Exploring the Nexus of Nonprofit Financial Stability and Financial Growth

Taking a unified approach to studying nonprofit financial health, this research tackles a key question that has remained unexplored in the literature: “What lies at the intersection of the two key dimensions of financial health–financial stability and financial growth?” Specifically, we identify and compare nonprofits that exhibit high levels of financial stability and growth (high financially performing) to those that exhibit low levels (low financially performing)? Overall, we find that high financial performers (HFPs) tend to be older and larger organizations (in terms of unrestricted net assets and total revenue). HFPs are also more likely to report capital assets, and report high levels of compensation. Finally, HFPs tend to contain their overhead spending by exercising efficiency by investing in talented officers (paying more than the rest), but limiting the share of officer compensation, administrative, and fundraising expenses, as a percentage of total expenses. The results of the study should be informative to stakeholders attempting to understand the profile of an organization that is successfully able to achieve both capacity growth and financial stability.