Cordell’s Corner

This & That

Cordell’s Corner: SCA is Financially Healthy - A Look at Ratios

Some simple ratios indicate the financial health of Summit Christian Academy or any nonprofit organization. Following are three such ratios.

1) Operating Reserve Ratio. How about our financial security and liquidity? What is the size of our reserves? It’s a portion of a year or number of months. Total unrestricted net assets are divided by total annual expenses that don’t include depreciation and amortization. SCA’s average over the last three years was 89%. That’s a healthy ratio. That’s 11 months. The higher the ratio, the greater the financial security. But you may not want it too high. That may indicate funds are hoarded. Opportunities may be missed to expand the mission. SCA is growing AND enhancing opportunities AND putting resources aside each year. That’s a recipe for great long-term financial success!

2) Program Expense Ratio. How much is spent on program versus operating and fundraising? Total program expenses are divided by total expenses. The average ratio over the past three years is 85%. SCA’s high ratio is very positive. It shows strong commitment toward the core mission. If this ratio is very high, it could indicate a reluctance to invest in infrastructure. For example, perhaps more funds should be spent on support service personnel or fundraising, in order to grow. SCA monitors the expense mix between program and support services. Our goal is to keep this ratio high, but not sacrifice opportunities to expand program services.

3) Profit Margin Ratio. Do earnings exceed spending? By what percent? Cordell Dick The change in unrestricted net Director of Major Gifts assets is divided by total unrestricted revenue and support. The average over the past three years was 15%. It’s a reasonable and healthy ratio. If the ratio is really high, charges for services may be too high or there’s been great fundraising success. On the other hand, the ratio may be too low. Charges may be inadequate or expenses too high, or perhaps the fundraising is inadequate. SCA’s goal is to balance charges and expenses properly. Charges must be reasonable and expenses appropriate.

Every financial decision impacts these ratios. Will you pray with us to discern God’s will in all of these matters? We want to expand and grow while staying healthy and strong. If you have questions related to financial ratios or making gifts to SCA, give me a call at 701.471.4000 (cell) or 816.525.1480 (office) or email me at cordelld@sca-kc.org.

Join Us! for a RETIREMENT RECEPTION honoring Mrs. Linda Harrelson

Summit Christian Academy Head of School (1999-2021) 3:30-6:00 p.m., Tuesday, May 11

(Short program and presentation at 4:00 p.m.) Elementary Commons | 1450 SW Jefferson | Lee’s Summit