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Reserves Investments
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Reserves

• Reserves are funds set aside for emergencies or
  other future needs
• Are nonprofit organizations like ENA State
  Councils allowed to have reserves? Yes!
  Allowed and encouraged

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Reserves Purposes

• To assure that your State Council/Chapter can
  continue in operation should there be a downturn
  in revenues or an extraordinary expense.
• To build up sufficient funds so that the State
  Council/Chapter can use the income for new
  programs or to sustain ongoing programs.

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How large should reserves be?

• National ENAs Reserves Policy
• Reserves should be sufficient to sustain basic
  operations and core member services for a minimum
  of six months.

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Your Reserves Target

• 12 months of expenses ______________
• 1/2 half of your annual expenses is your
  long-term reserves target
  ____________________

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Total Funds Needed

• Step 1 Calculate your short-term operating needs

• Avg monthly balance in checking account
• Additional amount to cover the month of the
  greatest need for cash
• Short-Term Operating Needs

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Total Funds Needed

• Step 2 Add Short-term Needs to Long-term Target
  Amount

• Total Short-Term Operating Needs
• Long-term Target Amount
• Total Funds Needed

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Step 3 Compare Total Funds Needed to the funds
you have

• List all your accounts add up the usual
  -balance in each of your accounts
• Checking Account(s) _____________________
• Money Market Account(s)_________________
• Savings Account(s) _____________________
• CD (s) ________________________________
• Stocks Bonds_________________________
• Grand Total On Hand____________
  

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What if we have more than the Total Funds Needed?

• Is it because your Council/Chapter has a costly
  program/project planned for the future so it is
  appropriate to accumulate more funds?
• Is it because your Council/Chapter is going to
  make a donation to ENAF or is going to undertake
  new activities to meet the needs of its members?
• Is it because the economy is in a tailspin and
  the Council/Chapter wants more than a 50 target
  in the event membership declines?

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What if we have more funds but no need for them?

• Accumulating excess funds year after year is not
  your mission.
• Such an outcome may be appropriate for your own
  budget at home, but your purpose, once your cash
  needs are met, is to use your resources to
  achieve the ENA mission.

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What if we have less than the total funds needed?

• You may want to begin the discussion at your
  State Council/Chapter Board meetings. Perhaps you
  can develop intermediate goals for setting funds
  aside. The old adage Rome wasnt built in a
  day may apply.

In any event, it is important to have the
discussion and take action that is appropriate
for your Council/Chapter
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Reserves Target Investments

• Lets continue and assume that your
  Council/Chapter has the Total Funds Needed.
• This means that you have enough short-term
  operating funds enough to meet the long-term
  reserves target.
• Then whats next?

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Should the Target amount be in investments
rather than cash or cash equivalents?
It depends on your State Council/Chapter.
However, since Reserves are not meant to be used
for day-to-day operations you should consider
putting the funds in long-term investments.
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What are cash equivalents?

• Checking Accounts
• Savings Accounts
• Money Market Funds
• Treasury Bills Notes
• Short-term CDs

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What are long-term investments?

• Long-term CDs
• Mutual Funds
• Investment Grade Corporate Bonds
• Treasury Government Agency Bonds
• Equities (stocks)
• Individual Stock and Bonds
• Not recommended
• Money Market Funds
• Treasury Bills Notes
• Short-term CDs

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Who decides?

• An Investment Policy should
• Define and assign the responsibilities of all
  involved parties
• Establish investment goals with a relevant
  investment horizon
• Establish a reporting schedule
• Establish a basis for evaluating investment
  results

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Policies

• Reference Guide for State Treasurers revised
  December 2008
• ENAs Current Investment Policy Appendix B
• ENAs Current Reserves Policy Appendix D
• Short Form Sample Investment Policy Appendix C
• ALL ON ENAS WEB SITE

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What we have covered today

• What are reserves and why you need them
• What are your short-term operating needs and your
  long-term reserves target
• What is your investment policy
• Where you can find this presentation and copies
  of sample policies

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THANK YOU!

• QUESTIONS?