Is Your Accountant Smoking Something? Who says you will lose your NFP status with a reserve fund?

Pink Piggy BankIf you are told your not-for-profit status is in jeopardy by having a surplus or an operating reserve of more than 3-6 months, it is time to find a new accountant! The Canada Revenue Agency has made no statement ever about the amount of operating reserves that is acceptable for not-for-profits.

To determine the optimal reserve amount, High Performance Membership Organizations™ assess their potential risks, strategic projects and opportunities. For most organizations three – six months is simply adequate for shut down. However, the organization needs resources to take advantage of opportunities and to survive a challenging economic environment.

It is also important to have a board approved Operating Reserve Policy which articulates the minimum reserve amount, identifies the purpose of the reserve, defines any restrictions related to certain funds, and outlines when and how the funds can be used. In addition to ensuring transparent processes, it also provides a level of understanding as to why the organization is maintaining reserves.

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1 Comment

Filed under Association Management, Association Management Issues, High Performance Organization

One response to “Is Your Accountant Smoking Something? Who says you will lose your NFP status with a reserve fund?

  1. jeffreynsa

    I love your subject line!

    JT

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