As nonprofit leaders, you know that financial strength goes far beyond reaching fundraising goals. A true measure of nonprofit resilience and sustainability lies in its ability to weather uncertainty, adapt quickly, and still deliver on its mission. That’s where LUNA—Liquid Unrestricted Net Assets—comes into play.

What is LUNA and Why Does It Matter?

LUNA stands for Liquid Unrestricted Net Assets, and it’s an essential financial metric. The calculation measures operational reserves to help nonprofit organizations assess how much readily available funding they have to sustain operations during unexpected downturns or delays in revenue.

In simpler terms, LUNA represents the “rainy day” reserves a nonprofit can access without restriction, enabling it to pay bills, make payroll, and keep programs running even during lean or uncertain times.

How to Calculate LUNA

The Wallace Foundation’s Strong Nonprofits Toolkit provides a practical breakdown of how to compute LUNA. In essence,

Examples of non-liquid assets include:

• Buildings and equipment
• Long-term receivables
• Endowments or board-restricted funds

What remains is your organization’s flexible financial cushion.

An Easy-to-Use LUNA Template

This link will download a spreadsheet template that will make calculating LUNA quick and easy.

How Much LUNA Is Enough?

There’s no one-size-fits-all answer, but many financial experts suggest aiming for at least three to six months of operating expenses in liquid reserves. That said, factors like program type, revenue volatility, and funding cycle predictability will affect this target.

If your organization’s LUNA is lower than desired, set a goal to build reserves gradually over time. This can be done by:

• Budgeting for small annual surpluses
• Allocating a portion of unrestricted gifts
• Designating year-end net income into reserve funds

5 Ways to Use LUNA in Your Messaging

If your organization already uses LUNA and tracks it actively, here’s how to take the next step and market your financial resilience:

• Build Trust with Transparency

  Showcase your LUNA in your annual report or donor newsletters. Use clear language like:
  “Thanks to prudent planning and strong relationships with our supporters, our nonprofit currently maintains nine months of LUNA reserves, allowing us to keep services running in emergencies.”

• Tell a “Resilience Story”

  Use LUNA to frame how your organization weathered past challenges—such as during the pandemic, natural disasters, or funding gaps.
  Example: “When a major grant was delayed, our LUNA allowed us to continue delivering meals without interruption. Your support helped make that possible.”

• Differentiate Yourself

  In competitive fundraising environments, emphasizing your LUNA signals to funders that you’re not just passionate—you’re prepared. Include LUNA metrics in grant proposals or donor cultivation materials to underscore stability and effectiveness.

• Inspire Strategic Gifts

  Invite donors to contribute directly to reserve-building. Position these gifts as catalytic:
  “Help us ensure that no child misses out on after-school care—even if the unexpected happens.”

• Use It Internally, Too

  Train board and staff to understand and champion LUNA. When everyone can articulate how your reserves support your mission, it becomes easier to align development, operations, and leadership strategies.

Funders Care About Financial Strength

Understanding a nonprofit’s LUNA gives insight into its financial viability, especially during uncertain times. A strong LUNA shows that the organization is not in crisis mode but is operating strategically and sustainably.

What to Consider When Reviewing a Nonprofit’s Financials:

• What is their current LUNA?
• How many months of operating expenses does it cover?
• Has the board adopted a reserve policy?

Supporting Stronger Nonprofits

At Rancho Santa Fe Foundation, we’re committed to helping nonprofits build capacity. We invite nonprofit leaders not only to prioritize LUNA in their financial analysis but also to use LUNA as a storytelling tool to inspire donor trust and investment.

In a Nutshell

Financial health isn’t just about the dollars you raise—it’s about how you manage and protect them. By understanding—and leveraging—LUNA, we can contribute to our region’s nonprofits’ ability to deliver on their missions for generations to come.

Additional Resources:

• BDO’s Nonprofit & Education Resources
  https://www.bdo.com/industries/nonprofit-education
  (Insights on nonprofit financial health, leadership strategies, and industry best practices.)
• Wallace Foundation – Strong Nonprofits Toolkit
  https://www.wallacefoundation.org/toolkit/strongnonprofits-toolkit
  (Free tools for better nonprofit financial management, including budgeting, cash flow templates, and dashboards.)
• GuideStar by Candid
  https://www.guidestar.org/
  (Research nonprofit organizations’ financial data and transparency ratings.)
• National Council of Nonprofits – Financial Management Resources
  https://www.councilofnonprofits.org/running-nonprofit/operations/financial-management
  (Best practices and resources to strengthen nonprofit operations and finances.)
• BoardSource – Building Strong Nonprofit Boards
  https://boardsource.org/
  
• Independent Sector – Financial Vitality Resources
  https://independentsector.org/resource/strengthening-the-financial-vitality-of-nonprofits/
  (Ideas for nonprofits and funders to promote stronger financial health across the sector.)

To learn more about Rancho Santa Fe Foundation, feel free to reach out to us at info@rsffoundation.org.