August 12, 2010

Why Nonprofit Groups Should Talk More About Money

A few years ago, at a Council on Foundations conference, I was reviewing the program with Lew Feldstein, the longtime New Hampshire Charitable Foundation leader, and I said, "Do you realize that the word ‘money’ is completely absent from the program?"

We scanned the text. It was chockablock with words like leadership, innovation, passion, justice, transformation, impact, scale, and strategy. But there was no mention of money. No finance. And certainly no accounting.

I asked Lew, "Why don’t we ever talk about money? However painful it is to admit, at the end of the day, the main reason nonprofits come to foundations is, well, for money."

He said simply, "It’s not what we care about."

This new blog—Money and Mission—is, in a real sense, about why and how we should care about how money works (or doesn’t). It will be led by several of us who work with nonprofit organizations at the Nonprofit Finance Fund.

To be sure, in recent years grant makers and nonprofit leaders have done a better job of discussing money and its place in the nonprofit world.

Grant makers are now talking about capitalization and finance and asking better financial questions when screening potential grantees.

More sophisticated online financial-analysis tools are on the way, so we can get away from the overly simplistic and context-free ratios showing how administrative costs compare with program spending and use measures that make direct and fair comparisons. What's more, some of the groups that rate the performance of nonprofit organizations are catching up with financial research on topics such as the cost of overhead.

And the Financial Accounting Standards Board, the organization that sets the accounting rules followed by most nonprofit groups, has gathered a committee of experts to advise it on topics that affect nonprofit organizations.

But we have more work to do.

Great ideas, deep caring for those in need, creativity, resourcefulness, a service ethic, and an expansive vision for the future are abundant in the nonprofit world. But we lack the financial capacity to meet these ideals, and our financial habits undermine efforts to build it.

We need to think of finance as more than a muddle of fund raising, budget monitoring, and compliance with overhead rules.

The current, tough economic environment is spurring needed change. Now, understanding money concepts like risk, leverage, and accounting, seems to be a moral imperative.

Never did grant makers, board members, government officials, and managers of nonprofit organizations need so urgently to understand and skillfully wield money as a tool.

This blog seeks to continue and extend the conversation about money, welcome more voices, and hear questions, comments, experiences, and ideas from all sides.

We’ll be contributing to the conversation, with diverse opinions from both inside and outside the Nonprofit Finance Fund. We hope to hear from you as well.