Building the Oil Supply and Stocking the Storehouse

By John Zietlow

“Oh, if we had only known how deep this recession would be, how long its after-affects could linger, and how pronounced its effects on givers might be, we would have held more in cash reserves.” Doubtless you have heard someone at a church or charity utter words like these, and maybe they’ve even twirled around in your mind.

What if you were the executive director or board chair for the Boston Salvation Army and watched your United Way allocation drop from $1 million in 1990 to $171 thousand in 2011?[1] And what happened to the cash-versus-debt balance at the almost 200 churches who have defaulted on debt over the past two years?[2]

No question about it: in today’s economy, it is as if “cash is king.” Just as a rapidly expanding economy masked inefficiency and overspending in some ministries—according to the spouse of a mission agency CEO—the downturn has placed a premium on proper cash management and on carefully-devised financial policies.

Storehouse. Al Jandl and Van Crouch introduced me to the Storehouse Principle.[3] They suggest God specially blessed storehouses established by His people. They contend this principle applies equally to organizations and individuals. “The LORD will command the blessing on you in your storehouses and in all to which you set your hand, and He will bless you in the land which the LORD your God is giving you (Deuteronomy 28:8 [NKJV]).” For those short of funds, start small but start now to build reserves (a storehouse) and ask God to bless and grow that storehouse.

Oil. Setting aside adequate oil for unforeseen future needs appears in two prominent places in Scripture.  Proverbs 21:20[4] (NET) says “There is desirable treasure and olive oil in the dwelling of the wise, but a foolish person devours all he has.” The tough part of this verse to swallow is that last phrase—it is very hard for a well-intentioned executive director or board member to admit that maxing out on service provision (and in so doing “eating up the seed corn”) is, well…still foolish.[5] We can see the validity of buying car insurance for an event that we hope and trust will never happen, yet at the same time walk in ignorance regarding self-insuring against liquidity risk.

The parable of the wise virgins (Matthew 25:1-13, NET) speaks of foolish wedding guests who “…did not take extra[6] olive oil with them. But the wise ones took flasks of olive oil with their lamps. When the bridegroom was delayed a long time… the foolish ones said to the wise, ‘Give us some of your oil, because our lamps are going out.’ ‘No,’ they replied. ‘There won’t be enough for you and for us…” The wedding guests were caught off guard without adequate resources held in preparation. But there’s more: They ran out of reserves because they did not think they needed as large a level of reserves to carry them through the waiting period. In our organizations’ financial context, this would be tantamount to holding too little in cash reserves because we underestimate the period over which these reserves must bridge revenue shortfalls or expense spikes. 

Hoarding. Perhaps your organization resists holding an adequate level in cash because of a valid concern regarding hoarding resources (see James 5:3b, which has more general application than the immediate context). We’re not talking about trying to get to the place where our organization does not require faith to accomplish its mission. That said, regardless of how much or how little is held in cash reserves, we will always be exercising faith regarding the mission outreach and the fruit that God promises to it.

Evidence from business. Faith-based organizations don’t mimic business, but studying business behavior helps us see why we might want to hold more cash than we previously thought prudent. A prominent academic study (Bates, Kahle, and Stulz, [BKS]) documents a tremendous increase in cash holdings by businesses from 1980 through 2006—a trend continuing to the present day.[7]  BKS investigated the reasons for the increase. They found that companies are investing less in cash substitutes such as accounts receivable and inventories (which would convert over time into cash) and so holding more cash.

Second, and to our point of recession-induced need, the variability of cash inflows and outflows has increased dramatically. In finance terminology, this represents an increase in risk, and cash holdings act as a hedge against that risk.  You might hear yourself saying, “Things don’t seem to be as dependable as they used to be.” Nonprofits are seeing their service outreach multiply while revenues are not keeping pace. Cash enables them to bridge that gap.

Third, organizations build cash when capital expenditures are low and reduce cash when making large capital expenditures. A follow-up study by three researchers finds that in the “Great Recession” those organizations having the smallest levels of cash reserves going into the recession cut back the most on their capital investments—no surprise there.[8] We expect ministries to “prefund” major capital expenditures so we should applaud build-up of cash on the balance sheet in anticipation of those expenditures.

Finally, businesses with higher research and development expenditures hold more cash (presumably to be able to fund these as well as to fund operations if there is a small or delayed payback to these expenditures). For ministries, the second factor—increased fluctuations in operating cash flow (study your Statement of Cash Flows over the past five years)—is the key element shared in common with businesses. Higher risk implies we should be holding higher levels of cash reserves.

Benchmarking cash reserves. We are fortunate to have some comparative data to guide us in setting our target reserves level. The Urban Institute (UI) defines “operating reserves” as “cash and other liquid assets that can be tapped when income falls short of expenses.” Furthermore, to be included in reserves, amounts your organization holds in cash and other current assets have to be unrestricted, meaning that the cash or other assets have no prohibition on being sold, no purpose limitation, or were the result of revenues and support in excess of expenses.

