Why nonprofit organizations should be saving more in their rainy day funds.
Establishing and maintaining reserves is integral to any organization’s financial stability, yet a recent BDO benchmarking survey, “Nonprofit Standards,” finds that nonprofits might not be putting enough away for a rainy day. “The survey found that nonprofits may be overlooking potentially disastrous liquidity issues,” said Adam Cole, partner and co-leader of BDO’s Nonprofit & Education practice. On average, the nonprofits surveyed maintain 8.7 months of operating reserves, but more than half reported that they have less than six months of reserves. BDO recommends that nonprofits keep at least six months of liquid unrestricted net assets in reserves.
Months of Operating Reserves Maintained
20 percent: 12 months or more
27 percent: 6 to less than 12 months
13 percent: None
40 percent: 1 to less than 6 months
Source: BDO, Nonprofit Standards, A Benchmarking Survey, June 2017