Reserve Fund Policy
Intent of the Board
On April 26, 1992, the MLA Board of Directors voted to establish a reserve fund. The intent of the board is that monies in the reserve fund be expended only in the case of emergency. An emergency is defined as an unforeseen combination of events or circumstances that required immediate action, including the expenditure of non-budgeted funds. Three factors should be considered in determining whether an emergency exists: time, financial need, and liability.
- Time. Must the expenditure be made immediately? If the need for funds can be postponed and/or met through the association’s usual budgeting procedure, an emergency probably does not exist.
- Financial Need. How great is the financial need? If the expenditure can be made through use of an established budget account or through a continuing education or other grant, an emergency probably does not exist.
- Liability. Is the association obligated to pay the expenditure? If the expenditure is a financial liability of the association or an expense needed to keep the association operating, the need may constitute an emergency.
Declaration of Emergency
- The executive committee of the board of directors must make the initial judgment that an emergency has arisen which requires the expenditure of money from the reserve fund.
- The executive committee, serving as the budget committee, will then consult the finance committee and subsequently make a judgment as to how to proceed. The executive committee will then direct the executive assistant to action according to the judgment.
The board action requires that the reserve fund be adjusted at the beginning of each fiscal year so that the balance is maintained at not less than eighteen (18) percent of the previous year’s actual expenditures. Whether or not money has been expended from the reserve fund during the previous year, the first budget action an any fiscal year must be to calculate and budget for the appropriate balance in the reserve fund.
Adopted: July 31, 1992,
Revised: August 2008
Revised: June 21 2017