Definitions
- Cash is defined as amount held in the Association checking and savings accounts.
- Investments is defined as the amount held in managed investment funds. The Association will maintain two funds: a low risk/low return fund (money market account) and a moderately more aggressive risk fund (mutual fund).
- Reserves are defined as the total amount of cash plus investments.
The Association will reinvest all managed investment income/interest back into the corresponding managed investment fund. Withdrawals from the investment account(s) require Board approval. Approved Association budgets reflecting withdrawals (deficit budgeting) from investment account(s) will not require further action from the board.
At least 50% of the current annual budget expenses must be in reserves at the start of the fiscal year. Of that, six (6) months of funding for “essential operations” shall remain in the lower risk investments account. Essential operations include, but are not limited to, staff salaries and fringe, student salaries, rent, telephone, technology, and other contracted services. The value of essential operations in the investment account does not replace the line items within the annual operational budget. The essential operations total dollar amount will be determined by the Association staff and presented to the board annually as part of the budget planning process.
If deficit budgeting is warranted, the Finance Committee will not recommend to the Board a deficit budget more than 1/5 of the total amount held in investments minus essential operations as of January 1 of the current fiscal year.
Annual gains from the high yield investment account will constitute available funding for strategic initiatives, as approved by the board, for the fiscal year. This is determined based on the increase in value of the account from the start of the previous fiscal year. Funds pulled from the high yield investment account by board approval for other purposes do not impact the valuation of profit or loss.
Association reserves may be used, with Board approval, to fund strategic initiatives that align with the Association’s current Strategic Plan. Up to 50% of total cost of a new initiative can be supplemented with Association reserves in the first year. Ongoing supplemental funding will be provided in decreasing increments for a period not to exceed five years (e.g. up to 40% of total cost in year two, up to 30% of total cost in year three, etc.). After five years, it is expected that a strategic initiative will generate revenue to cover the total cost of said initiative.