June 26, 2024

Outputs and Outcomes: What Nonprofit Reporting Means to Donors

Author Christina Hack, Chief Financial Officer

As a philanthropist, you want to know that your donations will positively impact the fulfillment of your chosen organization’s mission. Ideally, a nonprofit’s outputs will correlate directly to the achievement of their desired outcomes. But how can an interested party determine whether a nonprofit’s outputs and outcomes are balanced?

Nonprofit reporting provides insight into how an organization employs funds raised—and how it measures success. When evaluating a nonprofit’s impact, multiple factors should be considered. An organization’s “success” (i.e. their outputs compared to their outcomes) is best determined through a holistic lens. Below is a simple, step-by-step guide for donors and advisors alike to help you interpret a nonprofit’s outputs and outcomes.

Step One: Look at an organization’s overall financial health

Begin your exploration by reviewing the most straightforward information available—an organization’s financial data. Most nonprofit organizations will provide their fiscal reports, also known as a statement of financial position, via their website. If this information isn’t readily available online, try reaching out directly to request a copy. The primary purpose of reviewing such reports is to understand the organization’s net assets, or how the organization’s liabilities compare to its assets. Another purpose is to review the statement of activities to understand how the organization spends its resources. Valuable financial information is also found in audit footnotes on financial statements, and every non-secular nonprofit organization’s 990 tax form is available to the public via the IRS tax exempt organization search tool on their website.

While reviewing an organization’s statement of activities, you may see some spending categorized as “overhead.” It is vital to keep in mind that nonprofits are human endeavors, and human beings working for nonprofits have the same essential needs as staff in the for-profit sector. While volunteers are essential for many organizations, most—if not all—nonprofit organizations require a core team of part and full-time staff. Many nonprofits also own or rent physical spaces through which they facilitate their work, which also require funds to maintain. Overhead spending means different things for different organizations, but on the whole, it’s important not to view it as the enemy of impact.

Step Two: Set appropriate expectations

Myriad factors combine to determine how a nonprofit conducts itself, so it’s important to look at organizations as individual institutions. Every nonprofit organization is going to have its own array of financial obligations that factor into their balance of outputs and outcomes. So, expectations surrounding how an organization “should” be using their funds may be molded by considerations like the following:

  • The size of the organization:
    How many paid staff members are there, what’s their volunteer base like, do they have their own physical headquarters, or do they share a space?
  • Their scope:
    Are they a global, national or community-based organization, are their mission goals set in the short term or long term, is it a broad mission or highly specified?

Step Three: Look at what an organization is saying about itself

Depending on a nonprofit’s mission, quantifying impact may be a less than straightforward task, so it is more important to look at the metrics for success that an organization has established for themselves than to apply a general rule. For example, an organization with a mission of feeding children could measure their outputs and outcomes through comparing funds raised to the number of school lunches provided. That’s about as straightforward as it gets. But an organization with the mission to promote anti-bullying attitudes might use multiple metrics in combination to communicate their impact, like the number of schools visited, number of program participants and survey data. While these hypothetical organizations measure their impact by different metrics, the critical point is that they both established metrics appropriate for their causes and clearly communicated their outcomes, based on those metrics, to the public in their reporting.

When seeking to better understand an organization’s outputs to outcomes balance and overall effectiveness, it can be easy to rely upon star ratings provided by popular nonprofit-sector websites like GuideStar and Charity Navigator. These sites are helpful starting points for those looking to learn basic facts about a nonprofit organization, but it’s best not to make firm judgements based on how many stars a given organization has been awarded, as this approach can lack nuance and obscure the reality of a nonprofit’s effectiveness. Again, going straight to the source to look over their financial documents and impact reports will be the most reliable method for appraising the overall financial health and effectiveness of an organization.

Measuring a nonprofit’s impact through how they have been able to achieve balance between their outputs and outcomes is something any donor or advisor seeking to complete their own due diligence should have as a regular part of your philanthropic endeavors.