Financial Capacity and Sustainability of Ordinary Nonprofits

This article divides financial issues into capacity and sustainability in two time frames: long and short. Long term emphasizes maintaining services; short term emphasizes resiliency. An organization's long-term financial capacity is sustainable if its rate of change is sufficient to maintain assets at their replacement cost. A key contribution of this study is a sustainability principle that gives managers short-term budget surplus targets needed to achieve this objective. The formulas are applied to national data to give a picture of the sector and establish benchmarks for "normal" practice. "Ordinary nonprofits" are active public charities without endowments that are not primarily membership associations or grant makers.