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Actionable Financial Analysis: Insights for Grantmakers In an increasingly data-filled world, it can be difficult to sort through proliferating information to find what matters most. Nonprofit finance is no different, and identifying the risks and strengths in a grantee's financial picture can take expertise and time. Knowing what financial data to examine can help funders better steward grant dollars and inform candid dialogue with nonprofit leaders. How can grantmakers focus their financial due diligence to find key signs of fiscal condition and resource needs? Join Nonprofit Finance Fund and GuideStar to learn about Financial SCAN and how this data platform can add value to your grantmaking pratice. Presenters: Peter Kramer, Manager, Nonprofit Finance Fund; and Jenny Taylor, Community Manager, GuideStar USA (moderator)
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Jenny Taylor Community Manager GuideStar Peter Kramer Manager Nonprofit Finance Fund June 5, 2014
Actionable Financial Analysis: Insights for Grantmakers
AGENDA
Introduction to Financial SCAN
New Feature Overview
Brief Online Tour
Case Analysis
Q & A
Effective Solutions
Sound Financial Health
Strong Organizations
Quality Programs
We Believe that Financial Health Supports Impact
Knowing which metrics to focus on for assessing
financial health
Having the time and skills to collect, parse and
apply financial data to inform grantmaking
decisions
Fostering a candid dialogue with grantees about
financial health and resource needs
When it Comes to Nonprofit Finance, Funders Face Common Challenges
Financial SCAN at a Glance
What: Data platform for assessing nonprofit financial health and fostering dialogue among all stakeholders involved in making social impact
Who: Private and public grantmakers/donors, nonprofit organizations, philanthropic advisors, consultants and media
How: Private and public grantmakers/donors, nonprofit organizations, philanthropic advisors, consultants and media
WHAT
Data platform for assessing nonprofit financial health, making data driven decisions, and strengthening grantmaker-grantee dialogue
WHO
Nonprofit organizations, private and public grantmakers, individual donors, philanthropic advisors, and consultants
HOW
Draws data directly and automatically from IRS Forms 990,* presenting complex information in an easy-to-analyze and communicate format (350K+ orgs)
*Note: Financial SCAN does not include data from Forms 990 EZ
What’s in a Financial SCAN?
Organizational Dashboard: Five years of key financial trends and ratios
Graphs & Explanatory Text: More detailed overview of an organization’s:
Expenses
Revenue
Profitability
Balance Sheet
Liquidity
Peer Comparison Dashboard: Select peer organizations for financial benchmarking
How are Funders Using Financial SCAN?
Adds, strengthens and/or focuses
financial component of due diligence
Helps identify financial strengths and
red flags
Informs conversations among
grantmakers and their grantees about
financial health and needs
Saves time and resources
“This innovative new tool builds the financial management capacity of nonprofits and helps grantmakers engage with their grantees about financial health and funding needs.”
Kathy Reich, David & Lucile Packard Foundation
Financial SCAN 2.0: New Features!
Excel Download
Peer Group Comparison
Customized Enterprise Access
7 Day Nonprofit Access
Brief Online Demonstration
Key Considerations: What 990 data can and cannot do
990 data CAN help:
Understand an organization’s financial trajectory and recent
revenue, expense, and balance sheet dynamics
Show how an organization compares to its peers across
standardized fields
990 data CANNOT:
Provide the authoritative and most up-to-date financial picture
of your organization
Tie exactly to the information presented in an audit
Show revenue restrictions
Distinguish between operating dollars and capital dollars
Meet Today’s Case Organization: REAL WORLD SKILLS
MISSION: To prepare underserved youth for lasting
careers and self-sufficiency
PROGRAMS:
Personal & professional skill-building
Summer internship placement
Trade programs and certifications
RECENT DYNAMICS:
Steady yet modest growth
New location and dated equipment
Beginning strategic planning process
REAL WORLD SKILLS
Dashboard: Income Statement
Dashboard: Balance Sheet
Peer Comparison Dashboard:
1 2 3 4 5 6
1 2 3 4 5 6
1 2 3 4 5 6
1 2 3 4 5 6
1 2 3 4 5 6
Topics Explored in Financial SCAN Graphs:
Expense detail & composition
Revenue detail & composition
Profitability
Full cost of doing business
Asset composition
Depreciation of fixed assets
Liability composition
Liabilities as a % of assets
Liquidity
With the exception of 2008, surpluses and deficits have been close to breakeven
RWS has effectively managed this growth by
consistently covering its operating costs to achieve
marginal surpluses
But are surpluses adequate to build financial resilience?
RWS’s liquidity has fluctuated somewhat over the period, but has been consistently tight
Available liquidity represents a nonprofit’s ability to
handle risks and seize new opportunities.
Observations & Recommendations for REAL WORLD SKILLS
Observations from Financial SCAN:
Modest growth over last several years
Reliable mix of revenue sources
Relative to peers, few fixed assets
Tight liquidity constrains ability to innovate
Recommendations for Funders:
Acknowledge strengths (e.g., reliable revenue, surpluses
in most years, etc.) and encourage business planning in
strategy process
Discuss with RWS leadership the amounts and types of
capital needed to help the organization build working
capital and reserves and adapt to the changing job
market
Q&A
nonprofitfinancefund.org
20
Thank you!
Peter Kramer
Manager, Advisory Services
Nonprofit Finance Fund
617-204-9772
To learn more:
www.guidestar.org/financialSCAN
