Key Takeaways: Finance committees at nonprofits and associations regularly ask whether their reserves are where they should be. Peer benchmarking provides a credible frame of reference to inform that conversation, but the right reserve strategy depends on your organization’s specific circumstances. This article explains how to use peer data thoughtfully, what to look for in a benchmarking tool, and how working with an experienced adviser can help translate that context into a strategy that is right for your organization.
Are Your Investment Reserves Where They Should Be?
Walk into almost any nonprofit or association finance committee meeting and, at some point, a version of the same question finds its way into the room:
“Are we where we should be?”
Sometimes it is a direct conversation about operating reserves. Is what your organization holds truly adequate, not just for an unexpected disruption, but for the strategic opportunities that may come? Other times the concern is more subtle. Are you carrying more cash than you need? Are you preserving financial flexibility, or gradually eroding it without realizing it?
These are strategic questions, and how well nonprofit and association finance committees address them has real implications for mission delivery, long-term financial sustainability, and the organization’s capacity to grow.
Why Nonprofit and Association Benchmarking Often Misses the Mark
When investment or reserve policy questions come up, it is natural for finance committees to reach for benchmarks as a first move. Reference points such as sector surveys, peer comparisons, and widely cited rules of thumb all offer a sense of grounding. The problem is that without proper context, these reference points cannot tell you whether your organization’s position is balanced, conservative, aggressive, or simply inherited from decisions made under very different circumstances. A membership-based association with predictable dues revenue operates very differently than a grant-dependent nonprofit with uneven cash flow, even if their budgets are comparable. Applying the same benchmark to both produces a comparison that may be technically accurate, but fundamentally misleading.
Using Peer Data to Support Fiduciary Decision-Making
Adding Context to Board and Finance Committee Conversations
When nonprofit and association boards and finance committees have access to credible, well-structured peer benchmarking data, something meaningful tends to happen: the quality of the conversation improves. Not because the data answers the hard questions, but because it highlights gaps and makes certain questions possible to raise and explore with confidence. Peer benchmarking is not about identifying what high-performing organizations do and replicating it. Instead, it functions as a sanity check: a way to situate your organization’s financial position within a credible frame of reference and add context to the conversation while fulfilling your fiduciary responsibility.
Identifying Reserve-Related Risk
A reserve level that appears healthy in isolation may tell a different story when compared against peers facing similar risks. Revenue seasonality, grant dependency, and membership concentration are all factors that shape what adequate reserves look like in practice. Peer data can surface those gaps before they become harder to address.
Analyzing Reserve Liquidity and Investment Structure
When comparing liquidity, your organization may discover it is carrying more liquidity than its risk profile warrants, and that peers invest a larger share of their long-term reserves rather than holding everything in low-yield cash instruments. This leads to an important question: is your organization still in accumulation mode, or is it positioned to invest in expanding its reach and impact? In other instances, peer data may uncover the opposite. Benchmarking does not resolve these questions. It creates the conditions in which asking them becomes possible.
How to Evaluate Peer Benchmarking Tools for Nonprofits and Associations
Not all peer benchmarking tools offer the same value. When considering a benchmarking resource to inform your reserve and investment decisions, three things matter most:
- Data volume and accuracy – Tools that rely on self-reported survey data introduce well-documented problems, including low participation rates, inconsistent definitions, incorrect responses, and reporting errors. Standardized, publicly available financial data offers a more reliable foundation.
- Segmentation capability – Tools that offer meaningful segmentation, including 501(c) classification, total reserves, geography, employee count, and industry, allow you to filter comparisons to a peer group that reflects your organization’s actual operating environment.
- Methodology transparency – A credible resource should be clear about where its data comes from and how it is standardized. That transparency is a signal of reliability.
Determining the Right Reserve Strategy for Your Nonprofit or Association
The question most finance committees eventually ask, “are we where we should be?” does not have a simple answer. Peer benchmarking provides valuable context, but 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.
