There’s  a new book out that I highly recommend to CFOs, Directors, and Board members.  Ron Mattocks has written “Zone of Insolvency, How Nonprofits Avoid Hidden Liabilities and Build Financial Strength.” The” Zone of Insolvency” is a term used by bankruptcy courts to describe a period of corporate financial distress, sandwiched between solvency and total insolvency.  Ron does a great job applying this concept to nonprofits.

There are three financial tests to determine if you’re in the zone:

1. Balance sheet test — whether the value of the assets exceeds the liabilities; Insolvency is generally defined as the condition of having more liabilities than assets.
2. Cash flow test — whether the organization has sufficient cash flow to meet its fixed financial obligations as they become due; and Cash flow insolvency is the condition where debts cannot be paid as they become due.
3. Unreasonably small capital test—whether the organization has sufficient capital to obtain or support financing for future operations.

According to Mattocks, approximately one third of all nonprofits, more than 450,000 organizations, operate perpetually in financial distress, the “Zone of Insolvency,” and approximately 7% are totally insolvent.

The book caught my eye because it addresses some issues that are relevant to Village Missions these days.

In mid-February Stonecroft Ministries leaders met with Village Missions to tell them of the decision to stop all financial support of Village Missions.  Even though Stonecroft gradually had been decreasing their support of Village Missions for several years, this reduction of $40,000 per month, with such short notice, was a shock.

For more than 60 years, through the generous offerings of women involved in Stonecroft’s outreach clubs, support was provided for Village Missionaries serving rural communities that could not support a pastor. This has been a tremendous blessing to people who otherwise might not have a Gospel preaching church in their small town.

Today, facing demanding economic times, Stonecroft’s leaders felt they had no choice but to focus only on their vision -  the spiritual needs of women – even if it meant completely ending its support of Village Missions and rural communities.

Thankfully Village Missions is still far from entering the  Zone.

But we have to work hard to replace that income.  We have lived with budget deficits for several years, and we’re looking at another deficit year coming up.

Village Missions will stay on course, keeping country churches alive and vital. We are trusting God to enable us into the future.The needs are great across rural North America. We believe missionary statesman Hudson Taylor had it right when he said, “God’s work done in God’s way will never lack God’s supply.”

To learn how to be a partner in Keeping Country Churches Alive, click here.