Keeping funds in reserve may seem like a luxury for a charitable organization, but maintaining a nest egg is essential to ensure an organization’s long-term financial health.
An operating reserve is an unrestricted fund balance set aside to stabilize a nonprofit’s finances by providing a cushion against unexpected events and disasters, losses of income, or serious economic downturn.
The minimum amount to be designated as an operating reserve is an amount sufficient to maintain ongoing operations and programs for a set period of months. A commonly used reserve goal is three to six months’ expenses.
The Board of Directors of the Food Bank have set aside funds to cover three months’ operations and program expense based on advice from Feeding America and other non-profit advisory groups.