Minimum Financial Health Test
To assure investment of ZAP funds in organizations that are not in serious financial jeopardy, applicants must maintain a minimum level of financial health. Tier I and Tier II organizations whose audits reveal significant, ongoing difficulties will be asked to prepare a credible plan for restoring financial health, and submit six month progress reports that demonstrate compliance with their plan. To calculate compliance with the minimum financial health threshold, an applicant must not have a “Going Concern Opinion” or “Going Concern Footnote” in the audited financial statements and must not have more than one of the following five criteria:
- Negative Unrestricted Capital
- Negative Working Capital- Working Capital is calculated by taking current assets (i.e. cash, investments, accounts receivable, donations receivable, etc.) minus current liabilities (i.e. accounts payable, accrued expenses, current portion of long term debt, etc.).
- Net Losses in two or more of the three years reported in the application
- Net Loss in the most recent application year in excess of ending unrestricted capital for that year
- Debt to Fund Balance (Net Assets) ratio of less than 2:1 as of the most recent application year reported
The Plan should contain at a minimum:
- A realistic, self-aware assessment of the organization’s financial issues.
- A specific definition of financial health, including financial targets.
- A convincing plan for achieving the financial targets, including a timeline that will permit monitoring of progress at six-month intervals.
Because the circumstances of each organization may be varied and complex, such plans cannot be formulaic. It is anticipated that the plan may require negotiation to make it workable, although the Advisory Board will have the final authority over what is an acceptable plan. If an organization is unable to develop an acceptable plan or is unable to comply with that plan, the advisory board may choose to deny funding.
