Understanding how nonprofits respond to cash shortfalls helped inform new decisions about new workshops for 2015.
We typically think about nonprofit organizations focusing on their mission – the services they provide to their communities. But nonprofits also must focus on the business side of their operation. Good financial health is crucial for these organizations: a broke nonprofit can’t help anyone.
To understand more about nonprofit finances, the Nonprofit Center of Northeast Florida and the Jessie Ball duPont Fund surveyed a cohort of Jacksonville-area nonprofits in summer 2014. The expansive, 78-question survey, looked at everything from revenues and expenses to real estate investments to issues of financial oversight.
The upshot? The 90 nonprofits that completed the survey are generally solid financially (with a few caveats) and take a fairly traditional – some might say conservative – approach to managing their money.
As a result of the survey findings, the Nonprofit Center will launch three new educational sessions in 2015:
For a decade, the Jessie Ball duPont Fund has examined the financial health of the nonprofit sector using a simple yardstick: are nonprofits generating enough revenue to meet expenses and set aside some level of reserves? These community-wide studies have suggested that, even in stable economic times, roughly one-third of nonprofits fail to meet expenses in any given year.
The Fund has interest in finding ways to help those nonprofits that struggle financially, but needed more information. “We needed to look under the hood and understand some of the reasons that nonprofits struggled,” said Sherry Magill, president of the Fund.
The Fund worked with Trinita Logue, CEO of IFF, a leading community development financial institution, to design the survey and analyze results. In January 2015, the Nonprofit Center presented the findings to a gathering of area nonprofits and announced its lineup of new workshops.
“The survey has helped us understand some of the particular challenges that nonprofits are facing,” said Leah Donelan, vice president of operations for the Nonprofit Center, “and find ways to speak directly to those challenges.”
For example, the survey respondents demonstrated a strong aversion to debt. More than half of the organizations report they have never used debt, and more than two-thirds report having no debt in the past three years. Of those organizations that own facilities, only one-third have a mortgage or loan secured by the property.
At the same time, two out of three organizations report that they experience cash flow problems – most frequently caused by delays in payments for government contracts. These nonprofits tend to respond to such shortages by raiding reserves and cutting expenses.
“We want nonprofits to understand that there may be ways to smooth the ups and downs of their finances, without putting themselves at great risk,” said Magill. “As nonprofits grow in their financial sophistication, they are better positioned to present themselves to sophisticated donors and investors who have an interest in their work.”
“This project is a great example of the way the Jessie Ball duPont Fund supports the nonprofit sector,” said Rena Coughlin, president of the Nonprofit Center of Northeast Florida. “The relatively modest investment in the survey and the followup workshops has the potential to have much greater impact across the sector than any single grant to a single organization.”