In a nonprofit human services organization, extra funds that are set aside are known as prudent reserves. Prudent reserves are financial reserves that organizations maintain to ensure stability and sustainability in case of unexpected expenses, economic downturns, or other financial challenges.
These reserves serve as a safety net to protect the organization's ability to continue providing services and fulfilling its mission even during difficult times. They are considered a responsible financial practice to safeguard against uncertainties and ensure the long-term viability of the organization.
Unlike bonus pay, which is additional compensation given to employees as a reward for performance, or rainy day funds, which are savings set aside for emergencies or unforeseen circumstances, prudent reserves specifically focus on protecting the financial health and continuity of the organization itself.
