Four Things Boards Should Understand About Operating Reserves
Rick Moyers, from The Chronicle of Philanthropy:
The general aversion of many boards to talking about finances in any detail creates an initial roadblock to conversations about reserves. And the lack of a widely understood and commonly used definition of operating reserves doesn’t help. It’s hard to talk about something if you don’t know what it is.
Finally, common misconceptions about operating reserves—not just among board members but also among nonprofit executives, funders, and even financial-management experts—complicate matters further.
However, boards can’t afford to go on ignoring this critical issue. Operating reserves are essential to the financial and programmatic stability of almost every nonprofit organization. And far too many organizations have insufficient reserves or none at all.