FINANCIAL HEALTH ANALYSIS TOOL OVERVIEW
Purpose:
Data Source:
Inputs Definitions & Instructions:
Enter Data ONLY in yellow cells. The rest are calculated for you.
Gray Cells are auto-calculated. Do not enter data in these cells.
Inputs
Fiscal Year Ending
Net Assets Without Donor
Restrictions, End of Year
Net Assets Without Donor
Restrictions, Beginning of
Year
Total Expenses
Total Program Expense
Total Management &
General
Expense
Total Fundraising Expense
Net Assets Without Donor
Restrictions, End of Year
Board Designated Net
Assets
Net Fixed Assets, End of
Year
Mortgages, End of Year
Net Fixed Assets, Net of
Related Debt
Available LUNA
Total Annual Expenses ÷ 12
Cash - Non-Interest Bearing
Savings & Temporary Cash
Investments
Total Annual Expenses ÷ 12
OUTPUTS
Change in Unrestricted Net
Assets or "Operating Surplus
or (Deficit)"
Program Expense
Percentage
Management & General
Expense Percentage
Fundraising Expense
Percentage
LUNA: Liquid Unrestricted
Net Assets
Months Covered By Liquid
Reserves
Months of Cash on Hand
Please Note: This document is made available by BDO FMA, for informational purposes only and does not constitute financial or professional advice. The informa
this document is of a general nature and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon or
substitute for specific professional advice. BDO FMA recommends that you obtain your own independent professional advice before making any decision in relatio
particular requirements or circumstances. BDO FMA does not warrant the accuracy, completeness or currency of the information provided on and made available
document. By viewing or using this document, you acknowledge and agree that any reliance upon or use of any information made available through this documen
entirely at your own risk. BDO FMA shall not be liable for any loss or damage, whether direct or indirect, and however caused, to any person or organization arisi
of (or reliance upon) information provided on and made available through this document.
© BDO FMA LLC, 2022. All rights reserved.
ANALYSIS TOOL OVERVIEW
This tool is designed to provide a quick and basic overview of an organization's financials
Deviations from benchmarks do not necessarily imply poor financial performance or health but may
help to raise potential "flags" that may warrant further analysis or clarification.
All information can be gathered from IRS Form 990 data from the most recent 3 fiscal
years and next year's budget
structions:
w cells. The rest are calculated for you.
ulated. Do not enter data in these cells.
Instructions
Enter the fiscal years being analyzed. The oldest year of data being analyzed should be
entered in Column C, and then in increasing order to Column F, where the current or
upcoming year's budget data will be entered.
Enter the amount of unrestricted net assets as of the end of the year being analyzed.
This amount can be found in the Balance Sheet section of the Form 990, Part X, column (B),
line 27.
Enter the amount of unrestricted net assets as of the beginning of the year being
analyzed. This amount can be found in the Balance Sheet section of the Form 990, Part X,
column (A), line 27.
Enter the total expenses for each year being analyzed, as found in Statement of
Functional Expenses on the Form 990, Part IX, column (A), line 25.
Enter the total expenses for program services for each year being analyzed. This
information can be found on the Statement of Functional Expenses in the Form 990, Part
IX, column (B), line 25.
Enter the total expenses for management & general (i.e. administration) for each year
being analyzed. This information can be found on the Statement of Functional Expenses
in the Form 990, Part IX, column (C), line 25.
Enter the total expenses for fundraising for each year being analyzed. This information
can be found on the Statement of Functional Expenses in the Form 990, Part IX, column (D),
line 25.
Automatically populated. No data entry necessary.
Board designated net assets are not listed on the Form 990. If the amount is known,
enter the amount of board designated funds, if they exist. Enter only amounts that are
relatively illiquid (i.e., if a board designated amount represents an operating reserve, do
not enter it here).
Enter the total amount of fixed assets, net of accumulated depreciation. This
information can be found in the Balance Sheet section of the Form 990, Part X, column (B),
line 10c.
Enter the total amount of debt, as of the end of the year, that is collateralized by a
building or other fixed asset. This information can be found in the Balance Sheet section
of the Form 990, Part X, column (B), line 23.
Automatically populated. No data entry necessary.
Automatically populated. No data entry necessary.
Automatically populated. No data entry necessary.
