Boards and Finance Committees consistently return to a familiar set of questions about investment reserves: Do we have enough? Are we taking the right amount of risk? How do we know what’s normal?
Peer benchmarking can be a powerful tool to help answer these questions when used as added context to strengthen the conversation.
For example, using the Study on Nonprofit Investing (SONI), a benchmarking tool by Raffa Investment Advisers, we can take a look at 501c(6) associations in New York with a budget size between $500k-2M, which results in a data set of 398 associations. Only 32% of those associations hold more than 12 months of budgeted expenses in savings and investments. But perhaps more important than the data is the wide range behind it. We can see that organizations hold anywhere from a few months to multiple years of budgeted expenses in reserves depending on their structure, risk profile, and strategy.
This is where benchmarking becomes most valuable. It doesn’t provide answers, but context. It helps Boards move beyond guesswork and gut instinct toward more informed, productive conversations. Instead of asking, “What should we do?” leaders can ask, “How do organizations like ours approach this and why might we be different?”
SONI is a nonprofit peer benchmarking tool that analyzes IRS Form 990 and other publicly available data from more than 380,000 nonprofit organizations. Additionally, it allows users to compare their organization’s financial metrics to their peers, segmenting by 501(c) type, operating budget, focus area or industry, number of employees, and location. The SONI Dashboard is available for free on Raffa’s website: https://raffaadvisers.com/study-on-nonprofit-investing-dashboard/
Another key lesson from SONI is that structure matters as much as size. Many organizations are better served by moving beyond simple “buckets” and toward a more purpose-driven reserve framework: checking account cash (for daily operations), cash reserves (for stability), planned reserves (for known future spending needs), emergency reserves (for disruption), and strategic reserves (for long-term growth). The key is not the labels, but aligning each segment with its specific purpose, time horizon, and investment approach, both in policy and in practice.
Ultimately, the goal isn’t to copy peers, but to ask more informed questions. The right reserve structure depends on factors no database can fully capture. Revenue predictability, liquidity obligations, board risk tolerance, restricted funds, and your organization’s stage of development all shape what appropriate reserves actually look like in practice.
If you are interested in learning more about how to leverage peer data to strengthen your reserve strategy, Raffa Investment Advisers will be exploring these ideas in more depth at our upcoming session, “What’s Normal for Association Reserves?” where we’ll walk through practical ways to use benchmarking data to support stronger Board conversations and make better informed decisions.
