Actionable Financial Analysis: Insights for Grantmakers


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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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Actionable Financial Analysis: Insights for Grantmakers

  1. 1. Jenny Taylor Community Manager GuideStar Peter Kramer Manager Nonprofit Finance Fund June 5, 2014 Actionable Financial Analysis: Insights for Grantmakers
  2. 2. AGENDA Introduction to Financial SCAN New Feature Overview Brief Online Tour Case Analysis Q & A
  3. 3. Effective Solutions Sound Financial Health Strong Organizations Quality Programs We Believe that Financial Health Supports Impact
  4. 4.  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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. Financial SCAN 2.0: New Features!  Excel Download  Peer Group Comparison  Customized Enterprise Access  7 Day Nonprofit Access
  9. 9. Brief Online Demonstration
  10. 10. 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
  11. 11. 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
  13. 13. Dashboard: Income Statement
  14. 14. Dashboard: Balance Sheet
  15. 15. 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
  16. 16. 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
  17. 17. 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?
  18. 18. 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.
  19. 19. 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
  20. 20. Q&A
  21. 21. 20 Thank you! Peter Kramer Manager, Advisory Services Nonprofit Finance Fund 617-204-9772 To learn more: