I’m not following the second paragraph. CEA has an overall budget and the general theme I’ve heard w.r.t. reserves has been ‘we want to have about 12 months’ reserves’. 12 months reserves is the same number whether the org budgets are consolidated or split out.
Is the thinking that with a large pool of unrestricted funding CEA as a whole would be comfortable running with significantly less, say 6 months reserves (which would still be more than 12 months for any individual org)?
At the moment most of the orgs within CEA target 12 months reserves (though some have less and, in particular, they sometimes fall quite low at some point in the course of the year because we avoid on-going fundraising).
If we had something like 3 months of reserves for all costs unrestricted it would give us either greater financial security or the ability to cut the size of restricted overall reserves to, say, 7 months while keeping similar stability. This would free up EA capital for other projects.
It’s a little unclear what the right level of reserves ought to be. In the US it’s common for charities to have very large endowments (say 20 years). I think the 12 months at all times target we have right now is about appropriate, given the value of capital to EA projects, but would expect that number to drift upwards as the EA community matures.
“If we had something like 3 months of reserves for all costs unrestricted it would give us either greater financial security or the ability to cut the size of restricted overall reserves to, say, 7 months while keeping similar stability.”
This is super-useful to know and directly answers my question, thanks.
You mentioned above that the current plan is to use unrestricted funding on some discretionary shared services projects, rather than e.g. directly helping out the individual orgs Does this reflect a belief that this are the current highest-marginal-value activities are in shared services, or do you have some other reason for this allocation?
I’m not following the second paragraph. CEA has an overall budget and the general theme I’ve heard w.r.t. reserves has been ‘we want to have about 12 months’ reserves’. 12 months reserves is the same number whether the org budgets are consolidated or split out.
Is the thinking that with a large pool of unrestricted funding CEA as a whole would be comfortable running with significantly less, say 6 months reserves (which would still be more than 12 months for any individual org)?
At the moment most of the orgs within CEA target 12 months reserves (though some have less and, in particular, they sometimes fall quite low at some point in the course of the year because we avoid on-going fundraising).
If we had something like 3 months of reserves for all costs unrestricted it would give us either greater financial security or the ability to cut the size of restricted overall reserves to, say, 7 months while keeping similar stability. This would free up EA capital for other projects.
It’s a little unclear what the right level of reserves ought to be. In the US it’s common for charities to have very large endowments (say 20 years). I think the 12 months at all times target we have right now is about appropriate, given the value of capital to EA projects, but would expect that number to drift upwards as the EA community matures.
“If we had something like 3 months of reserves for all costs unrestricted it would give us either greater financial security or the ability to cut the size of restricted overall reserves to, say, 7 months while keeping similar stability.”
This is super-useful to know and directly answers my question, thanks.
You mentioned above that the current plan is to use unrestricted funding on some discretionary shared services projects, rather than e.g. directly helping out the individual orgs Does this reflect a belief that this are the current highest-marginal-value activities are in shared services, or do you have some other reason for this allocation?