Strengthening Nonprofit Financial Management


Nonprofit organizations, which deliver many of the social services Americans receive, often suffer from weak financial management capacity that affects the quality of their services. Between 2009 and 2013, the Wallace Foundation undertook an initiative to test if it could: (1) strengthen the financial capabilities of nonprofit staff, comparing the results of two models of professional and organizational development and (2) lessen the burden organizations bear when they accept public funds by engaging an organization to work with state agencies to streamline contracting practices. This project examined how 25 Chicago-based organizations responded over a four-year period of the initiative. The study provides insights into what it takes to build sustainable capacity in an organization and how to do it more cost effectively. The project also showed how hard it is to make changes to public funding mechanisms. Change is possible but slow.

Agenda, Scope, and Goals

Between 2009 and 2013, the Wallace Foundation funded a management consulting firm, Fiscal Management Associates, to provide the 25 nonprofit organizations with one of two models of professional development: (1) a customized model that included substantial individual consulting and group learning for organizations’ leaders or (2) a model that provided primarily group learning opportunities. The foundation also provided grants to the 25 organizations designed to offset some of their costs. Simultaneously, the Wallace Foundation funded the Donors Forum, a Chicago-based organization, which worked to improve the public funding environment for nonprofit organizations in Illinois.

Researchers conducted a long-term evaluation of the initiative gauging how the organizations changed over the four years, what this change cost, and how the public funding environment changed. The evaluation investigates the lessons learned from the initiative about strengthening the financial management of nonprofit organizations and also, more generally, about how to improve organizational capabilities.

Design, Sites, and Data Sources

The evaluation is a mixed-methods outcome and implementation study. Over four years, the executive directors and lead financial staff of the 25 Chicago-based study organizations filled out questionnaires, every 9 to 12 months, about the their financial health and capabilities. They also reported on the costs of participating in the initiative — both monetary costs and the time staff were spending on the initiative. Once a year, researchers visited Chicago and interviewed staff in the organizations and staff at the Donors Forum.