KNOW YOUR FINANCES

It may never be totally possible to prepare for every disaster. But, it is possible to operate with cash reserves. One of the Standards for Excellence benchmarks for effective nonprofit management is that agencies should have 90 to 180 days of expendable net assets (reserves). If a nonprofit organization loses its funding, or is faced with a disaster, there should be enough cash in reserve to continue program operations for three to six months.

Not every nonprofit organization has established cash reserves or rainyday funds, and even savvy nonprofit agencies can have a lean season – which leaves even sophisticated organizations vulnerable in times of emergency. Talk with your bank about what loans or lines of credit might be available. A boardapproved line of credit contingency with your bank can help to keep expenses met, like payroll, rent, and utilities going during the crisis. Sometimes federal and state agencies make relief money available, or extend accommodations, like delays on payments, lowering interest rates during a disaster, especially a national disaster, and other contingencies. Local news and professional associations will be valuable partners in getting out the information regarding these special circumstances.

Small Business Association and Federal Emergency Management Association (FEMA) both have funding sources if your area was declared a part of a national emergency. Check the resources page at the end of this manual for contact information. Other financial institutions may make disaster relief loans available, sometimes up to $2 million dollars or more, to help a business, including a nonprofit business stay in business during a crisis.

During a disaster finances need to be realistic. The organization can only continue business as far as the finances allow and they will likely have different or unexpected expenses in the face of a disaster. The disaster plan must keep pace with the financial means of an organization. Since most agencies do not, or cannot, budget for a crisis, the Response team may need to make important financial decisions based on available funding. An organization should use its Statement of Financial Position (Balance Sheet) to assess current assets and liabilities and Cash Flow Statements to determine how it will best navigate the unexpected expenses that arise during an emergency.

Work with your board on securing the resources your nonprofit needs to make it through a terrible season.