Thank you, National Council of Nonprofits, for sharing this Special Feature:
If a nonprofit’s board of directors were listening to its regular financial report, would board members recognize signals indicating that a financial crisis may be imminent? We certainly hope that your nonprofit’s board is not hearing about a potential financial crisis, just as we hope that board members would recognize the warning signs and then help the organization take corrective action.
But, what are the commonly available indicators – such as using restricted grant funds beyond the restrictions, or overusing credit cards – that might be signaling that the organization is heading towards rough waters? What process can nonprofit boards use to conduct a straightforward assessment, without engaging expensive consultants, or tapping the expertise of accountants or lawyers? It turns out that there are many simple questions board members can ask that will help them recognize when a nonprofit’s finances are sailing off course.
The Foraker Group, the state association of nonprofits for the state of Alaska, has long championed using a sustainability model as a framework for good governance and sound management practices. Recently the Foraker Group introduced a new tool, Indicators of Financial Crisis, to help boards ask key questions and make sense of some of the financial mysteries of a nonprofit’s financial status. Then, based on the answers to those questions, the tool suggests steps to get the nonprofit back on course, if needed.