This report is designed to assist you in your organization's development. Below you will find your overallranking, organizational snapshot and narrative write-up.

Snapshot of: Example Foundation, Inc.

Sector: T31 - Community Foundations

Revenue: $1M - $10M

Periods: 12 months against the same 12 months from the previous year

Prepared by: Lanter, Leonardo, and Levy

By: Rick Captain

Phone: 561-998-7770

 

NONPROFIT OPERATIONAL ANALYSISA measure of how well the organization is managing money with regard to its sector and mission.

  Conditions in this area of the report are quite similar to last period. Program efficiency in particular is about average and was about the same last period. Program efficiency measures the percentage of each expense dollar that is allocated toward programs. This number is important to stakeholders, since they perceive it as a reflection of how well the organization is achieving its mission. Additionally, the organization has received a high level of contributions this period relative to its investment in fundraising. The organization does not appear to produce a substantial percentage of total revenue through program revenue. Because of this, management may want to assess all of the organization’s revenue streams for reliability and sustainability, because fluctuations in these outside sources of cash can at times be difficult for management to control. Expenses might be adjusted based on this analysis to minimize risk to the organization’s future program services.

 

 

Shows the basic relationship between program expenses and total expenses. The best outcome would be a ratio close to 1, where the majority paid by a nonprofit would go towards "programs". This ratio is

typically keenly watched by employees, managers, Board members, donors, and contributors. It tends to be one of the more important metrics that many nonprofits use in assessing performance.

 

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This shows the breakdown of all expenses of the nonprofit. In most cases, the majority should go towards Program Service Expenses.

 

 

This metric shows the composition of the organization's revenue stream. Specifically, it shows how many cents in program revenue there are for each dollar of revenue generated. Some people like to look at this

to see how dependent the entity is on outside funding.  

 

This shows the breakdown of all incoming revenue of the nonprofit. In most cases, the majority should becoming from Program Service. This chart can be useful to show how dependent the entity is on outside

funding.  

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Shows how able a nonprofit entity is to pay for total expenses from program revenues alone. Many times (although not always) program revenues are more predictable and consistent sources of money and,

therefore, it is a point of interest to see how able a nonprofit is to liquidate expenses from just program revenue. The ideal score would be 1 or even above 1 in very rare cases.

 

 

Shows how much contribution revenue a nonprofit can generate from fundraising activities/expenses. The ideal relationship is a high number, which would mean that the nonprofit is able to generate a

multiple of how much it costs to do fundraising.  

 

This shows the average amount contributed by donors to the organization.  

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Shows the amount of organization expenses per member. If this number is high the organization should look into aggressively seeking new members.

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NONPROFIT FINANCIAL ANALYSISFinancial Score for Example Foundation, Inc.

LIQUIDITY - A measure of the organization's ability to meet obligations as they come due.

OPERATING YIELD TRENDS - A measure of whether the trends in profit are favorable for theorganization.

REVENUE - A measure of how revenue is growing and how it lends itself tothe organization's program services.

BORROWING - A measure of how responsibly the organization is borrowing and how effectively it is managing debt.

ASSETS - A measure of how effectively the organization is utilizing their gross fixed assets.

EMPLOYEES - A measure of how effectively the organization is hiring and managing its employees.

Financial Analysis for Example Foundation, Inc.

LIQUIDITY A measure of the organization's ability to meet obligations as they come due.

  The organization has produced some positive results in the liquidity area. First, the organization's cash and near-cash accounts have grown relative to its short-term obligations, which is good. These are the specific assets that the organization uses to pay the bills. For example, notice in the graph area of the report that the organization's quick ratio has risen from last period. Second, the organization has been able to improve earnings this period, which should help it to improve its "overall" liquidity position over time.

On the other hand, the organization has produced some negative results as well. The organization's overall liquidity position is still poor, as it was last period. In fact, it may be necessary to find some ways to improve these conditions -- it is possible that the rate of progress in this area is too slow. This means that the organization's liquidity position has improved but the organization still does not appear tobe in good shape. It is important to note that the organization's position seems poor according to the several ways liquidity is measured.

The organization's relatively weak overall liquidity position may be traced to turnover ratios - its receivable days and payable days performance. Both of these benchmarks are higher than sector averages, indicating that the organization is not as efficient as other similar nonprofits in collecting receivables or paying bills/payables. Although a high payable days ratio can indicate that the organizationmay be trying to keep money in the nonprofit by using trade credit, this is a statistic that generally will notbe pleasing to creditors.

