• khull

    August 2, 2022 at 11:20 pm

    We set ours at 3 months of expenses. Each year when our budget increase, we set aside an additional amount to get our reserve back up to that 3 month mark. We’ve discussed moving it up to 6 months, but with a budget of $4M our finance committee determined they didn’t feel comfortable having that much cash sitting around unused and not going towards our mission.

    Here’s our policy:
    The organization aims to hold a reserve fund equal to three months of budgeted operating expenses. The amount of the reserve fund will be calculated each year after approval of the annual budget, and approved by the Board of Directors. The reserve will be funded with surplus unrestricted operating cash and will be held in cash or cash equivalent funds.

    The operating reserve is intended to be held as emergency savings for the organization. In the event of a shortfall where reserve funds could be used, the following steps will be followed:
    1. The Executive Director, in conjunction with the Sr. Director of Administration, will identify the need for access to reserve funds. In identifying a need, staff should consider the availability of other funds and evaluation of the time period the funds will be used and replenished.
    2. The request to use reserve funds will be discussed and approved by the Finance Committee.
    3. The Board of Directors will approve the use of reserve funds.
    4. The organization will plan to replenish the funds within one year, and will report quarterly to the board on progress with repayment.