Board-Designated Reserves vs. Endowments
In the nonprofit world, we often hear about endowments as being the gold standard for nonprofit sustainability. And in a world where funding is rarely guaranteed and often capricious, sustainability is usually an ongoing concern. If we have an endowment, we think, then our organization is sure to be here forever.
But the truth is much more complex than that. At Nonprofit Finance Fund, we generally recommend that, where possible, organizations move away from donor-restricted endowments and towards board-designated reserves. Both support nonprofit sustainability, but a reserve provides near-term and mid-term flexibility and control as well. This blog post outlines in more detail some of the benefits of reserves and the drawbacks of endowments.