LIMITS TO LIQUIDITY ANALYSIS: Keep in mind that liquidity conditions are volatile, and this is a general analysis looking at a snapshot in time. Review this section, but do not overly rely on it.

 

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Generally, this metric measures the overall liquidity position of an organization. It is certainly not a perfect barometer, but it is a good one. Watch for big decreases in this number over time. Make sure the accounts listed in "current assets" (numerator) are collectible. The higher the ratio, the more liquid the

organization is.  

 

This is another good indicator of liquidity, although by itself, it is not a perfect one. If there are receivable accounts included in the numerator, they should be collectible. Look at the length of time the organization has to pay the amount listed in the denominator (current liabilities). The higher the number,

the stronger the organization.  

 

This number reflects the average length of time required to collect cash from receivable accounts such aspledged contributions and/or program services transactions completed using credit. It is crucial to

maintaining positive liquidity.  

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This number reflects the average length of time required to collect cash from all receivable accounts except pledged contributions. It is crucial to maintaining positive liquidity.

 

 

This ratio shows the average number of days that lapse between the purchase of material and labor, and payment for them. It is a rough measure of how timely an organization is in meeting payment

obligations.  

 

Cash reserve is a rough measure of the amount of cash on hand to cover future expenses. The organization should target 182 or more days of cash reserve.

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OPERATING YIELD TRENDS1

A measure of whether the trends in profit are favorable for the organization.

  It is interesting to see that the operating margins have substantially risen by 223.44% here, which drove a net gain in dollars into the organization. The organization's operating yield has risen significantly since the prior period. The strong increase in operating yield is unusual and positive, since revenues have only stayed about the same from last period. Efficiencies seem to have been made in managing the expense side of the organization. Specifically, the organization seems to have been able to drive considerable net gains this period by cutting costs from last period. As long as the organization does not cut operating expenses to the point of hurting the quality of its programs, it is excellent to have better operating yieldon relatively the same level of revenues. If the organization can now increase revenues and keep expenses in check, it should be able to continue to strengthen its financial position, allowing for improvement and expansion of program services in future periods.

1 Operating yield (net operating gain/loss) is the nonprofit equivalent of net profit.

 

 

This number indicates the percentage of revenue that is left over after paying for program expenses. It is an important statistic that can be used in business planning because it indicates how many cents of gross program profit can be generated by future revenue and also what percentage of revenue the

organization can use for other expenses such as administration and fundraising.  

 

A very important number. In fact, over time, it is one of the more important barometers that we look at.It measures how many surplus cents the organization is generating for every dollar it sells. This is a very

important number in preparing forecasts.  

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Investment yield shows the investment rate of return.

REVENUE A measure of how revenue is growing and how it lends itself to the organization's program services.

  This organization has had some interesting revenue results this period. Even though revenues stayed about the same as last period, the organization achieved a positive result because its employee base and fixed asset base both decreased. This means that, although the organization is only generating about the same level of revenue, it is actually earning higher revenues per employee and asset dollar. The organization is moving approximately the same amount of revenue through fewer resources that costmoney, like employees and assets. Over the long run, the challenge will be to move revenues higher on the existing level of assets and employees. This usually improves the operating yield.

The next three sections will examine how effectively the organization is using three of its most important resources: borrowed funds, assets, and employees. Ultimately, effectiveness here is determined by comparing changes in these resources to changes in the organization's revenue level. Resources are costs that should be used to leverage higher revenues, since higher revenues are necessary to improve and expand the organization's program services and make progress toward its mission.

 

BORROWING A measure of how responsibly the organization is borrowing and how effectively it is managing debt.

  Not many changes are happening in this section. Borrowing (total debt level) and revenues stayed about the same. It is difficult to assess borrowing leverage unless there are changes in debt and/or revenue performance. The one positive point to mention (as discussed in the Operating Yield section) is that the operating margin improved this period. It is typical to see margin improvements over time if debt levels are held constant, and it is good to see the organization achieving this.

ASSETS A measure of how effectively the organization is utilizing their gross fixed assets.

  In this case, the organization may have removed assets that were not generating enough revenues. The organization is now generating approximately the same level of revenue as it generated last period whenmore fixed assets were owned, and there has been an improvement in the operating margin of 223.44%.Even though revenue did not increase since last period, these are good results in this area because the organization has become more "asset efficient" and leaner. The most positive part of this is that it should cause operating yields and thus programming to improve over time, if the organization can continue to increase the level of revenues on the existing asset base.

