The establishment and maintenance of a funded reserve is a high priority. This will enable Mid-Plains United Way to support strategic business practices and to:
Manage cash flow interruptions
Minimize the need for borrowing working capital
Meet commitments, obligations or other contingencies
Provide flexibility for new organizational priorities
Generate investment income
To establish and maintain a funded reserve unencumbered and uncommitted at a level relative to the annual program funding and the costs of operating and maintaining the organization.
The reserve is intended to serve a dynamic role and is available to be utilized as needed rather than being static, devoted only to generating interest income.
Unrestricted Reserves – Amounts reported in the Unrestricted Net Assets section of the balance sheet and identified as undesignated.
Program Funding – Undesignated allocations to Agencies and Initiatives. It does not include expenses funded by grants.
Costs of Operating and Maintaining the Organization – Mid-Plains United Way net expenses for Program Services, Fund Raising & Administration and United Way World Wide membership fees.
Funded Reserve – A fund consisting of liquid assets and investments accounted for separately from operating funds. Liquid assets are those that may be converted to cash quickly and easily. It is not required that reserves be physically segregated in a separate account although Mid-Plains United Way may decide to do so.
IV. Strategies and Procedures
A. Reserves shall be accounted for separate and apart from Operating Funds.
B. The Investment Committee will have the responsibility for developing and recommending policies and guidelines for the investment of the reserve assets and the Finance Committee will approve such policies and guidelines.
C. The reserve goal shall be to achieve and maintain between three and six months
of Program Funding and Operating Costs as defined in Section III.
Assets for the reserve accounts shall come from the Annual Campaign, undesignated Legacies/Bequests/Memorials, earnings on investments, recapture of undistributed Allocations/Initiatives, Special Grants and other sources the Executive Committee may deem to be appropriate.
A. Working funds to financially operate the organization
B. Funds to stabilize a level of allocations or a level of increased allocation when events affect the source and application of funds.
C. Funds to meet unfunded and unexpected organizational needs.
D. Funds for emergency and emerging needs of Agencies.
E. Funds to make up a deficiency in the Campaign, either in results or collection experience.
The procedure for approving use of the reserve funds will be as follows:
Request submitted to Finance Committee
Action taken by Finance Committee
Recommendation to the Executive Committee by the Finance Committee
Approval by the Executive Committee
Approval by the Board of Trustees
The status of the funded reserve will be calculated at the end of each fiscal year based upon audited financial results.
The calculation formula will be based upon amounts defined in Section III as follows:
Unrestricted, Undesignated Net Assets as of 6/30 = No. of Months
(Budgeted Annual Operating Expenses + Program Funding) x 1/12
The Reserve Calculation will be presented to the Executive Committee at their meeting following approval of the financial audit results by the Finance Committee. The Committee will consider the adequacy of the reserve amount and will recommend any changes as deemed necessary.
IX. Policy Review
This policy will be reviewed every three years by the Finance Committee or sooner as conditions warrant. Any changes thereto will be reviewed by the Executive Committee and approved by the Board of Trustees.
Policy first approved: June 28, 2007