In the blizzard of headlines, financial news, forecasts, and surveys, individual nonprofits can easily get swept up by the most recent reports of impending crisis or hopeful recovery. But the conditions of another nonprofit, or even 100 other nonprofits, aren’t an accurate predictor for your organization. In all forecasts, “local conditions vary,” and the most relevant information is the situation at an individual nonprofit organization. Only by clearly understanding its own financial position, strengths, and risks can a nonprofit develop strategies to respond to the economy and plan for the future.
In our contact with hundreds of nonprofits in Minnesota this year, the Nonprofits Assistance Fund has worked with organizations in every degree of financial health or distress, from rock solid to previously solid to solidly in crisis. In every case, heightened uncertainty about revenue and client demand adds to the complexity of decisions. As nonprofits have had to quickly make decisions about program and staff cuts, budget reductions, and cash reserves, we’ve seen too many examples of organizations taking action without fully considering their “local conditions.”
We have found that the information or assessment gap falls into four categories:
- overestimating or underestimating the current financial condition of an organization;
- relying on inadequate, inaccurate, or untimely financial information;
- overlooking important internal and external environmental factors; and
- leadership gaps and delays among the management team, the board of directors, or both.
To help nonprofits quickly analyze their local conditions, we developed the Assessment of Recession Risk and Preparedness for Nonprofit Organizations tool to provide a starting point for nonprofits in identifying risk factors and immediate priorities. The tool’s 20 questions cover financial condition, financial information, organizational change factors, and leadership. For nonprofits in fragile financial condition, the assessment helps to identify how urgently they need to act and where to start. For healthy organizations, the assessment has been valuable for leadership team and board discussion about strengths, risks, priorities, and opportunities. Whatever your starting point, we hope you find this tool useful.
Box: Assessment of Recession Risk and Preparedness for Nonprofit Organizations
This tool offers a quick assessment of risk in four essential areas for nonprofit organizations. The rating and guidance provided will help to start discussions, set priorities, and focus attention as nonprofits develop plans to weather the recession. This assessment is a starting point developed to indicate the level of urgency and priority. It cannot take the place of a comprehensive organizational review or in-depth analysis of financial trends and forecasts.
Kate Barr is the executive director of Nonprofits Assistance Fund.
Copyright 2009. All rights reserved by the Nonprofit Information Networking Association, Boston, MA. Volume 16, Issue 4. Subscribe | buy issue | reprints.
