Some reasons why an investment fund is prudent for a small non-profit organization:
1) Emergency Fund: Having an operational reserve allows a small non-profit organization to be prepared for unexpected emergencies or crisis situations. Whether it’s a sudden decrease in funding, unexpected expenses, or a natural disaster, having a reserve fund ensures that the organization can continue its operations without disruption and fulfill its mission. The reserve can be used to cover immediate expenses until additional funding or assistance is secured.
2) Stability and Sustainability: An operational reserve provides stability and sustainability to a small non-profit organization. It acts as a financial buffer during times of uncertainty or fluctuating funding cycles. Having a reserve allows the organization to maintain stability in its programs and services, preventing disruptions due to financial shortfalls or delays in receiving funds. It also helps the organization in planning for the future and investing in long-term projects or strategic initiatives.
3) Capitalizing on Opportunities: An operational reserve enables a small non-profit organization to seize opportunities that arise without delay. It may be an opportunity to expand programs, establish partnerships, launch new initiatives, or invest in staff development. With a reserve fund, the organization can quickly take advantage of such opportunities as they arise, knowing that the necessary funds are readily available.
The suggested amount for an operational reserve may vary depending on the specific circumstances of the non-profit organization. However, a common recommendation is to aim for a reserve that covers at least three to six months of operating expenses. This provides a reasonable cushion to address emergencies and uncertainties without depleting the reserve entirely. It is important for the organization to assess its current operating expenses, cash flow, and any potential risks or challenges to determine an appropriate reserve amount.
The board and finance committee empowers an investment team to work with the professionals who mange our funds at the bank. While we do not control the fluctuations in the market, over time our investment fund has helped us manage year over year contingencies such as the pandemic.
Our board maintains policies and procedures that govern the size of reserve funds, and the use of both the principal and the interest our investments earn. These advance the mission of our congregation.
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