Two like-minded organisations in very different financial positions join forces to maintain a vital service.

Othila’s Young Women’s Housing and Support Service Inc. had been supporting homeless young women in Brisbane since it incorporated in 1998. By 2009 increased overheads had left a 20 per cent deficit in the budget and the organisation was facing rising wages costs due to impending changes to the Queensland Social and Community Services Award. Struggling to meet this shortfall through fundraising or attracting further government funding, Othila’s decided to explore another option – joining with a larger community service organisation.

With a 30 year history of providing a wide range of support, housing, family and training services to young people, Brisbane Youth Service (BYS) was an obvious choice of partner. The two organisations already had a strong working relationship and shared the same values and frameworks for providing services to young people. Also attractive was BYS’ strong financial position thanks to a diversified portfolio of government funding and successful community fundraising campaigns

For Othila’s manager Jill McKay, the possibilities for enhancing service delivery outcomes, not just keeping the organisation afloat, was reason enough to amalgamate with BYS.

“BYS at the time managed between 16 and 20 contracts with (three tiers of) government…Othila’s had one. BYS had the Centre for Young Families, provided transitional housing, intake, assessment and referral, drug and alcohol intervention programs, a Youth Connections program to assist young people re-engage with school, a health service, street outreach, mental health support programs, and a drop in centre. At that time there was also employment and training programs and a dedicated fundraising position. So you start seeing this growth (potential). Instead of Othila’s just surviving and doing what it does in a silo, (there is) real potential to branch out for the benefit of the young women.”

Othila’s put forward a proposal to BYS and after many discussions and negotiations between the two organisations’ staff and management committees throughout 2010, it was decided to bring Othila’s into BYS. Othila’s as a legal entity would wrap up and become a service under the BYS umbrella, the BYS Centre for Young Women.

Investing in each other

The path to amalgamation was long (“even now in 2013 there are times when we’re still managing the merge”), taking a significant investment of time for Othila’s manager. For BYS, the investment was also financial. Over three years, BYS invested approximately $120,000 of due diligence costs and in kind contribution into Othila’s/BYS Centre for Young Women to maintain the same level of service delivery. The same financial pressures that existed for the program from the outlook in 2010 are still the same financial pressures that the program faces today. BYS has drawn from donations and found other ways to manage these pressures.

At the governance level, BYS considered in detail the issues of financial sustainability for the merged entity, potential legal liability in the transfer of contingent or unknown risks, the increased costs arising from recognising unrealised staff entitlements accruing prior to the merger, the expectations of the government funding bodies and the impact of the merged operations on the BYS’ existing service delivery.

“Legal support was really important in terms of due diligence,” BYS CEO Annemaree Callander said. “BYS had a lot to do to be sure the business or the work Othila’s does was sound; manage the transfer of any assets, identify any ongoing HR matters such as Workcover claims, identify any risks or current complaints, determine what happens to client records and files when Othila’s winds up.”

The decision-making process, the rationale for decisions and the decisions themselves were clearly documented and ratified at the management committee level. Furthermore, as the merger would have a significant impact on BYS’ membership, organisational culture and objectives, it needed to be consistent with the relevant provisions in the constitution.

“Winding up an organisation is a lot of work and added to that was the need to look at how Othila’s would become incorporated into all existing BYS processes, HR, IT, payroll, vehicles, policies and procedures,” Annemaree said. “We had to liaise with government agencies to transfer leases and amend funding agreements. The CEO, CFO and the Othila’s manager worked closely with both management committees to ensure all necessary matters were addressed. It required strong project planning and management and a significant investment of time.”

One aspect of the merge which was to take an unexpectedly long time was the official transfer of Othila’s government funding contracts over to BYS. Othila’s had service agreements with two different divisions within the Department of Communities and at the time there was not much experience of not-for-profit mergers, nor had policies been put in place for how to transfer contracts when two not-for-profits merged or amalgamated. Without a policy to guide the process, there appears to have been some confusion within and between the departments about how it should proceed. The whole process took 15 months to resolve.

The transfer of assets from Othila’s to BYS needed to be carried out in accordance with Othila’s constitution. Following the transfer, changes to formal titles and ownership needed to be carried out by BYS. An independent audit was performed upon winding up so that there was clear accountability for and documentation on the assets valuation. Time was of the essence in the winding up and assets transfer process. The Queensland Statutory Authority (Office of Fair Trading) also required that the relevant documentation be completed, certified and submitted.

