The following post was written by Helen Ng, Marketing and Communications Manager at the Charities Review Council.
You never know what may happen to your job, family, or health, and that is why it is important to save some money to plan for the unexpected. Just as you would have a rainy day fund to be used when absolutely necessary, charities maintain a reserve fund to safeguard against unexpected financial challenges. There's a good interview with the Urban Institute's Thomas Pollak about this and the results of a recent study about nonprofits and reserves.
While a nonprofit should maintain a reasonable level of cash to safeguard against unexpected financial challenges, maintaining excess unrestricted reserves indicates the nonprofit is not maximizing the use of its resources in pursuit of its charitable mission. In such cases, it may not be appropriate to continue soliciting from the public unless it is clear that the fundraising could be used for a reserve fund.
What do you think? How much is too much for you?