Nonprofit Financial Health Analysis Worksheet: Instructions and Benchmarks

The attached worksheet is a template for calculating a snapshot of a nonprofit's financial health, with a focus on liquidity. The instructions below
explain, step-by-step, how to use the worksheet.

INPUTS Instructions Row

Enter the end date of the current fiscal year in cell C3 in MM/DD/YYYY format. The dates for previous years
End of Current Fiscal Year Row 3
will then automatically populate in row 7.

Enter the amount of unrestricted revenue for each year being analyzed. This amount can be found in the
Unrestricted Revenue and Support Statement of Activities (Income Statement) in your audited financial statements. Do not include revenue Row 9
listed in the temporarily restricted column of the audit.

Enter the total expenses for each year being analyzed, as found in the audit's Statement of Activities (Income
Total Expenses Row 11
Statement).

Enter the revenue from individual contributions for each year being analyzed. Include any income from
Individual Contributions Revenue Row 14
Special Events. This information can be found on the Statement of Activities (Income Statement) in the audit.

Enter the revenue from foundation and corporate contributions for each year being analyzed. This
Foundation/Corporate Revenue Row 16
information can be found on the Statement of Activities (Income Statement) in the audit.

Enter the amount released from restriction for the year. This information can be found in the "unrestricted"
Satisfaction of Restrictions column or section of the Statement of Activities (Income Statement). For purposes of this analysis, it is Row 18
assumed that all revenue released from restriction originated from Foundation or Corporation grants.

Enter the amount of revenue derived from government sources for each year being analyzed. This
Government Funding Row 20
information can be found on the Statement of Activities (Income Statement) in the audit.

Enter the amount of (non-government) earned income for each year being analyzed. This includes program
Earned Income fees, rental income, merchandise sales, and other sources of earned revenue. This information can be found Row 22
on the Statement of Activities (Income Statement) in the audit.

Automatically populated; no data entry necessary. The formula in this row calcuates the difference between
Other Income Row 24
total unrestricted revenue in row 9 and what has been entered for all revenue sources in rows 14-22.

Enter the total expenses for program services for each year being analyzed. This information can be found
Total Program Expense Row 27
on the Statement of Functional Expenses or Statement of Activities (Income Statement) in the audit.

Enter the total management and general (i.e. administrative) expenses for each year being analyzed. This
Total Management and General
information can be found on the Statement of Functional Expenses or Statement of Activities (Income Row 29
Expense
Statement) in the audit.

Enter the total expenses for fundraising (or development) for each year being analyzed. This information can
Total Fundraising Expense be found on the Statement of Functional Expenses or Statement of Activities (Income Statement) in the Row 31
audit.

Enter the amount of unrestricted net assets from the Statement of Financial Position (Balance Sheet) in the
Unrestricted Net Assets Row 34
audit.

Enter the amount of board designated funds, if they exist. This amount, which can be found in the audit's
Statement of Financial Position (Balance Sheet), is internally designated by the Board of Directors, not
Board Designated Net Assets Row 35
externally restricted by a funder. Because it is technically unrestricted, the amount will be listed as a sub-
category of "unrestricted net assets."

Enter the total amount of fixed assets, net of depreciation. Fixed assets are sometimes referred to as "capital
assets" or "property, plant, and equipment." Do not include any fixed assets that are designated as
Fixed Assets Row 36
temporarily restricted (this is unusual). Fixed assets are found in the Statement of Financial Position (Balance
Sheet) with additional detail provided in the notes to the financial statements.

Enter the total amount of mortgage debt (i.e. debt that is collateralized by a building or other fixed asset),
Mortgages or other debt associated including both current and non-current amounts. This information can be found in the Statement of Financial
Row 38
with fixed assets Position (Balance Sheet); additional detail on debt composition can be found in the notes to the audited
financial statements.

Fixed Assets, Net of Related Debt Automatically populated based on amounts in Rows 36 and 38. No data entry necessary. Row 39

Available LUNA Automatically populated based on the amounts in row 34-38. No data entry necessary. Row 42
Total Annual Expenses ÷ 12 Automatically populated based on the amounts in row 11. No data entry necessary. Row 44

Enter total amount of cash and cash equivalents as found (typically the first item) on the Statement of
Cash and Cash Equivalents Financial Position (Balance Sheet). This number should include all highly liquid and easily convertible Row 47
investment products.

Total Annual Expenses ÷ 12 Automatically populated based on the amounts in row 11. No data entry necessary. Row 49

Board Designated Reserves Automatically populated based on the amount entered in row 35. No data entry necessary. Row 53

Enter total amount of temporarily restricted net assets. This information is found on the Statemet of Financial
Temporarily Restricted Net Assets Row 54
Position (Balance Sheet).

