Designed for finance managers, CFOs, and accountants, this session will examine what key performance indicators nonprofits should look at to gauge their operational efficiency, stewardship of resources, and performance compared to peer organizations. The session will also include a discussion of the tools and data that are available to enhance this process and to improve accountability to donors and other stakeholders.
2. What are KPI’s? Key Performance Indicators, or KPI’s, are quantifiable measures of an organization’s performance, activities, or success. Used to measure progress towards goals Translate an organization’s mission into clear, measurable outcomes
3. Why are they important to nonprofits? Transparency to internal and external audiences Accountability to Donors/Funders Proof of Delivery on Mission
4. Financial KPI’s – The basics While KPI’s can be organization or even campaign specific, basic financial KPI’s are relevant to most nonprofits. Some examples: Average Donor Contribution Cost per dollar raised Program Efficiency Liquidity Fundraising Efficiency Operating Reliance Employee Productivity
5. 3 Important Ratios Three key ratios that are of interest to nonprofit stakeholders Program efficiency ratio – How much of every expense dollar goes to programs? Operating reliance ratio – How much of your total expenses are covered by program services revenue? Fundraising efficiency ratio – What multiple is your contribution revenue of your fundraising expenses?
6. Program Efficiency Program Efficiency = Program Service Expense / Total Expenses Measures the percentage of every expense dollar that goes to programs Important metric to donors, board members and management The best outcome would be a ratio of 1 – where 100% of all spending is on programs
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8. A measure of your organization’s ability to cover total expenses from program services alone
9. Very important if program services revenue are deemed most consistent and predictable
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11. A measure of how much contribution revenue a nonprofit can generate from fundraising activities / expenses
38. Habitat for Humanity NTEE Code L20 – Housing Development, Construction and Management Revenue Band: $1MM-$10MM Revenue Composition Example Organization
39. Program Efficiency What expenses are allocated to programs? - Resale store expense? Ratio Score
41. Fundraising Efficiency Depends on what is included in your contribution revenue number as well as your fundraising expense number
42. Our sample org is on par with its peers for program efficiency, below its peers for operating reliance and above its peers for fundraising efficiency What questions might you ask about this particular organization based on its 3 key ratios? My thoughts: What percentage of their contributions are gifts in kind? Do they have a ReStore operation? Where are those $? Contributions or Programs? How are donations of building materials treated? Are mortgage payments considered program services revenues? Considerations and Questions
43. Ratios are best used as conversation starters There are specific aspects to your business model that may make a particular ratio look “good” or “bad” – but the reality is the opposite Be clear what numbers you have included in the numerator and denominator and why Ratios need comparisons to make them relevant – a solitary number is not useful Period to period comparisons Peer comparisons Financial Ratios can give you a quick picture of your organization’s overall strength In Summary
Editor's Notes
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Let’s take a look at how our sample organization compares to its peers….
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High level business model – raise money and supplies to build and sell houses to those who could not otherwise afford them.