The UI calculates operating reserve ratios using a formula devised by experts serving on the Nonprofit Operating Reserves Initiative Work­group.[9] The part of net assets that comes from “nonborrowed” real estate and other fixed assets is excluded in that the organization cannot readily convert it to cash to pay expenses. The UI has tabulated data on many nonprofits in the Washington D.C. area and found that:

  • 57% of the organizations have less than three months’ worth of operating expenses covered by operating reserves.
  • 19% of the organizations actually had negative operating reserves, most commonly because of high levels of unpaid bills (accounts payable); large amounts reported under “mortgages and other notes payable”; or money owed to benefactors and officers of the organization.[10]

Anecdotal evidence suggests churches and other ministries are in a better position with respect to operating expenses but for many organizations this position deteriorated over the 2008-2011 period.

Digging out. There are several routes toward building oil and storehouse provisions:

  • Designate a person to oversee liquidity. This would normally be the treasurer.[11] Have this individual start with assessing the needed cash reserve position and then educating the board and development team on this position and how critical it is to build to and then maintain the position. The designated person then provides ongoing reports including present and anticipated cash positions along with recommended actions should the positions be below target.
  • Forecast cash changes and your resulting cash position. Think of cash planning and cash reserves as a fort or place of hiding (“A shrewd person sees danger and hides himself, but the naive keep right on going and suffer for it”[12] Proverbs 22:3 NET).
  • Preserve cash by astute management of cash inflows (accelerate these), cash positions (consolidate these so your cash is not spread out all over the place) and cash outflows (reduce these to the extent possible). Some donors will prepay pledges if they know this is important to your church or nonprofit.
  • When completing asset sales, place the proceeds in cash reserves. If there is a downturn in donations, this sort of strategy may be a lifesaver, sparing deep personnel cutbacks or field operation closures.

Conclusion. Financial health is a prerequisite for mission achievement. As you and your organization begin to build or rebuild your oil supply and stock or restock your storehouse, take confidence that God is your Source and He will supply all of your needs according to His riches in Christ. 

John Zietlow, D.B.A., CTP, is Professor of Business Administration, Southwest Baptist University (Bolivar, MO) and Associate Faculty at Indiana University-Purdue University at Indianapolis (IUPUI). He co-authored Financial Management for Nonprofit Organizations (Wiley, 2007) and Cash & Investment Management for Nonprofit Organizations (Wiley, 2007). Website:



[1] Megan Woolhouse, “Salvation Army Cuts Ties with United Way,” The Boston Globe, August 28, 2010.

[2] Shelly Banjo, “Churches Find End Is Near,” The Wall Street Journal, January 25, 2011.

[3] Al Jandl and Van Crouch, The Storehouse Principle: A Revolutionary God Idea for Creating Extraordinary Financial Stability (Broken Arrow, OK:  CrossStaff Publishers LLC), 2004.

[4] Scripture and/or notes quoted by permission. Quotations designated (NET) are from the NET Bible® copyright ©1996-2006 by Biblical Studies Press, L.L.C.

[5] Nonprofit scholar Liz Keating calls this the “current services trap.”  See Kate Barr’s insightful comments on why this is a dysfunctional mindset at

[6] The NET translation has this note for verse 3: “The word ‘extra’ is not in the Greek text but is implied. The point is that the five foolish virgins had only the oil in their lamps, but took along no extra supply from which to replenish them. This is clear from v. 8, where the lamps of the foolish virgins are going out because they are running out of oil.” Scripture and/or notes quoted by permission.

[7] Thomas W. Bates, Kathleen M. Kahle, and Rene M. Stulz, “Why Do U.S. Firms Hold So Much More Cash than They Used To?” The Journal of Finance, 44 (October), 2009, pp. 1985-2021.

[8] Ran Duchin, Oguzhan Ozbas, and Berk A. Sensoy, “Costly External Finance, Corporate Investment, and the Subprime Mortgage Credit Crisis,” Journal of Financial Economics, 97 (September 2010), pp. 418-435.

[9] The formula is based on the 2006 IRS Form 990. See related information at  

[10] Amy Blackwood and Thomas H. Pollak, “Washington-Area Nonprofit Operating Reserves.” 

[11] Marie Hollein, “The Treasurer as Chief Liquidity Officer,” Journal of Corporate Treasury Management 4(1), 2010, pp. 28-34.

[12] The note to this verse in the NET Bible is instructive: “The shrewd person knows where the dangers and pitfalls are in life and so can avoid them; the naive person is unwary, untrained, and gullible, unable to survive the dangers of the world and blundering into them.” Scripture and/or notes quoted by permission.



This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.