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Reserve Policy

Jane Alliance Neighbourhood Services

Revised Reserve Policy

This policy was revised by Jane Alliance Neighbourhood Services governing Board of Directors February 13, 2014.

Purpose

Jane Alliance Neighbourhood Services runs successfully when we are able to offer our clients with efficient and equitable services as well as access to resources that would enable their needs as required. Our organization understands that the needs of our community are constantly evolving with changes in one’s livelihood and circumstances. Overall, the purpose of the reserves policy for Jane Alliance Neighbourhood Services is to ensure the stability of the mission, programs, employment, and ongoing operations of the organization. This Reserve policy is intended to provide an internal source of funds for situations such as a sudden increase in expenses, one-time unbudgeted expenses, unanticipated loss in funding, or uninsured losses. These funds are not used as a holding account for unallocated operations. Instead, the Reserve may also be used for one-time, nonrecurring expenses that will build long-term capacity, such as staff development, research and development, or investment in infrastructure. Reserved funds are not intended to replace a permanent loss of funds or eliminate an ongoing budget gap. It is the intention of Jane Alliance Neighbourhood Services for Reserved funds to be used and replenished within a reasonably short period of time. The Reserve policy will be implemented in concert with the other governance and financial polices of Jane Alliance Neighbourhood Services and is intended to support the goals and strategies contained in these related policies and in strategic and operational plans.

Definitions and Goals

The Reserved fund is defined as appropriations of funds balanced at the action of the Board of Directors. The minimum designated funds set out are established in an amount sufficient to maintain ongoing operations and programs for a set period of time, measured in months. It serves a dynamic role and will be reviewed and adjusted in response to internal and external changes. The target minimum Reserve fund is equal to one month of average operating costs. The calculation of average monthly operating costs includes all recurring, predictable expenses such as salaries and benefits, occupancy, office, travel, program, and ongoing professional services. Depreciation, in-kind, and other non-cash expenses are not included in the calculation. The calculation of average monthly expenses also excludes some expenses like pass-through programs operated by partner organizations, one-time or unusual expenses. The amount of the reserved funds target minimum will be calculated each year after approval of the annual budget, reported to the Board of Directors, and included in the regular financial reports.

Accounting for Reserves

This Reserve policy will be recorded in the financial records as Board-Designated Operating Reserve. The Fund will be funded and available in cash or cash equivalent funds. All reserved funds will be maintained through general cash and investment accounts of the organization.

Funding of Reserves

The Reserved Fund will be funded with surplus unrestricted operating funds. The Board of Directors may from time to time direct that a specific source of revenue be set aside for reserved funds. Examples may include one-time gifts or bequests, special grants, or special appeals.

Use of Reserves

Use of the Operating Reserves requires three steps:

  1. Identification of appropriate use of reserve funds. The Executive Director and staff will identify the need for access to reserve funds and confirm that the use is consistent with the purpose of the reserves as described in this Policy. This step requires analysis of the reason for the shortfall, the availability of any other sources of funds before using reserves, and evaluation of the time period that the funds will be required and replenished.

  2. Authority to use operating reserves.

  3. Reporting and monitoring.

Approach

The Executive Director will submit a request to use Operating Reserves to the Finance Committee of the Board of Directors. The request will include the analysis and determination of the use of funds and plans for replenishment. The organization’s goal is to replenish the funds used within twelve months to restore the Operating Reserve Fund to the target minimum amount. If the use of Operating Reserves will take longer than 12 months to replenish, the request will be scrutinized more carefully. The Finance Committee will recommend the request to the Executive Committee or the Board of Directors.

The Executive Director is responsible for ensuring that the Reserved Fund is maintained and used only as described in this Policy. Upon approval for the use of this policy, the Executive Director will maintain records of the use of funds and plan for replenishment. He/she will provide regular reports to the Finance Committee/Board of Directors of progress to restore the fund to the target minimum amount.

Relationship to Other Policies

Jane Alliance Neighbourhood Services shall maintain the following board-approved policies, which may contain provisions that affect the creation, sufficiency, and management of the Operating Reserve Fund.

Review of Policy

This Policy will be reviewed every other year, at minimum, by the Finance Committee, or sooner if warranted by internal or external events or changes. Changes to the Policy will be recommended by the Finance Committee to the Board of Directors.

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