Enter total amount of permanently restricted net assets, if applicable. This information is found on the
Permanently Restricted Net Assets Row 55
Statemet of Financial Position (Balance Sheet).
OUTPUTS Benchmarks Row

Change in Unrestricted Net Assets
or "Operating Surplus or (Deficit)"
Operating results are the key source of the accumulation or depletion of reserves. Surpluses increase Row 12
reserves and allow for future flexibility and sustainability. Deficits deplete reserves and should be balanced
by surpluses in prior or later years. Operating results can vary widely across organizations or across years,
so it is important to note longer term trends. Any negative result or downward trend should be investigated
further and analyzed to understand whether a change in operating results is being driven by operating
revenues, expenses, or both. Multiple years of operating deficits can indicate that an organization’s deficit is
"structural" and needs to be addressed strategically by raising additional revenue or reducing operating
costs.

Revenue Composition These amounts represent the revenue received from individual donations, foundations/corporations, Rows 15-25
government sources, earned income, and other sources. While there are no specific benchmarks for revenue
composition, an overreliance on one source of funding or funder could be a concern depending on the
organization's business model.

Program Expense Percentage While functional expense mix may vary based on organizational focus and life stage, watchdog organizations Row 28
and funders prefer to see the program expense precentage at no less than 65% - 70%. However,
organizations that are new or are in the midst of capital-acquiring or capacity-building initiatives often have
program expense ratios below this threshold. [Source: BBB's Wise Giving Alliance]

Management and General Expense Management and general (adminstrative) expenses should generally account for 20% - 25% of total Row 30
Percentage expenses, unless circumstances mentioned above requiring higher administrative costs apply. [source:
BBB's Wise Giving Alliance]

Fundraising Expense Percentage Fundraising expenses should generally be 10% - 15% of overall expenses, unless the organization is in a Row 32
growth phase and/or investing in its fundraising capacity. [Source: BBB's Wise Giving Alliance]

LUNA: Liquid Unrestricted Net Liquid Unrestricted Net Assets (LUNA), or reserves, consists of that portion of an organization's unrestricted Row 40
Assets net assets balance that could be converted to cash relatively easily if necessary. LUNA equals unrestricted
net assets minus board designated reserves and the equity portion of fixed assets. Subtracting these two
amounts removes the portion of the unrestricted net assets balance that is tied up in a building, equipment,
designated fund or other illiquid asset. Negative LUNA occurs either when the organization's unrestricted net
asset balance is negative, or when the unrestricted net asset balance is smaller than the organization's net
fixed assets.

Months Covered By Liquid Reserves Months of liquid reserves (i.e. months of LUNA) is calculated as a percentage of average monthly operating Row 45
expenses. The months of LUNA measure shows the amount of reserves available to cover operating
expenses, maintain assets, weather downturns, or pursue opportunities. Months of LUNA greater than 1.0
indicate an organization is able to meet operating expenses as well as have some reserves available for
activities such as asset maintenance, rainy day funds and/or strategic opportunities. A benchmark often cited
in the nonprofit sector is 3 to 6 months of operating reserves, with an upper limit of 36 months. If an
organization has a negative LUNA balance it effectively has zero months of LUNA.

Months of Cash on Hand Months of cash on hand is an important measure of liquidity. The amount needed will vary based on how Row 50
quickly an organization can convert receivables into cash, though a common benchmark utilized by lenders is
a minimum of 3 months cash reserves. In the nonprofit sector, a more practical range of 1 to 3 months is
often recommended. Organizations should think strategically about cash flow management and maintain
rolling cash flow projections in order to predict and plan for potential cash flow issues.

Board Designated Net Assets Board designated net assets are a portion of unrestricted net assets set aside by the governing board for a Row 53
specific programmatic initiative, infrastructure need, or other purpose. While these funds are available for use
only at the discretion of the board, they may represent an additional resource that could serve the same
goals as the above-mentioned LUNA.

Temporarily Restricted Net Assets
Temporarily restricted net assets are restricted to use for a particular purpose or within a particular timeframe Row 54
according to donor intent. A high ratio of temporarily restricted net assets could indicate that the organization
regularly receives multi-year grants, which is a common funding model. However, a high or increasing
temporarily restricted net asset ratio may also indicate that the organization is having trouble satisfying grant
restrictions from year to year.

Permanently Restricted Net Assets Permanently restricted net assets (often referred to as an "endowment") must be preserved in perpetuity, Row 55
according to donor intent. In many cases, the interested earned on an endowment can be used to fund an
organization's operating activities or a particular program and is therefore an important resource to consider
when evaluating financial health.