Enter amount of non-interest bearing cash as found on the Balance Sheet of the Form
990, Part X, column (B), line 1.
Enter total amount of savings and temporary cash investments as found on the Balance
Sheet of the Form 990, Part X, column (B), line 2.
Automatically populated. No data entry necessary.
Benchmarks
Operating results are the key source of the accumulation or depletion of reserves.
Surpluses increase reserves and allow for future flexibility and sustainability. Deficits
deplete reserves and should be balanced by surpluses in prior or later years. Operating
results can vary widely across organizations or across years, so it is important to note
longer term trends. Any negative result or downward trend should be investigated
further and analyzed to understand whether a change in operating results is being driven
by operating revenues, expenses, or both. Multiple years of operating deficits can
indicate that an organization’s deficit is "structural" and needs to be addressed
strategically by raising additional revenue or reducing operating costs.
While functional expense mix may vary based on organizational focus and life stage,
watchdog organizations and funders prefer to see the program expense ratio at no less
than 65% - 70%. However, organizations that are new or are in the midst of capital-acquiring or capacity-
building initiatives often have program expense ratios below this threshold. [Source: BBB's Wise Giving
Alliance]
Management and general should generally account for 20% - 25% of total expenses, unless
circumstances mentioned above regarding a lower program expense ratio and higher administrative costs
apply. [source: BBB's Wise Giving Alliance]
Fundraising expense should generally be 10% - 15%, unless the organization is in a growth phase
and/or investing in its fundraising capacity. [Source: BBB's Wise Giving Alliance]
Liquid Unrestricted Net Assets (LUNA), or reserves, consists of that portion of an
organization's unrestricted net assets balance that could be converted to cash relatively
easily if necessary. LUNA equals unrestricted net assets minus illiquid board designated
reserves and the equity portion of fixed assets. Subtracting these two amounts removes
the portion of the unrestricted net assets balance that is tied up in a building,
equipment, or other illiquid asset. Negative LUNA occurs either when the organization's
unrestricted net asset balance is negative, or when the unrestricted net asset balance is
smaller than the organization's net fixed assets.
Months of liquid reserves (i.e. months of LUNA) is calculated as a percentage of average
monthly operating expenses. Months of LUNA measure shows the amount of reserves
available to cover operating expenses, maintain assets, weather downturns, or pursue
opportunities. Months of LUNA greater than 1.0 indicate an organization is able to meet
operating expenses as well as have some reserves available for activities such as asset
maintenance, rainy day funds and/or strategic opportunities. A benchmark often cited in
the nonprofit sector is 3 to 6 months of operating reserves or LUNA, with an upper limit of 36
months. If an organization has a negative LUNA balance it effectively has zero months of LUNA.
Months of cash on hand is an important measure of liquidity. The amount needed will
vary based on how quickly an organization can convert receivables into cash, though a
common benchmark utilized by lenders is a minimum of 3 months cash reserves. In the nonprofit
sector, a slightly lower range of 1 to 3 months is often recommended. Organizations should think
strategically about cash flow management and maintain rolling cash flow projections in order to predict
and plan for potential cash flow issues.
e available by BDO FMA, for informational purposes only and does not constitute financial or professional advice. The information provided in
e and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon or treated as a
advice. BDO FMA recommends that you obtain your own independent professional advice before making any decision in relation to your
tances. BDO FMA does not warrant the accuracy, completeness or currency of the information provided on and made available through this
document, you acknowledge and agree that any reliance upon or use of any information made available through this document shall be
shall not be liable for any loss or damage, whether direct or indirect, and however caused, to any person or organization arising from the use
rovided on and made available through this document.
ncials
health but may
Row
Row 7
Row 9
Row 11
Row 14
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Row 19
Row 22
Row 26
Row 28
Row 30
Row 31
Row 33
Row 37
Row 39
Row 42
Row 43
Row 45
Row
Row 12
Row 18
Row 21
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Row 35
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Row 46
Nonprofit Financial Health Analysis
Organization Name:
Oldest ------------------------------------------------------------------> Newest
Document: 4. Next
1. 990 from 2. 990 from 3. 990 from
Year's
3 years ago 2 years ago last year
Budget* Source on IRS Form 990
Fiscal Year:
Did your organization have an operating surplus or deficit?
