Nonprofit Financial Health Scorecard
TLDR
Nonprofit financial health is mostly determined by six measurable variables: months of cash reserves, revenue concentration, unrestricted net asset share, audit history, indirect cost recovery, and debt-to-asset ratio. This scorecard adds four governance variables - budget variance, board finance review, receivables aging, and policy currency - and outputs an A through F grade with linked guides for each weakness.
What the Scorecard Measures
Financial health for a nonprofit isn’t a single number. It’s the relationship between liquidity, revenue stability, structural assets, and governance discipline. The scorecard combines those four dimensions into ten questions and grades the result A through F.
Liquidity (cash reserves, debt). How long the organization can operate if revenue stops, and how much of the asset base is encumbered.
Revenue stability (concentration, restricted balance). How exposed the organization is to a single funder leaving, and how much of net assets are available for general operations.
Structural soundness (audit, indirect, budget variance). Whether the financial statements are credible, whether the organization recovers the full cost of its programs, and whether actuals track the budget.
Governance discipline (board review, receivables aging, policy currency). Whether oversight is working, whether the organization manages its receivables, and whether the rules of the road are current.
How the Grades Are Distributed
The scorecard isn’t graded on a curve. It’s graded against absolute thresholds that map to nonprofit finance norms documented in audit literature and Form 990 analysis. In practice:
- A (90%+): Roughly the top 10% of mid-sized nonprofits. Strong on every dimension.
- B (75-89%): Solid posture with one or two specific gaps. The most common gap is revenue concentration.
- C (55-74%): Functioning, but with meaningful exposure. Reserves and indirect cost recovery are typical pressure points.
- D (35-54%): Multiple weaknesses compounding risk. Stabilization work needed before growth investment.
- F (under 35%): Structurally fragile. The scorecard recommends a one-time diagnostic engagement with a fractional CFO or auditor.
Nonprofit Financial Health Scorecard
An interactive 10-question scorecard that grades your nonprofit's financial health A through F across cash reserves, revenue diversification, restricted balance, audit history, indirect cost recovery, and debt levels. Delivered by email.
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- Months of cash reserves
- Unrestricted cash divided by average monthly operating expenses. The most cited measure of short-term financial resilience for nonprofits. Three months is the conventional minimum; six months is the conventional target.
DEFINITION
- Revenue concentration
- The share of total revenue from the largest single source (typically a single funder, single grant, or single contract). Concentration above 40% is generally considered a structural risk.
DEFINITION
- NICRA
- Negotiated Indirect Cost Rate Agreement. A federal cognizant-agency-approved rate that lets a nonprofit charge indirect costs to federal awards at an agreed-upon percentage.
DEFINITION
Q&A
What is a nonprofit financial health scorecard?
A tool that scores an organization's financial position across reserves, diversification, restricted-vs-unrestricted balance, audit history, indirect cost recovery, debt, budget discipline, board oversight, receivables management, and policy currency. The grade summarizes structural risk in a single letter.
Frequently asked