The Importance of Establishing Operating Reserves for Nonprofits


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When the Kendeda Funda philanthropy that has given more than $1.2 billion to hundreds of thousands of nonprofits over three decades sunsets in 2023, it won't be doing any more grantmaking.

Instead, it's putting its money where its mouth is, in the form of a $7 million grant program to nonprofits that have at least three months' worth of operating reserves on hand.

"While living that close to financial insolvency may be common, it is extremely risky for any nonprofit, not just those whose funders are sunsetting," the foundation explains in a blog post.

"This lack of financial security can have a complicating ripple effect throughout an organization, making it hard for leadership to make decisions, address crises, and forecast future opportunities."

The operating reserve fund was born out of a desire "to strengthen the core operations of Kendeda's grantee partners, now and in the future, to build an operating reserve fund that would be the equivalent of at least three months' operating expenses (and give them the resources, support, and space to do it in a way that made sense for their organization)," says Diane Ives, the fund adviser for Kendeda's People, Place, and Planet program, in the blog post.

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