1. PURPOSE

1.01        The purpose of this Statement of Policy and Procedure is to provide guidance on the establishment and utilization of a MakeWay operating reserve fund.   

2. SCOPE

2.01        This policy applies to the Board of Directors, the CEO and the Senior Management Team. 

3. POLICY

3.01        MakeWay will establish an Operating Reserve Fund to ensure stability of the organization’s ongoing mission and operations. 

3.02        The Operating Reserve Fund 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. The Operating 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.

3.03        The Operating Reserves are not intended to replace a permanent loss of funds or eliminate an ongoing budget gap.

3.04        The Operating Reserve Fund will be established as an internally restricted fund.  Board of Director approval is required to utilize Operating Reserve funds.

3.05        The Operating Reserve Fund will be funded with unrestricted operating surpluses. The Board of Directors may from time to time direct that a spe­cific source of revenue be set aside for the Operating Reserve Fund.

3.06        The target minimum Operating Reserve Fund is equal to three months of average operating costs. The calculation of average monthly operating costs includes all recurring, predictable expenses such as salaries and benefits, rent, office, travel, and ongoing professional services. Amortization and other non-cash expenses are not included in the calculation.

3.07        The amount of the Operat­ing Reserve Fund target minimum will be calculated each year after approval of the annual budget and reported to the Finance & Audit Committee and Board of Direc­tors.

3.08        Funds drawn from the Operating Reserve Fund are replenished within a reasonably short period of time, generally to be considered 12 months. 

4. RESPONSIBILITY

4.01        It is the responsibility of the CEO and CFO to identify the need to access Operating Reserve funds and to confirm that any use is consistent with the purpose as outlined in this policy. 

4.02        The Finance & Audit Committee is responsible to review requests to use Operating Reserve funds and to recommend to the Board of Directors for approval as appropriate.

4.03        The CFO is responsible to report on the balance of the Operating Reserve Fund and any changes to the Operating Reserve Fund balance to the Finance & Audit Committee and Board of Directors at a minimum annually. 

5. DEFINITIONS

5.01        “Operating Reserve Fund” - An Operating Reserve Fund is an internally restricted fund bal­ance set aside to stabilize a non-profit’s finances by providing a cushion against unexpected events.

5.02        “Internally Restricted Fund” - An internally restricted fund is funding with internal restrictions for its use. This includes Donor Advised Funds.

6. REFERENCES and RELATED STATEMENTS of POLICY and PROCEDURE

002 Statement of Policy & Procedure - Cash Management Policy