By KIRSTEN COX
Covenant Solutions

Cost recovery is a hot new trend in the fire industry. Because of all the buzz, there are a number of businesses looking for ways to add this service to their existing product base. Your department may be interested in benefiting from this additional revenue stream, but maybe you’re not exactly sure how to wade through the maze of information or how to locate a reliable service provider. Following are questions and answers that should help you to navigate the waters with confidence.

Is cost recovery legal?

Fire service incident response cost recovery is legal in every state in some form. There are variations and limits that can come into play, based on federal, state and local laws and insurance provision coverage. In most states there are no specific laws in place to address cost recovery, however, before you proceed you will want to become aware of any state guidelines that may exist and how they address the cost recovery issue. Most competent cost recovery services should be able to guide you in the right direction or provide the information to you themselves.

Does being a nonprofit organization means that you can’t charge fees?

No. Typically, nonprofit entities like fire departments and municipal pools do charge some type of fee for services due to the necessity of covering ever-rising operational costs. A nonprofit means that any revenues are used to provide greater services and are not distributed to the employees or directors for personal gain or use. A nonprofit will typically have an assigned treasurer or officer to keep records of all revenue, and funding in general and the distribution of such. The nonprofit will need to file for tax-exempt status with the IRS, and a federal emergency identification number is assigned, so they can be held accountable for any funds collected from fees. A tax-exempt entity will typically file an IRS Form 990 annually for receipts, confirmations and accountability.

How can we implement a cost recovery program?

When there isn’t a federal or state law addressing an issue, local communities and municipalities may pass local laws that do. Cost recovery is commonly addressed as such. Because state and federal laws can be subject to change, your cost recovery service can help you stay current with relevant legislation.

You’ll want to start by locating an experienced cost recovery service with a successful track record. You can begin by searching the Internet under “fire department billing” or “fire rescue cost recovery” or by asking neighboring departments what company they are using and if they’re satisfied with their results. Be wary of a company that tries to guarantee any sort of collection percentage, as that’s virtually impossible due to the wide number of variables. Covenant Solutions also recommends choosing a service that specializes only in fire service incident response cost recovery instead of offering the service as an add-on to an already-existing product such as ambulance transport billing.

• Step one is to ensure that the service understands the methods and billing practices that your department wishes to enact. Your cost recovery program is yours and yours alone and should be under your direction and control. Your cost recovery service is simply working as your agent in representing your program and intentions. A service should be prepared to supply information and offer recommendations to help you determine how to govern your program, but ultimately this is your program to be implemented as you see fit.

• Step two is to work with your cost recovery service to be sure important documentation is in order, such as a W9, and a resolution or ordinance, if desired, that includes the establishment of a rate schedule. Your service should be able to provide a standardized rate schedule based on documented formula’s that can be verified as acceptable national averages, along with available legal research and documentation pertaining to fire departments and their cost recovery programs.

• Step three is to determine the best method for your department to submit all billable incident reports and all required information. It is very important to lay out an interface between the department and the cost recovery service that’s practical for your own needs. The service should offer you a variety of choices such as web form, fax, or email submittal options. Incident reporting export options may also become a valuable to you in the near future.

• Step four is to begin your research and submittal of qualifying incident reports to your chosen service, beginning from your chosen launch date. You may be able to bill retroactively as well, per whatever statutes of limitations are in place for your state. Covenant Solutions suggests keeping a log of all run reports that have been sent to your service so you can follow up on progress and keep track of all payments. Your cost recovery service should be able to provide you with reports on a monthly, quarterly or annual basis to assist with these accounting needs. Some services, like Covenant, may also be capable of receiving cost recovery data from NFIRS incident reporting software either now or in the near future. Check with your software provider to see what they offer in terms of export capabilities.

Ultimately, it’s your decision how technologically advanced your cost recovery reporting system becomes. The real key to a successful cost recovery program is to find a reliable service you can feel confident in, that will keep your departments needs their number one priority. Once you find that good fit your department can benefit enormously from the additional revenue stream.