[Foundation-l] Building up the reserves

[Veronique Kessler]

Hi,

The question of what is the right reserve amount is a common one.  I've 
hear of ranges from 0 to 3 months to 3 years.  I agree that one year is 
a good measure and that could be increased or decreased depending on a 
variety of circumstances both internal and external.   Many non-profits 
may have a smaller than optimal reserve because they simply don't have 
more funds to keep in a reserve. We are quite fortunate to have the 
amount of reserves that we do.    As we have operated over the last few 
years with a single main fundraiser, our revenue tends to peak over a 4 
month period while we have expenses all year.  Right after a fundraiser, 
we have more reserves than we do right before the fundraiser begins 
because we have months of the year where there is little revenue but 
expenses are about the same. 

Veronique



Andrew Gray wrote:
> On 3 March 2010 13:35, effe iets anders <effeietsanders at gmail.com> wrote:
>   
>> I assume you do realize that this 12.5M is /after/ the fundraiser, hence
>> including the huge amount of donations that has been raised?
>>     
>
> ...as, indeed, was last December's glut.
>
> Looking at both mid-year and end-year reports, the cashflow status
> becomes clearer:
>
> Assets (cash) versus monthly running costs (estimated)
>
> mid-2007 - - - - - $1m
> end-2007 - - - - - $2.3m - - - - - $0.21m - - - - - 11 mos.
> mid-2008 - - - - - $3m - - - - - ($0.32m) - - - - - 9 mos.
> end-2008 - - - - - $6.7m - - - - - $0.43m - - - - - 15 mos.
> mid-2009 - - - - - $6.2m - - - - - ($0.54m) - - - - - 11 mos.
> end-2009 - - - - - $12.5m - - - - - $0.65m - - - - - 19 mos.
>
> Reserves jump dramatically each year-end report, but then idle until
> the next fundraiser - as running costs increase roughly linearly,
> though, the average number of months funding in reserve seesaws.
>
> I don't know what's considered a normal margin to have - I'd presume
> around a year or so is considered quite good - but hopefully someone
> more au fait with standard practice in the field could enlighten us.
>
>