Trends & Ideas
How big is your operating reserve?
by Kate Scorza Ingram
The Washington Post offers a story about financial reserves among nonprofits, sharing the recommendation that organizations have a minimum of three months of reserves (this is a primary reserve ratio = 0.4). The three months is called "the industry standard" in the article, not just by KPMG but also referenced by Urban Institute.
One of the more interesting findings is that "larger groups were less likely to have sufficient operating reserves than smaller ones, a finding that surprised researchers. Seventy percent of charities with expenses over $5 million had low operating reserves, compared with 50 percent of groups with less than $100,000 in expenses."
The recommendations are especially relevant, considering only 39% of performing arts centers participating in PAC Stats had a primary reserve ratio equal to or greater than 0.4.
The Washington Post offers a story about financial reserves among nonprofits, sharing the recommendation that organizations have a minimum of three months of reserves (this is a primary reserve ratio = 0.4). The three months is called "the industry standard" in the article, not just by KPMG but also referenced by Urban Institute.
One of the more interesting findings is that "larger groups were less likely to have sufficient operating reserves than smaller ones, a finding that surprised researchers. Seventy percent of charities with expenses over $5 million had low operating reserves, compared with 50 percent of groups with less than $100,000 in expenses."
The recommendations are especially relevant, considering only 39% of performing arts centers participating in PAC Stats had a primary reserve ratio equal to or greater than 0.4.