Nonprofit boards do not always have clear protocol or guidelines around how and when designated reserve funds can be used. These are used during extreme uncertainty or for special purposes. Decisions should be taken about these reserve funds – will they be used for short-term deficit or a long-term project?
Organizations should be strategic in utilizing reserve funds and ensure they don’t spend every dollar they have (whether in bank accounts or reserves). This is an important conversation for the ED to have with the board to ensure everyone is aligned in the overall approach to using reserve funds in navigating through this crisis. It is especially important for organizations that have policies requiring board approval for use of reserve funds.