It was estimated that to have external facilitation for the amalgamation would have cost between $50,000 and $60,000. An application for this amount was made to the Department of Communities, but funds to support amalgamations or mergers were not available. So the costs of the process were absorbed by the two organisations and supplemented by pro bono legal advice thanks to law firm Clayton Utz. Jill stated, if she was able to do the process over again, differently, external facilitation would have helped both organisations better manage the change and help them finalise the amalgamation. Even now a couple of years on, some aspects are still incomplete.

“The biggest priority for both Othila’s and BYS was ensuring the continuity of services to young people,” Annemaree said. “In the absence of dedicated resources to manage the change process all the work involved in the amalgamation was on top of staff’s regular and day to day responsibilities.”

Managing change

In the journey of amalgamation, both organisations made a deliberate decision to not include the clients in the process because they realised it was not something that the young people could have any control over. Instead, they remained steadfast in their commitment that the services to homeless young women would not be interrupted and there be no noticeable change in the services they received. “The intent and the focus was to ensure none of the change affected homeless and at risk young people, particularly young women otherwise it defeats the purpose,” Jill said.

Jill proudly reports that service delivery did not suffer throughout the entire process, and any feelings of loss were quickly replaced by appreciation for the benefits of the BYS Centre for Young Women being part of a broader organisation able to provide a suite of services to clients. “When we asked (in 2012 and 2013, two years after the amalgamation) the young women what has been the impact in going from Othila’s to the BYS Centre for Young Women, they said, ‘we haven’t noticed’, ‘I’ve been able to access counselling now that I wasn’t able to get before’. The program site has remained the same, phone number’s the same, and the referral process is the same.”

“Having a specialised young women’s housing and support service has been a great addition to the service offerings at BYS,” Annemaree said. “It has expanded our capacity to respond to homeless young women and support them through transitional housing on to secure long term housing. Given that domestic and family violence is a primary cause of homelessness for many young women, having a dedicated young women’s space gives young people more options to engage with BYS in a way they feel safe. BYS also benefited from the transition of remaining assets at the wind up of Othila’s as a legal entity.”

For the staff of Othila’s, the changes were more keenly felt. They had a new employer; Jill went from being the leader of her organisation to a program manager in a much larger organisation; they had new computer systems to learn, administration and reporting systems to get used to. Keen to support them, Othila’s closely involved each team member throughout the process, a strategy that ensured their cooperation in coming along with the change.

Being proactive

Being proactive in making the decision to amalgamate was probably key to the success of the merge. For Jill, it was about “looking at the merger (as a way to) enhance the model of service delivery as opposed to continuing on as Othila’s and waiting for a time when things changed in government or policy direction. We would have been in a place of reducing what we were doing and just getting smaller and smaller.”

Now that the bulk of the amalgamation work is done, the reality for the BYS Centre for Young Women is quite different. “We’re still here and we’re in a strong position,” Jill said. “We’re really part of BYS and there are opportunities which mean that the resources for young women are not going to deteriorate, and we might have the opportunity to be able to continue to enhance what we do for young people, by being collectively and formally together.”

Case study key themes

Proactive – Othila’s approached BYS before their financial position became dire and they could still contribute resources and energy to the amalgamation. By being proactive, the organisation was working from the front foot, leading the process and deciding its future. If it had waited for the inevitable, the organisation could have found itself in a position where it was forced into an amalgamation, with constrained timeframes and potentially with another, and less compatible, partner. Or it may have had to reduce or even cease its services altogether.

Investment - Both organisations invested a great deal of money and time on the amalgamation, as well as trust in each other and good will in order to see it through.

Change management – Carefully managing the change process was vital to making it as smooth a process as possible and maintaining the good will and commitment to staff. The effort made to ensure the transition had minimal impact on the young women receiving the service speaks to Othila’s and BYS’ commitment to the amalgamation being about the young women they served, not the survival of an organisation for its own sake.

Commitment to service delivery and mission – Othila’s and BYS’ commitment to the young people they serve was most likely a key ingredient to the success of this amalgamation. Other important ingredients were already there: shared values, pre-existing good relationships and shared goals. Perhaps what really made it work as successfully as it did was the insistence by both organisations that service delivery not be affected. Othila’s could have decided to reduce its services to young women in order to get its budget in order. BYS could have chosen to absorb Othila’s and continued to deliver the service in a reduced capacity within its means. Instead, it decided to honour the service and the young women by putting more money into it to ensure service delivery was not reduced.

This case study appears in the Rethinking Resources: Case Studies of Financial Resilience from Queensland Community Services report.

Listen to the interview with Jill Mackay on StudioQ: Part 1 and Part 2

Download the report

Download this case study

Read more about mergers and amalgamations

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