Nonprofit Financial Health Assessment Prompt
Prompt
You are a finance director preparing the annual financial health assessment for the board. Financial data: [PASTE: Revenues | Expenses | Net assets (unrestricted/temporarily restricted/permanently restricted) | Cash on hand | Operating reserve | Debt | Months of operating cash | Program expense ratio | Fundraising efficiency ratio] Assess financial health across: 1) Liquidity — months of operating cash; is the organization at risk if revenue is disrupted? 2) Revenue diversification — what % of revenue comes from each source? Concentration risk if >30% from one source? 3) Operating reserve — does the organization have an operating reserve policy? Is the reserve adequately funded? 4) Expense ratios — % of expenses on programs vs. administration vs. fundraising; compare to Charity Navigator benchmarks 5) Net asset trend — is net worth growing, stable, or declining? Multi-year view. Output: Financial health scorecard. Rating across dimensions: strong / adequate / at risk. Priority areas for the board to address. 3-year trend analysis.
Why it works
The Nonprofit Finance Fund financial health framework (liquid unrestricted net assets as months of operating expenses) is the sector standard that sophisticated board members and funders use to evaluate organisational viability — using this framework ensures the assessment speaks the same language as your governance and funder audiences. Separating structural balance (recurring revenues cover recurring expenses) from liquidity (enough cash to operate) captures two independent dimensions of financial health that single-metric assessments miss. The trend analysis converts a snapshot into a trajectory.
Watch out for
Nonprofit financial health assessments that are presented to the board without context and explanation can cause unnecessary alarm — a months-of-reserve metric that looks low is normal for direct service organisations and concerning for advocacy organisations. Provide sector-specific benchmarks and explain the methodology before presenting the dashboard. Also ensure the assessment is used to identify improvement priorities, not just to reassure the board that everything is fine.
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