PFC Learning Series Tool 4: A Primer on Analyzing Financials of Charities and Nonprofits

Apr 29, 2021
  • Description

Financial statements are your primary source of information about an organization's financial position. Financialinformation is typically measurable, objective, and comparable over time and it is a useful indicator of overallorganizational financial health. Understanding the financial position of a charity or non-profit organization (NPO) iscritical when assessing their long-term viability, financial needs, and organizational capacity.

This primer is a basic tool for donors and funders to help understand and analyze financial statements to determinethe financial sustainability of an organization and identify potential red flags. Understanding financials will help you answer some fundamental questions, such as: 

1.  Is the charity financially sustainable?

2. Are there good processes for financial management?

3. Are financial resources used efficiently?