En Ensuring suring the mi mix fit its s you our r go - PowerPoint PPT Presentation

What at fin inan ancial cial repo eports ts doe oes s YOUR boa oard d need: eed: En Ensuring suring the mi mix fit its s you our r go governance ernance need eds A Conver ersation ation with h Hilda lda Pola lanco, nco, Fisc scal al Mana nagem emen ent t Assoc ociat iates es and Ruth h McCambridge mbridge, , th the No Nonpr prof ofit it Quarterly erly Tweet t us! Sponsor sored ed by: #Hild ildaOnFin aOnFinanc ance

Finan nancial cial Healt lth and nd Strat trateg egy 1. Set annual and long term financial goals and plans: • Understand the full costs of programming • Plan for cash and capital needs • Establish operating reserves and policies on their use • Incorporate scenario planning • Develop three-year financial plans 3

Finan nancial cial Healt lth and nd Strat trateg egy y (continu ntinued) d) 2. Establish mechanisms for monitoring financial performance: • Set Key Performance Indicators • Develop performance dashboards • Incorporate forecasting 4

Str Strateg egic ic Financial ancial Go Goals ls Revenue enue Conc ncentra entration tion and nd Pre redictability dictability Expense nse Str Structure ture Pro rogram gram Deliv iver ery Model el 5

Organization A’s mission is to increase its participants’ academic performance and persist isten ence. ce. Progra rams ms include ude after er-school school enri richment hment and academi demic c suppo port. t. Three govern ernment ment fundin ing g sources ces make e up the bulk k of revenue nue and the organizat nization on often en experi eriences ences cash h shorta tages ges. Financi ncial Monit itoring ring Plan 1. 1. Project Cash sh Flow to predict shortages 2. Observe trends the balance 2. nce of re receiv ivable bles s vs. . cash 3. 3. Track the available “cushion,” aka operati ting ng reserves es 4. 4. Monitor the Operating rating Surplus s (Defici icit) t) 5. Keep an eye on Reven 5. enue ue Mix and Concen ncentration tration 6. Calculate Operating rating Results ults of key Progra rams ms to ensure full costs are covered

Organization B’s mission is to make theater accessible to a broad audience. Progra rams ms include ude performance ormances s and class sses. es. Reven enue e sources ces are re diver erse, se, but multi ti-yea ear fundin ing g and operati ting ng reserves es are dwindl dlin ing g and the organizat nization on is consid sidering ering increa easi sing ng fundrai aisi sing ng and/or or ticket t prices es as we well as cost st reducti ctions. ons. Financi ncial Monit itoring ring Plan 1. 1. Observe trends in Un Unrestr strict icted d and Tempor orarily arily Restr strict cted ed Net et Asset t balan ances ces 2. 2. Track the available “cushion,” aka opera rati ting ng re reserves es 3. Monitor the Operat 3. ating ng Surplus s (Defici icit) t) 4. 4. Track Reven enue ue Mix to determine which streams have declined most significantly 5. Analyze Ticket Sale and Class ss Registrati istration on trends ds alongside Revenue 6. 6. Analyze major Expen ense se Dri river er tre rends s for cost reduction opportunities

Program m Manager gers Executi cutive e Direct ctor Board of Direct ctors • Budget-to-actual • Balance Sheet (and • Management narrative revenue & expenses supporting schedules) • Balance sheet (and for the program(s) • Budget-to-actual revenue supporting schedules) and grants/contracts & expenses they oversee • Budget-to-actual revenue • for each program & expenses • organization-wide • for each program • Year-end projection(s) • organization-wide • Cash flow projection • Year-end projections • Cash flow projection • Performance dashboard 8

Management Narrative

Balance Sheet

Liquid uid Unrestr Unrestrict icted ed Net Net Assets ts (LUN UNA) A) • Represents the portion of an organization’s unrestricted net assets that could be converted to cash relatively easily • Measure of funds available for purposes such as supplying working capital, guarding against downturns, and pursuing new opportunities LUNA NA = Un Unres restr trict icted ed Net et Assets s – (Fixed d Assets ets – Mortga tgage ges) s) Benchmar chmark: k: LUNA sufficient to cover 3-6 months of operating expenses is generally considered healthy, but this depends on an organization’s business model, plans and goals. 11

Balance Sheet: Supporting Schedule

Balance Sheet: Supporting Schedule

Budget-to-Actual Revenue & Expense

Year-end Projection

16 Cash Flow Projection

Cash Flow Projection

A Performance rmance Dashboar ard d compleme ment nts your r oth other financial ancial reports s witho hout ut replacing acing them Management Narrative Balance Sheet Budget vs. Actuals Year-end Projections Cash Flow Projections Performance ormance Dashb hboar oard 18

To e effectiv tively ely commun unicat icate stra rategic gic-level, l, action onab able re results, ts, a Dashboar ard d must: t: • Be presented in a us user-fr frien iendly dly visua ual l forma rmat t • Repres resent nt a manag agea eable ble set set of Key Performa ormance nce Indi dicat cator ors s (KPIs) that: – Are easily quantified – Can be measured based on available, high quality data – Drive your business model • Clearly show perform ormanc nce agains nst t a define ned d target t • Support risk-management by highli hligh ghtin ting g out ut-of of-th the-or ordina dinary results ts The Goal is to suppo port t decisio sion-maki making ng and facil ilitat itate communi unicati ation 19

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KPIs can be defined ned across s all areas s of your organiza nizatio tion Fundraisi raising ng & Programs ams & Financi ncial al Health th De Developme pment nt Service ce De Delivery Mark rket etin ing g & Ou Outreach ch & Human n Capit ital al Communic nicatio ations ns Advocac acy Risk Informati rmation on Facili lities ties & Manage geme ment nt & Technolo ology gy Capit ital al Projects cts Governan ance ce

QUESTIONS?

Stron ongNon gNonpr prof ofits.or its.org In collaboration with the Wallace Foundation, FMA has created a library of tools and resources to help organizations become “fiscally fit” Four r Topic c Ar Areas: : Plann nning ing | Moni nitoring oring | Op Oper erat ations ions | Governance ernance 24

Onl nline ine Tut utorials orials for StrongNon ongNonprof ofits.or its.org FMA offers complimentary orientation one-hour webinars that feature an overview of the website and drill down on several of its key resources Upcoming webinar dates: • December cember 1 at 2:00pm 00pm • Febru ebruar ary y 18 18 at 2:00pm 0pm To register, or see upcoming webinar dates: http://fmaonline.net/events/ For a 15-minute, on-demand webinar tour of the site: http://fmaonline.net/SNPonDemand 25

Resources and Links For r access ess to NPQ ’s other webinars: https://nonprofitquarterly.org/category/webinars/ To sub ubscrib scribe to NPQ ’s quarterly magazine: https://nonprofitquarterly.org/series/summer-2015/ Sign up for NPQ ’s next webinar on nonprofit technology on November 5 th 1 p.m. ET! http://info.nonprofitquarterly.org/nonprofit-technology- idealware