Scott Menzel Product & User Experience Manager GuideStar Peter Kramer Manager Nonprofit Finance Fund December 10, 2013

Weaving Financial Data Into Your Grantmaking Process: Interpretation and communication with Financial SCAN

AGENDA

Introduction to Financial SCAN

New Feature Overview

Brief Online Tour

Case Analysis

Q & A

Knowing which metrics to focus on for assessing financial health

Having the time and skills to collect, parse and apply financial data to inform grantmaking decisions

Fostering a candid dialogue with grantees about financial health and resource needs

When it Comes to Nonprofit Finance, Funders Face Common Challenges

Effective Solutions

Financial SCAN demystifies nonprofit data and illuminates nonprofit financial health, providing the field with knowledge and tools for building and sustaining healthy, effective organizations.

Sound Financial Health

Strong Organizations

Quality Programs

Financial SCAN: A New Analysis Filter on 990 Data

Financial SCAN at a Glance

What: Data platform for assessing nonprofit financial health and fostering dialogue among all stakeholders involved in making social impact

Who: Private and public grantmakers/donors, nonprofit organizations, philanthropic advisors, consultants and media

How: Private and public grantmakers/donors, nonprofit organizations, philanthropic advisors, consultants and media

WHAT

Data platform for assessing nonprofit financial health, making data driven decisions, and strengthening grantmaker-grantee dialogue

WHO

Nonprofit organizations, private and public grantmakers, individual donors, philanthropic advisors, and consultants

HOW

Draws data directly and automatically from IRS Forms 990,* presenting complex information in an easy-to-analyze and communicate format (313K orgs)

*Note: Financial SCAN does not include data from Forms 990 EZ

What’s in a Financial SCAN?

Organizational Dashboard: Five years of key financial trends and ratios

Graphs & Explanatory Text: More detailed overview of an organization’s: Expenses Revenue Profitability Balance Sheet Liquidity

Peer Comparison Dashboard: Select peer organizations for financial benchmarking

How are Funders Using Financial SCAN?

Adds, strengthens and/or focuses financial component of due diligence

Helps identify financial strengths and red flags

Informs conversations among grantmakers and their grantees about financial health and needs

Saves time and resources

“This innovative new tool builds the financial management capacity of nonprofits and helps grantmakers engage with their grantees about financial health and funding needs.”

Kathy Reich, David & Lucile Packard Foundation

Financial SCAN 2.0: New Features!

Excel Download Peer Group Comparison Customized Enterprise Access 7 Day Nonprofit Access

Brief Online Demonstration

Key Considerations: What 990 data can and cannot do

990 data CAN help: Understand an organization’s financial trajectory and recent

revenue, expense, and balance sheet dynamics Show how an organization compares to its peers across

standardized fields

990 data CANNOT: Provide the authoritative and most up-to-date financial picture

of your organization Tie exactly to the information presented in an audit Show revenue restrictions Distinguish between operating dollars and capital dollars

Meet Today’s Case Organization: REAL WORLD SKILLS

MISSION: To prepare underserved youth for lasting careers and self-sufficiency

PROGRAMS: Personal & professional skill-building Summer internship placement Trade programs and certifications

RECENT DYNAMICS: Steady yet modest growth New location and dated equipment Beginning strategic planning process

REAL WORLD SKILLS

Dashboard: Income Statement

Dashboard: Balance Sheet

Peer Comparison Dashboard:

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Topics Explored in Financial SCAN Graphs:

Expense detail & composition Revenue detail & composition Profitability Full cost of doing business Asset composition Depreciation of fixed assets Liability composition Liabilities as a % of assets Liquidity

With the exception of 2008, surpluses and deficits have been close to breakeven

RWS has effectively managed this growth by consistently covering its operating costs to achieve marginal surpluses

But are surpluses adequate to build financial resilience?

RWS’s liquidity has fluctuated somewhat over the period, but has been consistently tight

Available liquidity represents a nonprofit’s ability to handle risks and seize new opportunities.

Observations & Recommendations for REAL WORLD SKILLS

Observations from Financial SCAN: Modest growth over last several years Reliable mix of revenue sources Relative to peers, few fixed assets Tight liquidity constrains ability to innovate

Recommendations for Funders: Acknowledge strengths (e.g., reliable revenue, surpluses

in most years, etc.) and encourage business planning in strategy process

Discuss with RWS leadership the amounts and types of capital needed to help the organization build working capital and reserves and adapt to the changing job market

Q&A

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Thank you! Peter Kramer

Manager, Advisory Services Nonprofit Finance Fund

617-204-9772 peter.kramer@nffusa.org

To learn more:

www.guidestar.org/financialSCAN