Nonprofit Financial Management Practices: A 50 Year Compendium
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Transcript of Nonprofit Financial Management Practices: A 50 Year Compendium
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Nonprofit Financial Management Practices:A 50-year CompendiumHeather Carpenter & Donijo Robbins
Grand Valley State UniversitySchool of Public, Nonprofit, & Health AdministrationGrand Rapids, Michigan
September 2013
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Our Purpose• To understand how NPOs weather small and large
financial and economic changes and challenges over time.
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NPOs by the Decades• 1950s – Birth of modern day NPO• 1960s – Declaration of War (on Poverty)• 1970s – Commercialization• 1980s – Tax reform• 1990s – Boom then bust• 2000s – Debt & Dependency
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Weathering Storms• Key indicators
• NPO growth • Revenue diversification• Self-sufficiency• Fundraising efficiency ratio• Liquidity • Assets and liabilities• Net worth• Debt and dependency
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Number of NPOs filers,1988 – 2010 (IRS 990 information)
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Revenue for NPOs with Assets <$1M
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Revenue for NPOs with Assets $1M - $50M
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Revenue for NPOs with Assets $50M+
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Change in the composition of revenue<$1M $1M - $50M $50M+
2010
1988
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Program Stabilization Ratio
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Fundraising Efficiency
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Liquidity
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Assets to Liabilities Ratio
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Net Asset Growth (%change)
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Change in the composition of liabilities<$1M $1M - $50M $50M+
2010
1988
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According to NPOs, in 2009 governments*
• Didn’t pay for the full cost of contracted services • Increased complexity and time required for reporting on
contracts and grants• Made the application process too complex and time
consuming• Changed the contracts and grants • Paid bills late
* Urban Institute (2010). Human Service Nonprofits and Government Collaboration: Findings from the 2010 National Survey of Nonprofit Government Contracting and Grants, p. vii.
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NPOs responded by*• Freezing or reducing employee salaries (50%)• Drew on reserves (39%)• Laid off employees (38%)• Reduced health insurance, retirement contributions, and
other staff benefits (23%)• Borrowed funds or increased lines of credit (22%)• Reduced programs or services (21%)• Served fewer people (17%)
* Urban Institute (2010). Human Service Nonprofits and Government Collaboration: Findings from the 2010 National Survey of Nonprofit Government Contracting and Grants, pp. vii-viii.
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Observations
• NPOs weathered the Great Recession better than the private sector
• Large NPOs are taking on more and more debt to stay afloat
• Medium sized NPOs best the others in all areas
• NPOs have less restrictive financial practices
• Continue professionalization
• Increase reserves
• Watchdog orgs should consider size of NPOs
Recommendations
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QUESTIONS?