Nonprofit Accounting Basics

Nonprofit Operating Reserves Initiative Website

Updated: 
Nov 03, 2017
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Beginning November 1, 2017 the NonprofitAccountingBasics.org website added an important new resource it its “Fundamentals” section. The Nonprofit Operating Reserve Initiative (NORI) launched its new home on the web at http://www.nonprofitaccountingbasics.org/nonprofit-reserves.

With leadership support from The Urban Institute’s Center on Nonprofits and Philanthropy and from United Way Worldwide, the NORI Workgroup, comprising experienced individuals representing multiple facets of the nonprofit sector, began meeting ten years ago to address concerns about the financial health of nonprofits. Their discussions led them to identify the need for organizations to maintain cash reserves at levels adequate for achieving financial stability. The Workgroup published a whitepaper defining and promoting the term “Operating Reserves” for a target audience of nonprofit leaders, board members, and funders. To further support the initiative, the Workgroup subsequently produced the “Nonprofit Operating Reserves Policy Toolkit” to provide a practical way for groups to turn theory into practice.

Over the last ten years, the concept of Nonprofit Operating Reserves has become more commonly understood and recognized as an imperative for financial sustainability, especially in the wake of the recession of 2007-2009, when so many organizations were forced to cease or curtail important community services. Many funders have come to understand the importance of a healthy balance sheet as an indicator that the organizations they invest in have the resources to continue to deliver services through temporary financial fluctuations, and that the presence of adequate working capital and operating reserves puts them in a more robust, less fragile, financial position. The NORI Workgroup continues to spread the word about the importance of building reserves, and to encourage more and more funders to reward this effort and diminish the fear that organization leaders may still harbor that if they have money in reserve, funders will not give them new money for programs and operations.

The Workgroup is grateful to the Greater Washington Society of CPAs Education Foundation and its signature free public resource website, NonprofitAccountingBasics.org, for dedicating a section of its website to offer a cohesive assembly of NORI’s documents, background, and resources. The section will feature a document library with new items such as a sample slide deck (to help users to define and make a case for building reserves along with a summarized process for developing a reserve policy), plus worksheets to facilitate discussions about setting the right operating reserves target. We plan to continue to build the reference section, adding new academic studies, research, and articles about this important topic, and to share examples of Operating Reserve Policies submitted by users.

Please visit http://www.nonprofitaccountingbasics.org/nonprofit-reserves to check out this new resource. Your feedback, suggestions, and submissions are welcome. Please direct them to BessFromNORI@gmail.com. (All submissions are subject to GWSCPA technical review.)