Finances in the Future: Nonprofit Professionals Seem Ill Prepared
In 2011, The Center on Philanthropy at Indiana University released a very interesting report entitled “Financial Literacy and Knowledge in the Nonprofit Sector.”
Sponsored by Moody’s Foundation, the Center surveyed 500 nonprofit professionals responsible for their organization’s finances. Less than 10 percent considered themselves experts, most grading themselves as just “knowledgeable” in financial principles and concepts.
The report showed indications of the need for more training in the business aspect of nonprofits:
- The majority of the nonprofit professionals forecast fundraising and inflation, but few use economic variables in their planning.
- Only one-third answered all questions correctly when asked about bond pricing, investment risk and diversification.
- Almost 90 percent orient their board members to roles, policies, financials and the form 990, but only a slight majority about risk management procedures.
- Fewer than half have their boards involved in internal audit, investment management, budget development, fundraising, debt restructuring or financial scenario planning.
- Sixty percent did not have a board audit committee.
- The majority of the professionals had staff procedures manuals and policies on the use and distribution of endowment earnings.
- Financial objectives seem to be all over the board. The most frequently cited were a target level of reserves (37%), running a budget surplus (27%) and breaking even (23%).
- Contrastingly, only about half had less than 90 days of unrestricted cash, one-quarter had up to 180 days cash, and only one-fourth had more.
If a nonprofit lives day to day, trying to make payroll and maintain services, these are the survey answers I would expect. It is vital that nonprofits force themselves and their boards out of this mode and start thinking about what they need to look like in 2020. A strong decision-oriented retreat is needed and that is what Proctor’s Linking to Money excels in. Call (614.208.5403) or email to talk about how to get your organization focused on a sustainable future.