You need to know where your organization's foundation stands fiscally to determine if it's where you want to be or if you need to change course. For example, an assessment that returns a healthy fiscal picture might provide your foundation the confidence to pursue new programs or initiatives that will help fulfill your mission.

Conversely, identifying unhealthy trends in financial health might allow you to take corrective action before little problems develop into larger issues. After all, if you ignore the failing financial health of your foundation, you could risk losing donors and new supporters. Now that I've convinced you of the importance of such an assessment, here are the steps required for conducting one:

Find the right mindset. A sound financial mindset is required of all who make decisions, big or small, on behalf of the foundation. This includes both staff and volunteer leadership. While the calculation and tracking of the relevant fiscal measurements is typically performed by finance staff or the treasurer, this information should be shared and discussed with both staff and volunteers on a regular basis. Sharing fiscal measurements on a regular basis helps to reinforce their importance with all decision makers. It's just one more way to keep stakeholders engaged and provides them with relevant talking points for potential donors.

If you ignore the failing financial health of your foundation, you could risk losing donors and new supporters.

This mindset should also be woven into your regular business activities. To gauge whether you have the right attitude, ask yourself these questions: Do I regularly look for cost-effective strategies for business operations? Does our staff and volunteer leadership identify cost-effective strategies?

Establish key measurements. Your foundation's financial health should be measured with relevant indicators and metrics at regular intervals. Although the key measurements might differ by organization, some of the common metrics for foundations include cash on hand (in days), fundraising rate-of-return, donor growth, and average gift size.

You should also consider evaluating activities that are within the control of the foundation's decision makers—such as travel, event rental, and postage rates—separate from forces that are outside of their control (e.g., investment portfolio results). Evaluating operating activities separately from non-operating activities can bring to light areas requiring attention more readily. For instance, robust investment income can mask inefficiencies in operations if not examined separately on a regular basis.

In conclusion, evaluating and maintaining your foundation's fiscal health is essential to ensuring that the foundation is positioned to continue to serve its mission. This process, which is the responsibility of both staff and volunteer decision makers, should include a mindset and concrete measurements. Doing this will enable those decision makers to make the right choices with the organization's resources.