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Nonprofit Profit Reserves: The Real Deal – Reflection
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I am the Controller at a non-profit that produces meals for people in need in our community, We did not have to use our reserves to continue throughout the pandemic. We had a substantial increase in donations and received grants from federal/state/local governments that sustained our increase in operations due to the increased need.
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I’m the Finance Manager at an adult literacy nonprofit with an annual budget of 1.2 million. We also, thankfully, did not have to use our reserves to weather the pandemic. We received a PPP loan of $156,000 that we used to pay for staff salaries and some rent costs. Donations also increased as people were motivated to help bridge the digital divide that impacts our students. We also went remote in our teaching for the first 1.5 years of the pandemic which cut costs significantly, and we are now slowly increasing in-person options as of this year.
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1) What is the recommended investment mix for holding cash reserves for a school? Our funds are invested at 60% equities/40% fixed income along with our other endowed funds.
2) Our reserve requirement is 6 months of expenses, but as expenses have gone up and reserve balances are down, we are now under that threshold but facing need to use those reserve funds for emergent building needs. Any advice? Use them or seek other sources?
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I am the CFO of a Catholic High School in the midst of an enrollment dip and a capital campaign when the pandemic hit. While we still operated and collected tuition, we were forced to cancel in person fundraising and athletic events for nearly two years, so two successful PPP loans were used so we did not have to dip into reserve funds at any higher rate than expected. We were able to retain all staff with PPP funds.
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I work both at a private TK-12 school and am on the board of a social service agency focused on providing food to low income people that is mostly staffed by volunteers.
From the school perspective, we were did not experience a drop in tuition revenue because we pivoted to online and pivoted back to in-person quickly. When students were not on campus, expense levels dropped significantly, (e.g., we normally subsidize bus transportation, so when the bus stopped, the subsidy stopped). We also received a PPP loan. As a result, we did not dip into reserves.
From the social agency perspective, we lost all of our volunteers immediately, so had to begin paying people to provide services. We experienced a big increase in donations which helped tremendously. We also received two small PPP loans (because the staff is so small) and did not have to dip into reserves. Donations have dropped since the pandemic, but we’ve been able to sustain reserves.