How Much Reserves Are Too Much?

Every nonprofit school needs a rainy day "reserve" fund for cash flow emergencies, but what feels like financial security can morph into poor financial stewardship if some of the money could be better used serving constituents. Moreover, overly healthy reserves could inhibit some donors from further supporting the organization. Every school's needs are different, so a recommended exercise is to perform a risk analysis revealing how much funding would be needed to mitigate each risk. The board and school leaders can then work to agree on a reserve goal and create a clear policy for how and when funds may be used. 

Nonprofit Quarterly (05/30/17)

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