Administration: Net Assets
The Net Assets policy has two parts the Reserves fund or “rainy day fund” and the “Special Projects Fund”. The intention of this policy is to:
1. Differentiate reserves or our “rainy day fund” from “special projects funds”
2. Require additional board evaluation of the return on investment if a project is proposed below or at the low end of the target range.
3. Identify funds available for new projects when reserves are at the high end or above the target range.
Reserve Fund Policy
The Lamaze Reserve Fund is a fund maintained to help ensure the ongoing financial health of our organization by providing a source of funds that can be used in the event of a substantial loss of revenue, or unexpected expenses. This fund is a combination of all unrestricted assets which have not been identified as part of the Special Projects Fund.
1.2 Appropriate Use
The appropriate use of the Lamaze Reserve Fund is to provide funds to allow our organization to cover unanticipated losses due to reduced revenue or increased expenses. The use of funds in the Reserve Fund is subject to the approval of the Lamaze Board.
Lamaze’ target is to maintain a Reserve Fund equal to between six and nine months or 50% to 75% of the annual budgeted operating expenses, with a minimum of no less than 35%.
The Board should be made aware and separately vote that they are approving a budget that is not within the target range. The Treasurer shall additionally notify The Board quarterly if the Annual Forecast (Estimated Projection) does not maintain the target range. Actions should be taken to ensure that the minimum amount is never reached, and a plan should be in place and communicated to The Board should the Net Assets fall outside of this range. The following scenarios are to be used as guidance.
A. If reserves are above 75% and a project is submitted and approved by the board, Finance Committee approval is not necessary to fund the project. Funds over 75% of annual budgeted operating expenses are considered to be part of the Special Projects Fund.
B. If the reserves are in the target range of 50% to 75% the finance committee should be informed of the project and raise any concerns about the impact of the project on the financial stability of Lamaze.
C. If the project will reduce the reserves below 50% the finance committee should review the project and approve only projects with an acceptable Return on Investment (ROI).
1.4 Review Process
The Finance Committee will review the balance in the Lamaze Reserve Fund no less than once each year and make a recommendation to The Board as to any steps that should be taken to maintain the balance at an appropriate level.
Special Projects Fund Policy
The Lamaze Special Projects Fund is maintained to provide financial resources that allow the organization to pursue significant projects that are beyond the scope of our annual operating budget and that contribute to the mission of our organization.
2.2 Appropriate Use
The appropriate use of the Lamaze Special Projects Fund is to fund significant projects and initiatives intended to help the organization pursue its mission. These projects will generally be of a scope, scale and/or duration that are beyond that of activities included in our annual operating budget. The use of funds in the Special Projects Fund is subject to the approval of the Lamaze Board. The Board may preapprove projects, contingent on the availability of money in the Special Projects Fund, so that these projects can be pursued in the event that funds become available due to positive financial results.
Lamaze Special Projects Fund in combination with the reserves fund will identify funds to be utilized for strategic initiatives. Special Projects funds will span from the bottom of the target Reserves Fund range or 50% with Finance Committee review. Reserve funds over 75% will automatically be considered part of the Special Projects fund and would not require Finance Committee review to spend these funds. Should the Net Assets increase to greater than 100%, the Board should create a five year plan to be used for special projects that would provide added value to the members of Lamaze and return to the policy target range.
2.4 Review Process
The Treasurer will review the balance in the Special Projects Fund reserve no less than once each year and make a recommendation to The Board as to any steps that should be taken to maintain the balance at an appropriate level
Approved: July 2012