The shift in funding models and pricing highlights a central challenge for many not-for-profits – maintaining financial sustainability while continuing to deliver quality services.

Sound financial governance enables Not-for-Profits (NFPs) to make informed decisions about resource allocation, manage risks, and ensure their mission can be sustained into the future.

For boards, this responsibility is not fulfilled by reviewing financial statements alone. Under the ACNC Governance Standards, responsible persons must ensure the organisation’s financial affairs are managed responsibly and act with care and diligence. That requires clear visibility over the right performance indicators throughout the year.

A focused KPI framework helps boards cut through complexity and concentrate on what truly drives sustainability and resilience. Importantly, those KPIs should not sit at the organisational level alone — they should form part of the executive’s performance expectations. Executive KPIs should clearly link strategy, financial stewardship and service delivery.

From a financial perspective, boards commonly embed measures such as:

  • Operating Surplus Margin (%) (Operating Surplus ÷ Total Revenue) × 100) – measures sustainability and efficiency in managing income and expenditure.
  • Budget Achievement (%) (Actual Expenditure ÷ Budgeted Expenditure) × 100) – assesses the organisation’s ability to manage within approved budgets.
  • Liquidity Ratio (Current Ratio) (Current Assets ÷ Current Liabilities) – evaluates short-term financial stability and ability to meet obligations.
  • Cash reserves (Months of Operating Expenditure) (Unrestricted Cash ÷ (Annual Expenditure ÷ 12)) – measures financial resilience.
  • Revenue Diversification ((Largest Source ÷ Total Revenue) × 100) – monitors reliance on major funding sources (e.g., NDIS, Government Grants).

The board determines what “appropriate” looks like in each area. The executive is accountable for delivering to that standard. Financial measures alone, however, are not enough. Executive KPIs should also address operational alignment:

  • Service delivery efficiency (%) (Actual Service Units Delivered ÷ Budgeted Units) × 100) – Measures effectiveness of resources used to deliver funded outcomes.
  • Service unit cost efficiency (Actual Unit Cost ÷ Benchmark Unit Cost) – Compares actual cost per service unit to benchmark or budget

Selecting executive KPIs is not about creating an exhaustive checklist. It is about identifying the concise indicators that genuinely drive sustainability, accountability and impact. Boards set the guardrails. Executives drive performance within them. When KPIs are clear, aligned and consistently monitored, they provide more than oversight – they create confidence that the organisation can continue delivering on its mission, even in a changing funding environment.