IU Center on Philanthropy and Charities and Governance and Finances and Philanthropic Research and Philanthropy

Study finds finance managers at not-for-profits lack financial knowledge

March 3, 2012

Financial managers at some midsize not-for-profits lack basic knowledge, a new study by the Center on Philanthropy at Indiana University reveals.

In the survey of more than 500 organizations with budgets of $1 million to $5 million, 76 percent of managers said they were financially “knowledgeable,” but only 36 percent correctly answered all three assessment questions.

“This disconnect has potentially significant implications for nonprofits and the donors who place their trust in them,” said Una Osili, director of research at the Center on Philanthropy.

So where did they trip up? Mostly on bonds. Fewer than half the managers surveyed, 48.3 percent, knew that the following statement is false: “If interest rates rise, bond prices will rise.”

The survey, sponsored by The Moody’s Foundation, also probed for strengths and weaknesses in the organizations.

Nearly half, 49 percent, kept less than three months’ worth of cash reserves. Another quarter had four to six months of cash on hand, while the remainder had more than seven months’ worth of cash.

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