Presented by Bridgette Burge, N.C. Center for Nonprofits for Housing Works! 2015 North Carolina Affordable Housing Conference

In 2014  78% of NC nonprofits reported increased demand  60% could not meet it Nonprofit Finance Fund’s “2015 State of the Nonprofit Sector Report”

Affordable housing

Long-term financial stability

To share 1. Selected principles and practices for path toward long-term financial stability 2. Tools for quick ways to gauge overall financial health 3. Additional resources

 Govern the nonprofit’s work  Provide oversight to ensure mission implemented effectively, ethically  Ensure the nonprofit has sufficient resources to carry out its work

 Establish operating reserves of 3-6 months.

 Ensure compliance with federal, state, and local laws & regulations  Contribute financially & get others to also  Set financial, governance, and management policies

 Written agreement for required reports  Committees  Fundraising  Finance  Audit

 Review/approve annual budget  Plan for balanced budget.  Board has a role in addressing deficits.  Cost Allocation  Regular review of financial statements SOP – assets & liabilities SOA – revenue & expenses

 Participates in budget planning  Recommends budget to Board  Recommends fiscal policies  Discusses financial statements in detail  Make tough choices  Asks tough questions

 More than $1 m in revenue  Audit Committee  has financial experts  selects auditor  oversees audit process

Building unrestricted net assets from one year to the next Cash reserves of 3-6 months

Quick Ratio Reserve Ratio Mark-Up

How much cash do we have to cover all current obligations? total “quick” assets ÷ total current liabilities = liquidity ratio (cash available to cover all current obligations)

Cash: $10,000 Accounts Receivable: $5,000 Inventory: $5,000 Stock Investments: $1,000 Current Liabilities: $15,000 $10,000 + $5,000 + $1,000 $15, Ratio

Higher ratio is better 1.5 ratio means nonprofit probably has enough liquid assets to cover current obligations. 3:1 recommended to NC grant-makers

How long could we operate at full capacity if all new revenue disappeared? total cash & cash equivalents ÷ average monthly expenses

Have we increased unrestricted net assets? unrestricted net assets + depreciation expense ÷ total expenses

Won reforms on White House’s Office of Management and Budget (OMB) Uniform Guidance 10% indirect cost mandate Reduce audit costs Standardize application and reporting requirements

Three webinars “Getting Your Overhead Funded” 1. Understanding and Communicating Full Costs (Nov. 6) 2. Recovering Full Costs (Nov. 16) 3. Negotiating a Federal Indirect Cost Rate (Dec. 11) ncnonprofits.org/connect/training/webinars

N.C. Center’s Information Central Dennis Walsh “Stress Testing the Charitable Organization” + 30 question self-assessment Nonprofits Assistance Fund articles “Analyzing Financial Information Using Ratios” “Ratio Calculation Worksheet”

Here’s to sufficient resources & wise stewardship. Thanks for your good work. Bridgette Burge Director of Programs N.C. Center for Nonprofits ex