Should You Tap the Operating Reserves?

Operating reserves can provide essential stability when a nonprofit faces financial strain, but they only work when leaders understand what the funds are for and who has authority to use them. In this article, our founder explains how unclear reserve practices can create avoidable governance risk and why boards need shared definitions, clear policies, and a disciplined decision-making process before a crisis hits.

The article offers a practical framework for deciding when a reserve draw may be appropriate, including whether the strain is temporary or structural, whether mission continuity is at risk, whether alternatives have been considered, and whether there is a realistic path to replenishment. It also connects reserve decisions to the board’s fiduciary duties of care, loyalty, and obedience, showing how financial stewardship becomes governance in practice.

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