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Managing a Fundraiser
by Deane Brengle
I don't have to be a weatherman to predict that someday it's going to rain on your nonprofit. And it's going to rain hard!
I don't mean literally. No, I mean you're going to have something happen to your nonprofit that devastates your operating account balance.
If you haven't got a rainy day or reserve fund you should. It's what keeps your nonprofits work moving forward after a sudden financial hit. But according to a 2006 survey 31% of all nonprofits surveyed said they didn't maintain a reserve fund. The same survey reported that 1 in 3 of the nonprofits that did have a reserve fund tapped or depleted it. That's a 1 in 3 chance lightning is going to strike your nonprofit! Let's get ready for it.
Creating the Reserve Fund
The first step in creating a reserve fund is figuring out how much you need to fund it.
Every nonprofit will have a different answer to "How much money?" depending on its set up and needs. Most of you will use the formula that determines how much your operating budget is each month and then multiplies that amount by the number of months you are planning for. The great majority of nonprofits budget for 3 to 6 months of operating expenses plus unknown emergencies and/or opportunities. But up to a year is not uncommon too.
Just remember it isn't so important to have a fixed amount as it is a percentage for a final number. If you budget a fixed number each year you won't take into account the variables that a percentage will cover. If your new fundraising event is rained out or you get an opportunity to purchase a building, a percentage will have you covered. When planning for your reserve fund your board of directors should brainstorm the possibilities, both positive and negative, and set some numbers to them.
After your board arrives at a figure it needs to establish the policies concerning how the reserve fund will be used and any procedures to be followed when spending those dollars. These procedures should specify exactly how the funds are handled. Also, designating your reserve fund dollars to specific areas, programs, projects, and expenses will keep you out of hot water with your members and the IRS. Nobody likes the appearance of a slush fund.
Funding the Reserve Fund
The second step is to fund the reserve fund. I won't candy coat this, it's tough. Most of you probably don't have enough funds to operate the way you would like to much less save for a reserve fund. But you must.
There are two basic ways to do this.
Investing the Money
The third step is how to invest the money. Once you've got it you need to keep it safe, accessible, and earning more money for you.
There are many investment options open to you so be sure and check them all out and choose wisely.
Details to consider are:
Investment Vehicles to consider:
Your accountant can help you understand the pros and cons of each type of investment. If you have, or anticipate you will have, a large reserve fund you should consult a professional financial advisor who can help you manage your dollars to their fullest potential.
Storm Clouds Are Gathering
I can see storm clouds gathering at the horizon. Are they coming your way?
You better get a reserve fund discussion added to your board's agenda for the next meeting. Just in case.
About the Author:
Deane Brengle is the editor of several free online publications that cover fundraising for small nonprofit groups. You can visit these publications and read more about fundraising in articles by him and other experts in the field at The Fund$Raiser Cyberzine, The Fundraising for Small Groups Newsletter, and Fundraising Booklets.
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ISSN 1530-6127 - Library of Congress, Washington DC, USA
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