khull
Forum Replies Created
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Steve, our finance committee has determined for now that 3 months reserve is the target, so when we budget each year we budget for an amount to set aside in reserves to get the reserve fund up to 25% of that year’s budget.
We’ve had conversations over the years of whether we should move up to 4, 5, or 6 months, but for now 3 months is doable for us and provided us a good safety net in times when we were unsure about what funds would be coming in.
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As a non-cash item, we did also do organization wide “rest days” during the pandemic. Over the past few years, we’ve given on average 4 or 5 extra days off per year. Like Nancy mentioned, we did have staff who weren’t taking their vacation, but one benefit to this approach for us was that everyone was off at the same time, so that folks could step away for a day and not come back to a bunch of stuff to catch up on. I realize this approach would be much harder for a direct service provider.
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Can it be a mixture of both? There is certainly a role for making sure that conversations stay on track, but the moderators may also be able to offer some insights or resources. However, I think the moderators should be intentional about when and if they are adding to the threads. If moderators are always the first to respond, it may stifle community input and ideas.
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Are there other foundation funders who would be willing to help provide one or two years of support to get your wages up? We’ve found that funders in our area have become very attuned to the equity issues when nonprofits pay so much less than other roles, so we have been able to get some shorter term funding to help us raise salaries.
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We set ours at 3 months of expenses. Each year when our budget increase, we set aside an additional amount to get our reserve back up to that 3 month mark. We’ve discussed moving it up to 6 months, but with a budget of $4M our finance committee determined they didn’t feel comfortable having that much cash sitting around unused and not going towards our mission.
Here’s our policy:
The organization aims to hold a reserve fund equal to three months of budgeted operating expenses. The amount of the reserve fund will be calculated each year after approval of the annual budget, and approved by the Board of Directors. The reserve will be funded with surplus unrestricted operating cash and will be held in cash or cash equivalent funds.The operating reserve is intended to be held as emergency savings for the organization. In the event of a shortfall where reserve funds could be used, the following steps will be followed:
1. The Executive Director, in conjunction with the Sr. Director of Administration, will identify the need for access to reserve funds. In identifying a need, staff should consider the availability of other funds and evaluation of the time period the funds will be used and replenished.
2. The request to use reserve funds will be discussed and approved by the Finance Committee.
3. The Board of Directors will approve the use of reserve funds.
4. The organization will plan to replenish the funds within one year, and will report quarterly to the board on progress with repayment.