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EMPLOYEES A measure of how effectively the organization is hiring and managing its employees.

  Even though the revenue base is approximately the same as last period, this organization has been able to earn that level of revenue with fewer people, which is positive. The organization is now more "employee efficient" -- managers are driving about the same revenue through fewer people. A nonprofit will generally be reluctant to hire more people under these circumstances, unless it can bring in people who will bring in additional income. Careful planning must always be done before new employees are hired.

This is an important limitation of financial analysis: financial analysis looks back at what has happened, rather than ahead at where the organization is going. Past analysis is useful as an element to create good future projections, but it should not be used alone to make operational decisions. Decisions about hiring in particular should be planned carefully around where the organization will be in the future.

"One of the marks of true greatness is the ability to develop greatness in others." -- J.C. Macaulay  

 

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RAW DATA

  06/30/2009 06/30/2010 06/30/2011 06/30/2012

Statement of Activities

Program Service Revenue $247,496 $236,850 $231,318 $224,024

Contributions $4,326,775 $6,722,222 $3,823,629 $3,947,739

Government Grants $2,889,001 $2,925,747 $2,625,214 $3,038,086

Investment Revenue $185,379 $130,576 $179,985 $193,442

Membership Dues $0 $0 $0 $0

Other Operating Revenue $827,747 $1,179,872 $1,298,102 $1,060,442

Net Assets Released From Restrictions $441,071 $584,599 $348,455 $191,800

Total Unrestricted Revenue $8,917,469 $11,779,866 $8,506,703 $8,655,533

Program Service Expenses $6,618,050 $8,427,278 $6,815,050 $6,804,034

  Depreciation and Amortization $140,964 $179,501 $145,161 $144,926

  Interest Expense $85,968 $159,360 $108,823 $112,539

Gross Yield $2,299,419 $3,352,588 $1,691,653 $1,851,499

Gross Program Margin 25.79% 28.46% 19.89% 21.39%

Fundraising Expenses $276,182 $401,822 $244,985 $291,286

  Payroll & Benefits $276,182 $401,822 $244,985 $291,286

Administration Expenses $670,897 $588,568 $535,101 $577,509

  Payroll & Benefits $670,897 $588,568 $535,101 $577,509

Other Operating Expenses $875,298 $1,757,271 $830,058 $714,459

  Payroll & Benefits $875,298 $1,757,271 $830,058 $714,459

Total Operating Expenses $8,440,427 $11,174,939 $8,425,194 $8,387,288

Operating Yield (Net Operating Gain/Loss) $477,042 $604,927 $81,509 $268,245

Operating Margin 5.35% 5.14% 0.96% 3.10%

Other Inflows $0 $0 $0 $0

Other Outflows $0 $0 $0 $0

Total Change In Net Assets $477,042 $604,927 $81,509 $268,245

  06/30/2009 06/30/2010 06/30/2011 06/30/2012

Statement of Financial Position

Total Cash and Cash Equivalents $3,350,693 $2,828,421 $3,271,856 $4,820,079

  Unrestricted Cash $3,049,131 $2,573,863 $2,977,389 $4,386,272

  Restricted Cash $301,562 $254,558 $294,467 $433,807

Total Receivables $1,097,865 $1,748,701 $2,376,456 $1,612,340

Inventory $0 $0 $0 $0

Current Investments $0 $0 $0 $0

Other Current Assets $1,643,891 $1,526,783 $3,424,641 $2,537,020

Total Current Assets $6,092,449 $6,103,905 $9,072,953 $8,969,439

Gross Fixed Assets $519,642 $628,629 $496,871 $434,762

Accumulated Depreciation $0 $0 $0 $0

Net Fixed Assets $519,642 $628,629 $496,871 $434,762

Long Term Investment Assets $2,677,939 $3,345,271 $3,492,649 $3,588,921

Other Assets $269,462 $248,560 $246,577 $284,210

Total Assets $9,559,492 $10,326,365 $13,309,050 $13,277,332

Payables $3,535,481 $4,265,183 $4,690,204 $4,578,689

Short Term Debt $0 $0 $0 $0

Notes Payable / Current Portion of Long Term Debt $0 $0 $0 $0

Other Current Liabilities $885,644 $1,029,229 $881,549 $954,463

Total Current Liabilities $4,421,125 $5,294,412 $5,571,753 $5,533,152

Total Long Term Liabilities $72,894 $107,049 $118,165 $136,705

Total Liabilities $4,494,019 $5,401,461 $5,689,918 $5,669,857

Total Net Assets $5,065,473 $4,924,904 $7,619,132 $7,607,475

Number of Employees (FTE) 25.5 28.5 29.0 27.0

Number of Members 16,000.0 16,900.0 18,800.0 20,000.0

Number of Donors 2,324.0 2,380.0 2,440.0 2,500.0

COMMON SIZE STATEMENTS

  06/30/2009 06/30/2010 06/30/2011 06/30/2012Industry* (228)

