Transparency, fiscal responsibility, accountability: not words that sound very appealing to most. Rather than pouring over cash flow projections, or preparing prospective budgets, many nonprofit executives and staff would prefer to focus on implementing programmatic activities, and positively impacting their communities. However, financial health is crucial to the success of any nonprofit. Funding sources, in particular, look for transparency and accountability in an organization’s finances when making grant decisions.Â
A relatively new topic of study, nonprofit financial literacy is the subject of a recent report from the Moody’s Foundation and the Center on Philanthropy at Indiana University. Only 6.9 percent of respondents claimed financial expertise, and 17 percent self-identified as “novices” when it came to financial literacy.
There are many steps that nonprofits can take to improve their financial savvy. Only 26 percent of respondents stated that their board of directors was “very involved” in financial planning. Financial oversight from the board helps to guide fundraising efforts, and overall strategic decision-making. Keeping accurate financial records will directly affect and lead all future program activities. In addition, keeping a cash reserve and conscripting independent financial audits are good ideas, particularly in today’s volatile economy.
Enhanced financial literacy will improve the overall sustainability of your organization by increasing your chances of obtaining grants, passing due diligence inquiries, and expanding your donor base. In the end, nonprofits need to answer to their donors, through providing transparent, readily available financial statements, and through the efficacy of their programs.
Happy Financial Literacy Month!
- Nonprofit performance evaluation: Financial management (Alliance)
- Nonprofits urged to improve financial literacy (Philanthropy Journal)
- April is Financial Literacy Month (fpaforfinancialplanning.org)
Photo courtesy Edufiend.com