Giving Compass' Take:

• Michael Etzel and Hilary Pennington explain how the focus on nonprofit programs have left organizations without infrastructure and financial reserves. 

• Why have so many nonprofits been left without operating funds? How can philanthropists close the gap? 

• Learn more about funding nonprofit overhead

As any architect knows, durable structures rise from strong foundations. The same is true of nonprofits. Organizational capacity and financial resilience provide the foundation that allows a nonprofit to advance its mission from a position of strength. Yet, both donors and grantees commonly ignore or fail to act on this knowledge.

A Bridgespan review of financial statements spanning 2009 t0 2014 from nearly 300 name-brand nonprofits with big budgets and successful programs—which together account for a third of the top 15 US foundations’ spending—found that shaky finances are, in fact, the rule. More than half (53 percent) experienced recurring or chronic budget deficits in at least two of the past five years. And 40 percent had fewer than three months of reserves to cushion all-too-frequent shortfalls.

In fact, 30 of the 275 organizations had no reserves—making them technically insolvent.

These numbers are alarming, but ultimately understandable. Both nonprofits and donors instinctively focus money and attention on building programs to help as many people as possible. Yet the underpinnings of those programs, as well as the organization’s infrastructure and financial health, often suffer from neglect.

What’s needed, our study clearly revealed, is an operational model that supports strong programs and strong organizations.

Read the full article about nonprofit budgets by Michael Etzel and Hilary Pennington at Forbes.