Net Assets Without Donor Restrictions, End of Year (A) Part X, column (B), line 27
Balance Sheet
Less:
Part X, column (A), line 27
Net Assets Without Donor Restrictions, Beginning of Year (B)
Change in Unrestricted Net Assets or “Operating Surplus
or (Deficit)” (A-B)
$0 $0 $0 $0
How are resources allocated across programs and supporting services?
Total Expenses Part IX, column (A), line 25
Total Program Expense
Statement of Functional Expenses
Part IX, column (B), line 25
Divided by total expense:
Program Expenses
Program Expense % Total Expenses Automatically populates
Total Management & General Expense Part IX, column (C), line 25
Divided by total expense:
Management & General Expenses
Management & General Expense % Total Expenses Automatically populates
Total Fundraising Expense Part IX, column (D), line 25
Divided by total expense:
Fundraising Expenses
Fundraising Expense % Total Expenses Automatically populates
How liquid are the organization’s reserves?
Net Assets Without Donor Restrictions, end of year (A) $0 $0 $0 Automatically populates
Board Designated Net Assets** (B) N/A
Balance Sheet
Net Fixed Assets, End of Year (C) Part X, column (B), line 10c
Less:
Part X, column (B), line 23
Secured mortgages, End of Year (D)
Net Fixed Assets, net of related debt (E) $0 $0 $0 Automatically populates
LUNA: Liquid Unrestricted Net Assets (A-B-E) $0 $0 $0 Automatically populates
How many months of operations can be covered with liquid operating reserves?
Available LUNA from above calcuation (A) $0 $0 $0 Automatically populates
Statement of Functional Expenses & Balance Sheet
Divided by average monthly expenses:
Automatically populates
(Total Annual Expenses ÷ 12) (B)
Months Covered by Liquid Reserves (A÷B) Automatically populates
How many months of operations can be covered with the available cash?
Cash - non-interest bearing (A) Part X, column (B), line 1
Plus
Savings and temporary cash investments (B) Part X, column (B), line 2
Total Cash on Hand (A+B) $0 $0 $0 Automatically populates
$0 $0 $0 Automatically populates
(Total Annual Expenses ÷ 12) (C)
Months of Cash on Hand ((A+B) ÷ C))
*To calcuate operating results using the budget, enter unrestricted revenue in line 9 and total expenses in line 11
**Board Designated Net Assets not available on the IRS Form 990
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SUMMARY OF FINANCIAL METRICS
(AUTO-POPULATED) 0 0 0 0
Metrics Err:540 Err:540 Err:540 Err:540
1 Operating Surplus (Deficit) $0 $0 $0 $0
Funtional Expense Mix
Total Program Expense
2 Total Management & General Expense
Total Fundraising Expense
3 Cash on Hand $0 $0 $0 $0
4 Months of Cash 0.0
5 LUNA Balance $ - $ - $ - $ -
6 Months of LUNA 0.0
Benchmarks
Operating Surplus (Deficit)
Surpluses increase reserves and allow for future flexibility and sustainability
Deficits deplete reserves & should be balanced by surpluses in prior or later years
Operating results can vary widely across oyears, so it is important to note longer term trends
Functional Expense Mix
Functional expense mix will vary based on organizational focus and life stage
Management and general should generally account for 20% - 25% of total expenses
Months of Cash and Months of LUNA
Generally, 3-6 months are helpful
1-2 months are common (see "Some factors to consider" below)
Less than one month is concerning (see "Some factors to consider" below)
Some factors to consider
Equity (in access to resources—e.g., BIPOC-led, rural, smaller cities)
Subsector/revenue sources (e.g., government tends to underpay, making surpluses, reserves and cash challenging)
Organizational growth/change
Property ownership
© BDO FMA LLC, 2022. All rights reserved.
Operating Results
Operating Surplus (Deficit) Functional Expense Mix
$1 100%
90%
80%
70% Row 24
Row 21
60%
Row 18
50%
$1
40%
30%
20%
10%
0%
$0
Liquid Unrestricted Net Assets (LUNA)
LUNA Balance Months of LUNA
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
Cash on Hand
Cash on Hand Months of Cash
$1
$1
$0
© BDO FMA LLC, 2022. All rights reserved.