Statement of Activities

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Program Service Revenue 3% 2% 3% 3%  9%

Contributions 49% 57% 45% 46%  42%

Government Grants 32% 25% 31% 35%  2%

Investment Revenue 2% 1% 2% 2%  34%

Membership Dues 0% 0% 0% 0%  0%

Other Operating Revenue 9% 10% 15% 12%  5%

Net Assets Released From Restrictions 5% 5% 4% 2%  7%

Total Unrestricted Revenue 100% 100% 100% 100%  100%

Program Service Expenses 74% 72% 80% 79%  49%

Depreciation and Amortization 2% 2% 2% 2%  N/A

Interest Expense 1% 1% 1% 1%  N/A

Gross Yield 26% 28% 20% 21%  51%

Fundraising Expenses 3% 3% 3% 3%  3%

Payroll & Benefits 3% 3% 3% 3%  N/A

Administration Expenses 8% 5% 6% 7%  8%

Payroll & Benefits 8% 5% 6% 7%  N/A

Other Operating Expenses 10% 15% 10% 8%  4%

Payroll & Benefits 10% 15% 10% 8%  N/A

Total Operating Expenses 95% 95% 99% 97%  63%

Operating Yield (Net Operating Gain/Loss) 5% 5% 1% 3%  37%

Other Inflows 0% 0% 0% 0%  1%

Other Outflows 0% 0% 0% 0%  1%

Total Change In Net Assets 5% 5% 1% 3%  36%

  06/30/2009 06/30/2010 06/30/2011 06/30/2012

Industry* (228)

Statement of Financial Position

Total Cash and Cash Equivalents 35% 27% 25% 36%  10%

Unrestricted Cash 32% 25% 22% 33%  N/A

Restricted Cash 3% 2% 2% 3%  N/A

Total Receivables 11% 17% 18% 12%  5%

Inventory 0% 0% 0% 0%  0%

Current Investments 0% 0% 0% 0%  1%

Other Current Assets 17% 15% 26% 19%  1%

Total Current Assets 64% 59% 68% 68%  56%

Gross Fixed Assets 5% 6% 4% 3%  5%

Accumulated Depreciation 0% 0% 0% 0%  1%

Net Fixed Assets 5% 6% 4% 3%  4%

Long Term Investment Assets 28% 32% 26% 27%  39%

Other Assets 3% 2% 2% 2%  1%

Total Assets 100% 100% 100% 100%  100%

Payables 37% 41% 35% 34%  5%

Short Term Debt 0% 0% 0% 0%  0%

Notes Payable / Current Portion of Long Term

Debt 0% 0% 0% 0%  0%

Other Current Liabilities 9% 10% 7% 7%  4%

Total Current Liabilities 46% 51% 42% 42%  10%

Total Long Term Liabilities 1% 1% 1% 1%  3%

Total Liabilities 47% 52% 43% 43%  13%

Total Net Assets 53% 48% 57% 57%  87%

*The industry common size figures shown above were taken from all nonprofit organizations with NTEE code T31 for all years in all areas with yearly revenue $1 million to $10 million.

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SECTOR SCORECARD

Financial Indicator Current Period Sector RangeDistance from Sector

Program Efficiency 0.81 0.80 to 0.89 0.00%

= Program Service Expenses / Total Expenses

Explanation:  Shows the basic relationship between program expenses and total expenses. The best outcome would be a ratio close to 1, where the majority paid by a nonprofit would go towards "programs". This ratio is typically keenly watched by employees, managers, Board members, donors, and contributors. It tends to be one of the more important metrics that many nonprofits use in assessing performance.

Revenue Composition 0.03 0.05 to 0.20 -40.00%

= Unrestricted Program Service Revenue / Total Unrestricted Revenue

Explanation:  This metric shows the composition of the organization's revenue stream. Specifically, it shows howmany cents in program revenue there are for each dollar of revenue generated. Some people like to look at this to see how dependent the entity is on outside funding.

