2 Accounting Issues You Need to Understand
Nonprofits need to stand together (for example through the Direct Marketing Association Nonprofit Federation) and publicly oppose misleading math and misguided reliance on ratios to evaluate the effectiveness of a nonprofit.
Long-term return on investment
While the most vital metrics to a nonprofit are net revenue (how much is left to accomplish the organization’s mission, after expenses) and impact of the program, another important criterion in evaluating a nonprofit’s fundraising prowess is long-term ROI. That is, the net amount a nonprofit raises for its cause over time divided by the amount it spends to raise the dollars —the operative words being over time. Sadly — and dangerously — some politicians, state regulators, the IRS section G and watchdogs mischaracterize fundraising efforts based on an almost meaningless calculation: short-term ROI. Allow me to illustrate how ludicrous this approach is:
Tom Harrison is the former chair of Russ Reid and Omnicom's Nonprofit Group of Agencies. He served as chair of the NonProfit PRO Editorial Advisory Board.
