GuideStar’s Finances Stabilize, Seeks Revenue Growth

February 24, 2014       Mark Hrywna      

GuideStar, the nonprofit that compiles annual tax forms and other data of nonprofits, held its first-ever “impact call” to share financial results for 2013 and its future goals. The Williamsburg, Va.-based organization stabilized finances after the recession, improving cash flow in the past two years and reducing expenses by $1.7 million.

The organization has more than $2.5 million in cash, which is approximately three months of operating expenses.

Board Chairman Mari Kuraishi described Monday’s call as an attempt “to open lines of communications with constituents, first and foremost by being transparent in our results,” with the hope that it leads to data-driven decision-making across the nonprofit sector.

Nonprofit data and tax forms by their nature are typically at least a year out of date, Kuraishi said, and the organization wants timelier – and even real-time – reporting. “In a spirit of learning by doing, we wanted to pilot this mechanism to see if we ourselves could be more inclusive and open up a line of dialogue,” she said.

The vision that GuideStar is striving for is to become the hub of a supply chain for the nonprofit sector’s information, said President and CEO Jacob Harold. GuideStar is not important in and of itself, he said, but is important to help other nonprofits do their work. Among the 18 objectives in the new year will be to experiment with tools to come up with appropriate metrics, he said.

GuideStar collects, distributes and innovates on top of data, Harold said. The goal will be to collect more, better and higher-quality data that better reflects the complexities of nonprofits. “We want to experiment in how we can get data out more quickly to the field. We want to reach more people,” he said, noting that 6.7 million people come directly to GuideStar.org each year, which is only a fraction of its potential.

“We want to reach people with greater depth, not just answers to simple questions but provide enough information to tackle the harder problems of social change,” Harold said. Providing context for the data will be critical, for example, for a literacy organization in Chicago, it would key to provide contextual data about literacy rates in Chicago when sharing information about it, he said.

GuideStar reported uploading more than 4 million Form 990 images, up 7 percent from the 3.768 million in 2012. Website visits were up 24 percent, from 9.8 million in 2012 to more than 12.1 million last year. Potentially more exciting, Harold said, was that web services hits – when another website shows GuideStar’s data on its own site – were up 47 percent, from 15.2 million to 22.4 million. “In the long run, I think this is important to our future,” he said.

GuideStar executed basically a multimillion-dollar turnaround of $2 million during the course of three years, Chief Financial James Lum said, while not taking away services but actually increasing them.

The organization reported unrestricted revenue of $11.163 million with expenses of $10.194 million. It was still dealing with the aftermath of the recession in 2010 but has held steady since coming back in 2011. There was a need to adjust the underlying business model, so expenses were reduced by $1.7 million, from a high of $11.877 million in 2011, according to Lum. Expenses were reduced by not replacing personnel that had left along with cuts in travel and marketing, and a 40-percent savings in its digitization contract.

The past year, however, is not indicative of the future, Lum warned. From a historical context, it was a financial necessity to have strong cash flow operating income, he said, pointing out that the $1.35 million operating income in the past two years was as much as the organization lost over the prior 17 years of its existence.

The improvement in the organization’s cash position to $2.5 million ($1.068 million in the last two years, and $1.41 million in the previous 17 years), still is less than three months of operating cash. “It’s a great amount of progress for GuideStar in the past few years, and it helps us reset our financial position to prepare for the kinds of investment and impact we want to do going forward,” Lum said. Quarterly comparisons will not be as rosy, he said, because of a concerted effort to spend some of this cash and invest wisely.