Knowledge and Insights

Nonprofits are facing a new challenge as many donors, regulators and ratings agencies now are looking for performance reporting to be provided to them; that is, financial measurements as well as outcome and impact reporting.  Of these, financial reporting is most straightforward, as various percentages and ratios are calculated and presented in an attempt to depict an organization’s financial health.

When it comes to outcome and impact reporting, finding the right metrics to measure can be time consuming for an organization, so consider who will be reviewing these reports and what they are looking for when evaluating your performance.  While financial metrics are very important to donors, many of them want to know how your organization is making a difference.  What is the outcome of your programs?  How many people have you helped?  How has your organization improved your clients’ quality of life?  These are the types of questions your organization should be prepared to answer, so you will need to establish a process to measure and report out.  As their dollars have become more scarce in recent years, donors have increased their calls to action and are more selective about who they give to and, more importantly, why.  Millennials want to know what they are contributing towards, how their dollars will be used, what impact their dollars may have, and how it will be measured.

For years, charity ratings agencies have looked at overhead ratios as their main measurement criteria to evaluate an organization’s program effectiveness.  Charity Navigator, a well-known evaluator, currently rates an organization’s financial health, as well as accountability and transparency.  Recently, they have revealed plans to enhance their evaluation criteria by including results reporting, which will look at organization alignment, results criteria, outcome validation, constituent feedback and reporting, and lastly, evaluation reporting.  Guidestar, another resource for evaluating nonprofit organizations, recently changed its reporting and now provides information on programs and results.  The free-flowing reporting allows organizations to describe their programs and highlight successes, including their impact.

Donors expect more real-time reporting and current statistics.  Long gone are the days when an annual report highlighting the year’s accomplishments and achievements (published months after year-end) is sufficient.  In order to be more competitive in today’s philanthropic environment and meet current donor standards, nonprofits have to reinvent how they interact and communicate with donors.  Now is the time to act.  Organizations need to rethink what they measure and the metrics used to show their impact.  In addition, organizations need to develop processes to allow real-time reporting and information dissemination to their donors, members and constituents.

Learn how Mercadien can help you evaluate and improve your organization’s performance reports and results by contacting me at 609-689-9700 or [email protected].