini & Associates, a Bohemia-based accounting firm, are prevalent in the healthcare industry.
For networks like Kinexion, Cerini said, “Is it innovative, creative to take a page from a larger model and integrate it into a small non-profit organization? Yes. I think that’s the direction we’ll be looking more in.”
Jay Silverstein, executive director of the center and new interdisciplinary school, said that in addition to the cost savings, an MSO provides access to the knowledge needed to address government funding rules. “All operating systems require a high level of expertise when dealing with government funds and regulations… I don’t have a CFO, but there is a CFO at headquarters. I have a school here and adult residents and they are all regulated and funded differently.”
Now that he’s at Kinexion, his agencies can focus on developing programs. “We had our own culture, our own way of doing things that hasn’t been outdated.”