Working with an adviser experienced in supporting nonprofits and associations can help bring those factors into focus. Beyond benchmarking, the most meaningful conversations happen when an adviser takes the time to understand your organization directly, including upcoming initiatives, capital needs, cash flow requirements, and risk tolerance. That insight informs a thorough review of your Investment Policy Statement, identifying gaps and opportunities to strengthen it so the policy accurately reflects your organization’s current needs, risk tolerance, and long-term goals. The result is a reserve and investment strategy that is genuinely tailored to where your organization is today and where it is headed.
Nonprofit and Association Peer Benchmarking Tool
The SONI Dashboard
The Study on Nonprofit Investing (SONI) Dashboard is a complimentary peer benchmarking resource developed by Raffa Investment Advisers. Rather than relying on self-reported survey data, SONI draws on IRS Form 990 filings and other publicly available financial information from more than 380,000 nonprofit and association organizations. That data volume, combined with the standardization built into IRS Form 990 filings, is what makes meaningful peer comparison possible at a scale that is difficult for a survey to match.
Finance committees and boards can use the SONI Dashboard to compare reserve ratios, days of cash on hand, operating margins, and investment allocation practices against a relevant, filtered peer group, segmented by 501(c) type, operating budget size, mission area, employee count, and geographic location.
Explore the SONI Dashboard to see how your nonprofit or association compares against its peers.
Frequently Asked Questions: Nonprofit and Association Reserve Strategy
How much should a nonprofit or association hold in reserves?
There is no universal answer. Common guidelines often suggest three to six months of operating expenses, but the answer depends on your nonprofits’s revenue predictability, liquidity obligations, restricted fund structure, and risk tolerance. Peer benchmarking can help your finance committee understand how similar nonprofits approach reserves, providing useful context. An adviser, such as Raffa Investment Advisers, can assist in aligning your Investment Policy Statement with your current situation and future objectives.
What is a nonprofit reserve policy, and why does it matter?
A nonprofit reserve policy defines how much your organization intends to hold in reserves, what those funds can be used for, and how they should be invested. A well-structured policy gives your finance committee a clear framework for decision-making and helps ensure that reserve levels reflect your organization’s actual risk profile and strategic goals rather than habit or historical precedent. Working with an adviser, such as Raffa Investment Advisers, can assist your nonprofit in developing a nonprofit reserve policy that aligns with your organization’s objectives.
What is an Investment Policy Statement, and do we need one?
An Investment Policy Statement (IPS) is a governing document that guides how your organization manages and invests its reserves. It defines your investment objectives, risk tolerance, asset allocation guidelines, and liquidity requirements. Reviewing and updating your IPS regularly, particularly as your organization’s needs evolve, is a core part of sound fiduciary oversight. Raffa helps nonprofits review and update their IPS to maintain alignment with their organizational goals.
What does fiduciary responsibility mean for a nonprofit finance committee?
Finance committee members and investment committee members at nonprofits and associations serve as fiduciaries, meaning they are legally and ethically obligated to make decisions in the best interest of the organization. In practice, this means establishing clear investment policies, monitoring performance against those policies, and ensuring that reserve and investment decisions are grounded in the organization’s specific circumstances and long-term goals, not just sector norms or rules of thumb.
How does peer benchmarking support nonprofit investment decisions?
Peer benchmarking gives finance committees a credible frame of reference by comparing your organization’s reserve ratios, liquidity, and investment allocation against organizations with similar characteristics. It does not make decisions for your committee, but it surfaces gaps and opportunities that might not be visible otherwise, and it provides the context needed to have more informed conversations about whether your current strategy still fits your organization’s needs. If you’re interested in peer benchmarking, Raffa’s SONI dashboard is a helpful resource.
Dennis Gogarty, CFP®, AIF®
President & Co-Founder
Dennis Gogarty, CFP®, AIF® is President and Co-Founder of Raffa Investment Advisers, a firm he purpose-built to serve nonprofit organizations and membership associations. For more than 20 years, he has advised nonprofits and associations on fiduciary-focused reserve strategy, investment policy development, asset allocation, and governance best practices. Raffa currently serves more than 174 nonprofit clients nationwide (as of December 31, 2025). Dennis is a frequent speaker for nonprofit and association audiences and has presented for numerous organizations including the Council on Foundations, AICPA, BoardSource, and the American Society of Association Executives (ASAE).
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