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WNPS Operating Reserve Policy

I. PURPOSE

This Policy deļ¬nes and sets goals for the Washington Native Plant Society (WNPS) Operating Reserve, describes authorization for use of the Reserve, and outlines requirements for reporting and monitoring. This Policy is intended to ensure long-term stability of WNPS mission, programs, staffing, and ongoing operations.

The Operating Reserve is defined as a Board designated fund by the WNPS Board of Directors (Board) that provides an unrestricted internal source of funds for unanticipated financial emergencies such as: (1) a temporary financial shortfall to maintain orderly business continuity; (2) an extreme financial situation requiring immediate funding to avoid a major restructuring or dissolution of WNPS; and (3) a revenue source to respond to an immediate, exceptional opportunity that could not be met within established budget revenue.

The Operating Reserve is not intended to replace a permanent loss of funds, eliminate an ongoing budget gap, or address other structural financial problems. This Policy intends that any funds allocated from the Operating Reserve will be both used and replenished within a reasonably short period of time. (see section VI)

II. OPERATING RESERVE TARGET MINIMUM

The targeted minimum Operating Reserve fund balance is equal to 25 percent of the three-year running average of WNPS’s annual operating costs. Calculation of average annual 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. Calculation of average annual expenses also excludes expenses for pass-through programs and one-time or unusual capital purchases.

III. OPERATING RESERVE FUNDING

The Operating Reserve will be funded at the end of each fiscal year when a budget surplus exists in the unrestricted annual operating budget. The amount allocated to the Operating Reserve in any year will be limited to the value of five (5) percent of all annual contributions—excluding contributions to the WNPS Endowment Fund—until the targeted minimum is reached. By a two-thirds vote of the Board, the Board may authorize special allocations to the Reserve that exceed the five percent limit. The Board may decide to make no allocations to the Operating Reserve in some years.

IV. INVESTMENTS

Operating Reserve investments will be in cash and cash equivalents, mutual funds, and fixed income securities (including certificates of deposit and money market instruments). Twenty-five percent of the Operating Reserve must be invested in cash and cash equivalents and the balance may be invested in mutual funds and fixed securities with all returns on-investment reinvested in their respective accounts. The Operating Reserve will be maintained as a separate account in accord with investment policies and will not be commingled with WNPS’s general cash or other investment accounts.

V. ROLES, RESPONSIBILITIES, AND AUTHORITIES

The Board retains sole accountability for the Operating Reserve and delegates administration of the Reserve to the Executive Committee and Treasurer. Investment selection and portfolio management will be administered internally by the Treasurer and Financial Advisory Committee.

VI. USE

The Executive Director will formally notify the Treasurer and Financial Advisory Committee when any need arises to use the Operating Reserve. Formal notice will confirm that the use is consistent with the purpose of the Reserve as described in this Policy, and will include analyses of the reason for the shortfall, availability of any other sources of funds before using the Reserve, and the time period that the Reserve would be needed and subsequently replenished. If the amount requested from the Operating Reserve is 25 percent or less of the current reserve, the Treasurer and Financial Advisory Committee will confirm the request and the Treasurer will forward the request to the Executive Committee for review and approval. If the amount requested from the Operating Reserve is greater than 25 percent of the current reserve, the Executive Committee must forward the request to the Board of Directors for review and approval.

Subsequent to such approvals, the Executive Director is responsible for assuring that any Operating Reserve appropriations are used only as described in this Policy. Upon approval for the use of the Operating Reserve, the Executive Director will maintain records of that use and the plan for replenishing the Operating Reserve, as required. The Executive Director will provide regular reports to the Treasurer and Board on progress to replenish the Operating Reserve to the targeted minimum amount, as required.

VII. REVIEW OF POLICY

The Operating Reserve serves a dynamic role and will be periodically reviewed and adjusted in response to internal and external changes. At a minimum, the Financial Advisory Committee will review this Policy every other year or sooner if warranted by internal or external events or changes. Changes to the Policy will be recommended by the Financial Advisory Committee to the Board. However, the Board reserves the right to amend the Policy at any time.

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Updated: March 7, 2015
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