Today we are truly proud to launch a new online nonprofit financial analysis tool, which we created in partnership with Nonprofit Finance Fund (NFF), called Financial SCAN: http://www.guidestar.org/financialscan. Our senior product manager Pam Jowdy sat down with NFF’s vice president, Rebecca Thomas, and GuideStar’s senior vice president, Lee Glenn, to discuss this innovative new platform – the highlights are below. You can find the full video on YouTube here: http://www.youtube.com/watch?v=sdvqZvVumtA.
Pam: So Rebecca, tell me more about the problem that you are trying to solve – what is unique about this tool and how can it help nonprofits and foundations and professionals?
Rebecca Thomas, Nonprofit Finance Fund: NFF and GuideStar came together to really create a new financial health analysis standard for the nonprofit sector. Right now, there really is no industry-wide standard. Nonprofits are asked to create lots of reports, myriad data points for funders, reporters, advisors, and that really detracts from what they do best which is delivering a great program. Meanwhile, nonprofit funders and advisors score through all this data but really lack a shared understanding of what to look for and why it matters. The upshot is that no productive dialogue takes place between the parties about what it takes to run and maintain a healthy nonprofit organization. It’s not all that different from the challenges that we all face when we sit around the dining room table and talk about our finances – we don’t agree on basic financial terms and why they matter, we can’t have a good conversation about how we’re spending our money, how we’re saving for a rainy day and what kind of liquidity we need to pursue our future goals.
Pam: That sounds like a very interesting challenge to tackle. So Lee, can you tell me a little bit more about how specifically Financial SCAN will help me? How’s it work?
Lee Glenn, GuideStar: Financial SCAN is an online tool, it’s really easy to use, just like using TurboTax, so virtually everybody will have access to it and be able to use it and understand it. There’s something in it for everyone, no matter which position you are approaching the tool from: you can be a funder, advisor, or nonprofit, and it has some sort of information in there that will be interesting to you. We use a series of dashboards and metrics for at-a-glance analysis. We use graphic representations and educational content for a deeper dive and we also use peer comparisons so you can understand how your organization fits into a group of organizations of your choosing. It’s our hope that Financial SCAN will be used by decision makers in the nonprofit space to be consulted before they make any key decisions or start any big projects. Financial SCAN is a very cost effective way to get this insight. We know that cost is issue for nonprofits, so we developed a program for nonprofits to have temporary access a couple times a year.
Pam: That’s great. Rebecca, as a funder, donor or advisor, will this tool tell me where I should give? If I’m a nonprofit, do I need to be concerned the SCAN might rank me against my peers?
Rebecca: Nonprofits definitely don’t need to be concerned. Financial SCAN is really not about passing judgments on the relative merits of individual organizations. NFF really believes that the existing ratings and rankings platforms are inadequate for some of the complex decision-making that goes into deciding whether to support an organization and how to support that organization. Another thing I want to point is that Financial SCAN is really about a comprehensive analysis of an organization. We don’t focus on just a few limited metrics of organizational health like the overhead ratio – that’s one example of a metric that is commonly held up. Yet, in NFF’s experience, it really has no bearing on an organization’s stability or effectiveness in delivering in its mission.
Pam: So, informed conversations, no arbitrary metrics like overhead ratios – that is a noble goal, no doubt. I hope you don’t work yourselves out of a job in the process.
Rebecca: I hope we don’t either! But, in all seriousness, more analysis will have to be done. There is always more learning that all of us can do. But Lee and I are so excited to bring together all the stakeholders, involved in making social impact, to have a real candid conversation about it takes to effectively resource an organization, and what the relationship is between financial health and nonprofit effectiveness.
Pam: Wonderful. Well, thanks for your time guys, and good luck. And if you’d like more information, please click to www.guidestar.org .