Criteria for Nonprofits' Operating Reserves

Summary:

This article by Tom Raffa discusses nonprofit organizations need to maintain the balance between operating income and expenses to be prepared to weather periods with revenue shortfalls.

The article is at http://www.iknow.org/pages/articles/criteria.html

See also Nathan Garber's suggestions of things to consider at http://garberconsulting.com/FAQ.htm

Kathleen H. Mendez of the
Food Bank of Western New York, Inc., in
Buffalo, NY, commented on February 11, 2003:
I found the suggestion of "Short-term use of government or
foundation money until intended program begins (i.e., as an advance) to be
a very dangerous one. Too many nonprofits have gotten themselves into
real financial trouble and even put themselves out of existence by
following this practice. It is our belief that government or foundation
money should never be used for any purpose other than the intended
(restricted). Sometimes it may work well in the reverse, using the
operating reserve funds to cover grant expenditures prior to actual
receipt of the cash.