With the permission of Frank Kurre, CPA, national managing partner in the Not-for-Profit Practice of accounting firm Grant Thornton, LLP, I am forwarding a link to his just published white paper on “maintaining sufficient reserves to protect your not-for-profit organization.”

This document contains sensible guidance on determining appropriate levels of reserves for nonprofits in accordance with their own circumstances – current and planned for the future.  This approach entails staff and board members working together to define their own “prudent person” reserve level after considering a number of factors. 

NAVREF encourages NPCs to use the white paper to engage staff, their accountants and board members in a discussion of operational reserves and development of a local NPC policy if the NPC doesn’t already have one.  Additionally, if the NPC determines a board designated operational reserve is advisable, but doesn’t have sufficient unrestricted net assets available to fund it, developing a plan to achieve the self-determined level within a specified timeframe may be useful. 

From the GT cover email:

Maintaining insufficient reserves can put an organization at risk, but maintaining excessive reserves can also be problematic. A number of organizations have been criticized for retaining excessive reserves. So what level of reserves should not-for-profit organizations maintain within their net asset balances? This is an age-old question asked by many not-for-profit organizations and their various constituencies.   Grant Thornton tackles the issue of reserves in this white paper, offering some practical guidance to organizations that wrestle with this issue.  

For the white paper, please go to:  http://navref.org/newsletter/pdf/GT-NFP_Sufficient-Reserves_WP.pdf