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Lack of financial knowledge plagues NPOs

Mar 07, 2012 Philip Burgess

Especially in the wake of the economic downturn, many organizations and business experts are touting the importance of financial education. However, new research suggests a considerable number of groups fail to grasp even the most fundamental elements of business finance. The results of a study released this week by the Center on Philanthropy at Indiana University show a considerable number of nonprofit organizations are short on critical financial knowledge. For example, less than half of surveyed financial managers at mid-sized NPOs reported knowing about debt restructuring. Less than 40 percent of respondents had an audit committee, and while 76 percent claimed to be knowledgeable about finances, only a third correctly answered all three basic financial literacy questions. Many respondents - 38 percent - said maintaining a targeted level of cash reserves and financial flexibility is their top financial objective. Twenty-seven percent cited the need to accumulate annual surpluses in order to maintain the company mission during down years. "As Americans seek to enhance their knowledge of their financial circumstances, they also have greater expectations for organizations they support," said Patrick Rooney, executive director of the Center on Philanthropy.