Key Performance Indicators (KPIs) are essential quantifiable measures for nonprofits, used for transparency, accountability, and demonstrating success in meeting goals. Important financial ratios discussed include program efficiency, operating reliance, and fundraising efficiency, which help assess an organization's performance compared to peers. Using KPI data can improve reporting to stakeholders and aid in financial decision-making, while exploring these ratios fosters meaningful discussions about organizational health.

1. tIdentifying and Measuring KPI’sLiz Marenakos

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 goalsTranslate an organization’s mission into clear, measurable outcomes

3. Why are they important to nonprofits?Transparency to internal and external audiencesAccountability to Donors/FundersProof of Delivery on Mission

4. Financial KPI’s – The basicsWhile KPI’s can be organization or even campaign specific, basic financial KPI’s are relevant to most nonprofits. Some examples:Average Donor ContributionCost per dollar raisedProgram EfficiencyLiquidityFundraising EfficiencyOperating RelianceEmployee Productivity

5. 3 Important RatiosThree 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 EfficiencyProgram Efficiency = Program Service Expense / Total ExpensesMeasures the percentage of every expense dollar that goes to programsImportant metric to donors, board members and managementThe best outcome would be a ratio of 1 – where 100% of all spending is on programs

7. Operating relianceOperating Reliance = Unrestricted Program Service Revenue / Total Expenses

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

10. The best outcome would be a ratio of 1 or even above 1 in rare casesFundraising EfficiencyFundraising Efficiency = Unrestricted Contributions / Unrestricted Fundraising Expenses

11. A measure of how much contribution revenue a nonprofit can generate from fundraising activities / expenses

12. Ideally this ratio is a high number, which means the organization can raise multiple dollars for every dollar spent to do so. Using KPI DataReporting to Board Members

13. Annual Report to Members & Donors

14. Employee Performance Management

15. Benchmarking against Peer OrganizationsFinancial Ratio AnalysisLiquidity – Meeting obligations as they become due.

16. Sample ratios:

17. Current Ratio = Current Assets / Current Liabilities

18. Quick Ratio = (Cash + Total Receivables) / Total Current Liabilities

19. Days Cash Reserve = (Unrestricted Cash / (Total Expenses – Depreciation and Amortization)) * 365

20. The higher the ratio numbers, the stronger the organization