Not-for-Profit Enews Update: Financial Performance Measures

by Michael Mucci, CPA - Audit Manager

February 6, 2014

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This time of year the news is filled with earnings reports and financial analysis of some of America’s largest corporations. Financial experts, investors, and the general public will be inundated with all sorts of ratios and statistics that show the strengths and weaknesses of these companies. The stock market will fluctuate with each new report whether it shows growth or loss.

For not-for-profit organizations, this mass release of financial information does not happen, nor does it happen with this type of fanfare. Although an organization’s financial information is not the be-all end-all for whether or not donors give money or not, it is an important factor. There needs to be an in-depth look at the financial strength and program accomplishments each year by members of management or board members to ensure the organization is able to fulfill its stated mission.

This financial review goes far beyond the standard review of a balanced budget and positive changes in net assets each year. It has to include a way to measure whether or not the not-for-profit organization is using the donated money effectively and ethically to achieve its mission. As technology increases and more information can be easily obtained via the internet, websites are being created to provide this type of analysis to donors directly. If donors are valuing this information, then why shouldn’t management look at it as well so that they can directly address any donor questions and concerns as they are raised? If management is reviewing the efficiency of the organization on a regular basis, any inefficiency will be seen and can be addressed timely before it becomes a detriment to the organization.

These financial measures and efficiencies can be broken down into four main categories:

1. Administrative efficiency

2. Program efficiency

3. Fundraising efficiency

4. Other financial performance measures

Some examples of the above categories include:

Financial performance measures are important to both management and donors alike, but not just because they are readily available through the growth of technology. They are important to the organization because they provide insight to the efficiency of spending, costs incurred, growth in revenues, and the financial success of the organization’s various programs.

If you have any questions regarding the article above or any other issue affecting your not-for-profit organization please contact your Blue & Co. advisor or e-mail us at or call us at 800-717-BLUE.