The paper includes a checklist to assist not-for-profit boards and management teams in determining the right level of reserves and the best way of developing a reserves policy. Commentary is also included as to why a too high or too low cash reserve may present an issue to an entity. A significantly high cash reserve may result in a negative impact on public perception, deter donors and funding providers and may jeopardise an entity’s income tax exemption status. Whereas an abnormally low cash reserve may result in questions being raised around an entity’s viability and sustainability, reduce the confidence of potential donors and funders and leave an organisation vulnerable to any changes in government policies or economic conditions.
A copy of the insight paper can be found here.