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Can fiscal discipline transform philanthropy?

fiscaldiscipline

The days of judging a nonprofit’s worthiness by the percentage of money spent on administration and fundraising seem to be coming to an end.  Foundations and philanthropists of all stripes are beginning to see the wisdom of investing in organizations based on their outcomes, their business strategy, their financial savvy, their history of innovation, their vision for the future, and their ability to deliver results.

This is a good thing. But it is also risky. Far too many nonprofits lack the financial rigor at the board or executive management level to be successful in this new world.

It was easy in the old world. “Keep the spending ratios within industry limits. We may not grow. We may not thrive. But the people who give us money will keep giving us money and we won’t risk anything.”

In this new world, without risk those rewards are likely to dry up.

Now executives and board members previously only concerned with the amount of money coming in and how it looked on the books must pay closer attention to how it is actually being spent. If your funders are expecting growth, innovation, partnership, and expansion, you’ll have to find a way to develop the financial backbone to make the tough decisions and invest for the future.

Partnerships like those between The Wallace Foundation and Financial Management Associates have the ability to put high-quality resources at the fingertips of nonprofits that will help them ensure their financial fitness. I would encourage nonprofits, grant makers, and others in the philanthropic community to take advantage of these resources. Become financially aware. Prepare for the future of philanthropy.

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