Rating scales such as these should only be used when you can't think of anything else or if you ask for evidence. Our response to such questions can depend on all sorts of things - in this instance if an organisation just got turned down for a grant people may be feeling temporarily gloomy or they may have just got a grant and may be feeling unusually optimistic. It might even be something in their personal life which is affecting their mood. And anyway what is financial stability?
Those organisations which do best financially are those which have financial management in place and an active approach to finding funding. They also understand about spreading risk. If you only have one funder there is a higher risk than if you have many because that funder may stop funding you and then all you money is gone rather than just, for example, 10%. Here are my thoughts of how we might measure financial stability.
- Responsibility taken by trustees for monitoring finances - as a minimum quarterly in times of difficulty monthly or perhaps more frequently
- Active financial management – budgets and cash-flows which are updated as actual figures emerge to replace projections (estimates)
- A good understanding of finances and some financial skills amongst trustees and staff
- A history of overcoming financial difficulties
- Diversity of funding sources
- The length of funding contracts (some times fixed and sometimes on a rolling basis)
- A mix of restricted (for a specific purpose) and unrestricted funding where core costs can be covered by unrestricted funding
- Policies and procedures in place which ensure the integrity of resource management
- A well-considered reserves level - too little and there is a risk to your operations and too much and you are not fulfilling your charitable objects
- A good public profile with plenty of political support - not to be used often but there as a backstop if things look really bleak
- And overall - everyone within the organisation understands that finances are what keeps the show on the road and are 100% committed to helping out if called to do so. Once when an organisation whose board I chaired was in deep financial crisis as expected grants had not come in or were delayed. I instructed the chief officer to get all the workers to stop doing what they were doing so that they could concentrate for two weeks on fundraising - either activity stopped for two weeks or forever.
Whilst we may struggle to measure financial stability the health of our faith communities is much more difficult to measure. I am interested to know what proxy measures we may use to assess how well our faith communities are doing. Bums on seats and ...