It is growing increasingly important for not-for-profit boards, finance committees and management to expand their view of their organization’s financial performance.

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The State of the Not-for-Profit Sector in 2015
With increasing uncertainty in nonprofits’ operating
environment and ever-rising constituent expectations around
performance, program development and service delivery,
establishing a multiyear financial plan and developing
long-range financial projections will help leaders and those
responsible for governance to better understand baseline
financial performance projected for the next three to five
years. This planning will also offer valuable insights into
the organization’s sensitivity to changes in key business
drivers under a variety of “what-if” scenarios. In addition to
understanding the organization’s trajectory in relation to the
status quo, long-range financial plans enable finance executives
to make more informed decisions regarding their organization’s
ability to pursue growth, fund capital expenditures and service
debt. These plans will also shed light on how heavily their
organization might have to rely on investment income or
fundraising to support core operations.
An integrated long-range financial projection, informed by
organizational strategy, is increasingly becoming a valued
resource for finance and board discussions.
Joseph Mulligan, Manager, Not-for-Profit and Higher Education Practices,
Business Advisory Services
Given the dynamic nature of today’s operating environment,
it is growing increasingly important for not-for-profit boards,
finance committees and management to expand their view of
their organization’s financial performance. While nonprofits
routinely develop strategic plans to re-evaluate their market
position, assess organizational priorities and trade-offs, and
chart a course for the future, such initiatives are conducted
with varying levels of participation from and coordination with
chief financial planners. Although some finance executives are
intimately involved in these initiatives, others have historically
maintained a relatively nominal role, with their primary focus
on more traditional general accounting and financial reporting
matters. Finance professionals are increasingly being asked
to offer insights and deliver greater strategic value to their
organization’s long-term planning and resource allocation
decision-making.
In addition to participating in discussions and partnering with
organizational leadership to confront pressing issues around
balancing the budget, evaluating investments, managing cash
flow, addressing escalating costs and performing budget-
to-actual analysis, among others, finance executives must
maintain a keen eye on navigating the tumult associated with
the months and years ahead, while taking measured steps
to position their institution for financial sustainability and
future success. These leaders are charged with the difficult
task of balancing their organization’s ambitions with financial
capacity and the opportunity costs of resource deployment.
While an annual budget and year-to-date variance reports
and forecasts can play a vital role in helping finance and not-
for-profit leaders maintain a finger on the pulse of near-term
performance, it is essential that boards, finance committees and
senior management understand the organization’s anticipated
trajectory over the long term.
Enhancing the strategic value of the finance function