Please Note: This document is made available by Fiscal Management Associates, LLC (FMA), for informational purposes only and does not constitute financial or professional advice.
The information provided in this document is of a general nature and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon
or treated as a substitute for specific professional advice. FMA recommends that you obtain your own independent professional advice before making any decision in relation to your
particular requirements or circumstances. FMA does not warrant the accuracy, completeness or currency of the information provided on and made available through this document. By
viewing or using this document, you acknowledge and agree that any reliance upon or use of any information made available through this document shall be entirely at your own risk.
FMA shall not be liable for any loss or damage, whether direct or indirect, and however caused, to any person or organization arising from the use of (or reliance upon) information
provided on and made available through this document.
 Nonprofit Financial Health Analysis
Organization Name:
Enter data into
highlighted cells
End of Current Fiscal Year: MM/DD/YYYY only

1. Three Years 2. Two Years 3. Last Year 4. Current Year

Ago Ago (Actuals) (Budget)
Fiscal Year Ending:
Did your organization have an operating surplus or deficit?
Statement of Activities

Unrestricted Revenue and Support

Less:
Total Expenses

Change in Unrestricted Net Assets or “Operating Surplus or (Deficit)” #N/A #N/A #N/A #N/A

What was the mix of unrestricted revenue?

Individual Contributions Revenue

Individual Contributions Revenue
Individual Contributions Revenue % Total Revenue #N/A #N/A #N/A #N/A

Foundation/Corporate Revenue
Plus:
Satisfaction of Restrictions
Statement of Activities

Foundation/Corporate Revenue
Foundation/Corporate Revenue % Total Revenue #N/A #N/A #N/A #N/A

Government Funding

Government Funding
Government Funding % Total Revenue #N/A #N/A #N/A #N/A

Earned Income
Earned Income
Earned Income % Total Revenue #N/A #N/A #N/A #N/A

Other Income (self calculating) $0 $0 $0 $0

Other Income
Other Income % Total Revenue #N/A #N/A #N/A #N/A

How are resources allocated across programs and supporting services?

Total Program Expense

Statement of Functional Expenses

Program Expenses
Program Expense % Total Expenses #N/A #N/A #N/A #N/A

Total Management and General Expense

Management & General Expenses

Management and General Expense % Total Expenses #N/A #N/A #N/A #N/A

Total Fundraising Expense

Fundraising Expenses
Fundraising Expense % Total Expenses #N/A #N/A #N/A #N/A

How liquid are the organization’s reserves?

Unrestricted Net Assets (A)

Board Designated Net Assets (B)

Balance Sheet

Fixed Assets, net of depreciation

Less:

Mortgages or other debt associated with fixed assets

Fixed Assets, net of related debt (C) #N/A #N/A #N/A

LUNA: Liquid Unrestricted Net Assets (A-B-C) #N/A #N/A #N/A

 Nonprofit Financial Health Analysis
Organization Name:
Enter data into
highlighted cells
End of Current Fiscal Year: MM/DD/YYYY only

1. Three Years 2. Two Years 3. Last Year 4. Current Year

Ago Ago (Actuals) (Budget)
Fiscal Year Ending:
How many months of operations can be covered with liquid operating reserves?

Available LUNA from above calcuation #N/A #N/A #N/A

Income Statement and Balance Sheet

Divided by Average Monthly Expenses:

Total Annual Expenses ÷ 12

#N/A #N/A #N/A

Months Covered by Liquid Reserves #N/A #N/A #N/A

How many months of operations can be covered with the available cash?

Cash and Cash Equivalents

Divided by Average Monthly Expenses:

Total Annual Expenses ÷ 12

$0 $0 $0

Months of Cash on Hand #N/A #N/A #N/A

Additional Resources

Board Designated Net Assets (aka Board Designated Reserves) $0 $0 $0

Balance Sheet

Temporarily Restricted Net Assets

Permanently Restricted Net Assets

© 2016 Fiscal Management Associates, LLC. All rights reserved. www.fmaonline.net

 Operating Results

Operating Surplus (Deficit) Operating Revenue Mix Functional Expense Mix

100%
$12 100%
90% 90%
$10 80% 80%
70% Individual Contributions 70%
Unrestricted Revenue and Revenue 60%
$8 Support 60% Foundation/Corporate 50%
Total Expenses Revenue
50% 40%
Change in Unrestricted Net Government Funding
$6 Assets or “Operating Surplus 40% Earned Income 30%
or (Deficit)”
30% Other Income 20%
$4 10%
20%
0%
10%
$2
0%
Total Program Expense Total Management and General Expense
$0 Total Fundraising Expense

Net Assets Cash on Hand

LUNA Balance Months of LUNA Cash Balance

$12 0.0 0.0 0.0 0.0 $12

$10
$10

$8
$8

$6 (0.1)
$6

$4
$4

$2
$2
$0 (0.2)
$0

Net Assets, Including Temp. & Perm. Restricted Board Designated Net Assets Months of Cash on Hand
$12 $1 1.0

0.9
$10
0.8
$8
0.7
$6
0.6
$1
$4 0.5

$2 0.4

0.3
$0
0.2

Permanently Restricted Net Assets Temporarily Restricted Net Assets $0 $0 $0 0.1

$0
Unrestricted Net Assets (A) 0.0 0.0 0.0
0.0