What Philly orgs can glean from this national report on nonprofit fiscal health

The financial health of Philadelphia nonprofits is pretty closely aligned with that of their counterparts across the country, according to a GuideStar report published earlier this month.

The report, which looks at financial data from 2010 to 2014, shows that over half the nation’s nonprofits are at financial risk and have less than one month’s cash reserves. About 30 percent lost money over three years, and 7 to 8 percent are insolvent, showing liabilities exceeding assets.

GuideStar published the report with management consulting firm Oliver Wyman and nonprofit merchant bank SeaChange Capital Partners, the same group that published a report on the financial health of Philadelphia nonprofits in October of last year.

Seven percent of Philadelphia nonprofits are insolvent (skewing toward the lower end of those nationally), and 40 percent are running at a loss (10 less than those nationally). Size does not impact financial health, and large organizations are just as likely as small ones to be financially unstable.

The national report also offers up a few actionable steps nonprofit leaders, funders and policymakers can take to improve financial health outcomes.

For nonprofits, the report suggests implementing a “holistic risk management framework” and long-term scenario planning process to mitigate potential damage. It is also suggested that nonprofit executives start turning down contracts that reimburse work at rates that are substantially lower than the cost of providing services.

Other advice includes:

• Provide adequate funding, government or otherwise, for overhead
• Create more flexible funding models that lift nonprofit spending restrictions
• Encourage restructurings and mergers
• Transfer programs that rely wholly on government funding to government
• Increase contracts with for-profit entities