Amplify your Due Diligence with Financial SCAN

Editor's Notes

• #2: Scott does intro Thanks Scott, and thank you everyone for joining us this afternoon to learn about Financial SCAN. Many of you know NFF and GuideStar, but a quick introduction: NFF has more than 30 years providing capital to nonprofit organizations as well as advisory services on the topic of strategic finance. GuideStar as most, if not all of you know, is the leader in nonprofit data with the largest publicly available dataset in the nonprofit sector. NFF and GS came together leveraging our respective strengths in deep analysis and data access to build an online financial data platform that could help make 990 data more meaningful for the nonprofit leaders, funders, and advisors who use it. And that’s what we’ll be talking about for the next 30 minutes. I’ll start with some important background information about Financial SCAN and how organizations are using it, then we’ll run a live demo of the product in action.
• #3: We believe that financial health provides a foundation on which a healthy nonprofit enterprise can be built to deliver high-quality programs that reflect an organizations mission, and ultimately, provide solutions to individuals and communities in need. Good, clear financial data leads to better, more informed decision making about how our organizations operate and deliver services. Finanical SCAN can contribute to financial health by providing clear, comprehensive data, and a guide for interpreting it to help de-mystify some of the complexities of nonprofit finance. Moreover, it provides an accessible, common format that allows nonprofit leaders to engage their staff, boards, and funders in conversations about recent financial past and future resource needs.
• #4: But that graphic that we just looked at is the ideal – that’s what we as a sector often aspire to, but there are challenges within the sector – nonprofit accounting, the need for subsidy from third party payors, not to mention the complex nature of the problems we’re collectively working to address, that complicate our ability to make that Effective Solutions table a reality. At NFF, we take a financial angle on strategic issues, and these are some of the challenges that we hear and see from our work with clients across the country. STARTING WITH THE FIRST BULLET: Throughout the sector there has been much focus on one-size fits all metrics like overhead, rather than the “vital signs” of financial health. Actually, we’re starting to see some shifts among the funder and intermediary communities away from overhead. Something that NFF has advocated for many years. Instead we want to focus nonprofit leaders, funders, and advisors on leading indicators of comprehensive financial health. Nonprofits need profits in order to survive and thrive, so we need a more comprehensive look at an organization’s entire financial picture including things like profitability, liquidity, and the balance sheet. WITH REGARD TO THE SECOND BULLET: I was at a conference last year where I was discussing Financial SCAN and a woman in the audience spoke up about being a “program person” and not knowing where to start when looking at financials. Many people in the nonprofit sector are passionate champions of their respective causes, rightly so, and may not have the financial background or experience to help them navigate matters of strategic finance. AND LASTLY: There’s some discomfort and uncertainty about discussing financial dynamics in the grantor-grantee dialogue. NFF annually conducts a state of the sector survey and last year we had nearly 6,000 respondents. It’s actually live right now, so please go to nff.org if you haven’t already to add your voice. But in the survey, one of the questions we ask is about comfort level in discussing financial matters with funders. The data shows that many financial topics are feel uncomfortable between nonprofits and funders. Knowing what to communicate about your organization’s financial story and how can be a real challenge, not to mention connecting that recent past to current resource needs. So, we’ve designed Financial SCAN to help address some of these issues – knowing what to look at and what to measure, clear reporting and analysis that’s easy to interpret, a communication guide, common language or a clear reference point for financial conversations between grantmakers and grant seekers.
• #5: So what is it? A new data platform developed by NFF and GuideStar. At NFF, we’ve been underwriting nonprofit loans and advising organizations on matters of strategic finance for more than 30 years and we combined our financial analysis expertise with GuideStar’s unmatched access to nonprofit data. We designed Financial SCAN to make the most out of what the 990 can offer by taking an unintuitive compliance document and applying an analytical filter to the data to make it more accessible and useful for nonprofits and funders. The Financial SCAN data platform lives on GuideStar’s website and automatically pulls 990 data for reports with just a few clicks. It is designed to give a multi-year perspective on nonprofit financial health as well as the opportunity for a side by side peer analysis. It’s important to note that the SCAN is currently only able to pull data from the Regular Form 990, not the 990 EZ or 990 PF. As of 2010, nonprofits may file a Form 990 EZ if they are less than $250K in revenue.That said, the universe of organizations available in the SCAN is made up of more than 313K nonprofits. It is a paid service, and there are two ways for organizations to access the analysis: Nonprofit Express Pass is designed for nonprofit organizations, who might only need to run a report on their organization every 12 months, or as frequently as the data would be updated. Express Pass access costs $250 and over a seven day period, it allows a user to run a report on a single organization, as well as user-selected peer organizations and groups of peers. During the seven day period, users can run as many peer comparison searches as they like, but the single organization that is the focus of the analysis does not change. Annual subscriptions are intended for funders and institutions who would run many reports over the course of a year. An annual subscription costs $2,500 and provides unlimited reports.
• #6: The Financial SCAN analysis is available through both an online interface and a pdf report. Dashboards online and in PDF. While the Graphs and Explanatory Text only in the PDF. As you’ll see shortly, we’ve organized the report by chapters of analysis (expenses, revenue, profitability, balance sheet, and liquidity) for a clear, comprehensive picture. NFF always takes a similar approach when conducting financial diagnostic analyses in our customized consulting engagements. For the peer comparison dashboard, the user can select up to five peer organizations as well as a larger subset of peers to show how your organization fits into a broader context of relevant peers.
• #7: Read through bullets. This quote on the right came from a feedback call that we conducted, and it’s a powerful testament to the value that user is getting from SCAN, comparing it to having hired a part-time staff person to conduct financial analysis.