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Can a nonprofit build a reserve of funds?

Your Legal Questions Answered

Can a nonprofit build a reserve of funds?

I belong to a 501(c)(3) organization, a food pantry. We also distribute money for utilities and rent. The organization has $40,000 dollars in its account. Is this against the rules? The primary purpose of the organization is food distribution. Are the utilities and rent subsidies unlawful. Who do I contact for an Audit?

It is not unlawful to build up a reserve to assure that a charity can continue to function if its revenues fall off for a prolonged period. It is not unlawful to give help with utilities and rental payments for those in need, so long as that is within the charitable purpose of the organization and the donors were aware that their gifts could be used that way. It becomes improper if the charity uses funds raised for a purpose different than intended by the donor.
If you are seeking an accountant on behalf of the organization, you should seek a qualified accountant by asking your local accountants’ society, a group like Accountants in the Public Interest, your state or local association of nonprofit organizations, or simply ask other nonprofit executives who they have used and found competent. 
Tuesday, July 31, 2007

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