Operating Reliance 0.03 0.03 to 0.09 0.00%

= Unrestricted Program Service Revenue / Total Expenses

Explanation:  Shows how able a nonprofit entity is to pay for total expenses from program revenues alone. Many times (although not always) program revenues are more predictable and consistent sources of money and, therefore, it is a point of interest to see how able a nonprofit is to liquidate expenses from just program revenue. The ideal score would be 1 or even above 1 in very rare cases.

Fundraising Efficiency 13.55 5.00 to 9.00 +50.56%

= Unrestricted Contributions / Unrestricted Fundraising Expenses

Explanation:  Shows how much contribution revenue a nonprofit can generate from fundraising activities/expenses. The ideal relationship is a high number, which would mean that the nonprofit is able to generate a multiple of how much it costs to do fundraising.

Average Donor Contribution $1,579 N/A N/A

= Total Contributions / Number of Donors

Explanation:  This shows the average amount contributed by donors to the organization. 

Expenses Per Member $419 N/A N/A

= Total Operating Expenses / Number of Members

Explanation:  Shows the amount of organization expenses per member. If this number is high the organization should look into aggressively seeking new members.

Current Ratio 1.62 1.90 to 3.18 -14.74%

= Total Current Assets / Total Current Liabilities

Explanation:  Generally, this metric measures the overall liquidity position of an organization. It is certainly not a perfect barometer, but it is a good one. Watch for big decreases in this number over time. Make sure the accounts listed in "current assets" (numerator) are collectible. The higher the ratio, the more liquid the organization is.

Quick Ratio 1.16 1.30 to 1.64 -10.77%

= (Cash + Total Receivables) / Total Current Liabilities

Explanation:  This is another good indicator of liquidity, although by itself, it is not a perfect one. If there are receivable accounts included in the numerator, they should be collectible. Look at the length of time the organization has to pay the amount listed in the denominator (current liabilities). The higher the number, the stronger the organization.

Receivable Days 67.99 Days 10.00 to 40.00 Days -69.98%

= (Total Receivables / Total Unrestricted Revenue) * 365

Explanation:  This number reflects the average length of time required to collect cash from receivable accounts such as pledged contributions and/or program services transactions completed using credit. It is crucial to maintaining positive liquidity.

Receivable Days Less Contributions 125.01 Days N/A N/A

= ((Total Receivables - Contributions Receivable) / (Total Unrestricted Revenue - Contributions)) * 365

Explanation:  This number reflects the average length of time required to collect cash from all receivable accounts except pledged contributions. It is crucial to maintaining positive liquidity.

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Payable Days 245.62 Days 10.00 to 40.00 Days -514.05%

= (Payables / Program Service Expenses) * 365

Explanation:  This ratio shows the average number of days that lapse between the purchase of material and labor, and payment for them. It is a rough measure of how timely an organization is in meeting payment obligations.

Days Cash Reserve 194.24 Days 120.00 to 244.00 Days0.00%

= (Unrestricted Cash / (Total Expenses - Depreciation and Amortization)) * 365

Explanation:  Cash reserve is a rough measure of the amount of cash on hand to cover future expenses. The organization should target 182 or more days of cash reserve.

Gross Program Margin 21.39% 25.00% to 81.00% -14.44%

= Gross Yield / Total Unrestricted Revenue

Explanation:  This number indicates the percentage of revenue that is left over after paying for program expenses. It is an important statistic that can be used in business planning because it indicates how many cents ofgross program profit can be generated by future revenue and also what percentage of revenue the organization can use for other expenses such as administration and fundraising.

Operating Margin 3.10% -3.00% to 0.00% +3.10%

= Operating Yield / Total Unrestricted Revenue

Explanation:  A very important number. In fact, over time, it is one of the more important barometers that we look at. It measures how many surplus cents the organization is generating for every dollar it sells. This is a very important number in preparing forecasts.

Investment Yield 5.39% N/A N/A

= Investment Revenue / Investment Balance

Explanation:  Investment yield shows the investment rate of return.

    

NOTE: Exceptions are sometimes applied when calculating the Financial Indicators. Generally, this occurs when the inputs used to calculate the ratios are zero and/or negative.

READER: Financial analysis is not a science; it is about interpretation and evaluation of financial events. Therefore, some judgment will always be part of our reports and analyses. Before making any financial decision, always consult an experienced and knowledgeable professional (accountant, banker, financial planner, attorney, etc.).

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