Reserves Policy

The RACGP Reserve Fund is intended to provide financial flexibility to respond to emergencies, reducing impact during times of financial stress by establishing an internal source of funds for situations, such as a sudden increase in expenses, once-off, unanticipated loss in funding, or uninsured losses. It forms part of the RACGP’s general business continuity arrangements.

It is not intended to replace a permanent loss of funds, or eliminate an ongoing budget gap, however, ensures sufficient working capital for a safety net when cash flows are unreliable or at risk without having to rely on lines of credit or external sources during shortfalls.

It is the intention of the RACGP for the Reserve Fund to be used and replenished within a reasonably short period of time.

A target range of $19.0m to $41.0m.

The Board will review the range annually as part of the approval of the Annual Budget.

The bottom of the target range is determined as three months operating expenses (less depreciation, non cash-in-kind and grants).

The Board sets the higher level of the range taking account of working capital needs and financial risks such as unfunded insurances losses and commitments.

The Board recognises that building up the balance to within the target range will require to be achieved over a number of years.

The Board may determine that transfers from Accumulated Surpluses to the RACGP Reserve Fund should occur at any stage during the year.

Increases in the value of the underlying assets of the RACGP Reserve Fund should be accounted for as increases in the reserve value.

The Board may give consideration to building up the Reserve Fund in setting the Annual Budget for the College.

Proceeds from the disposal of unrestricted assets in excess of $100,000 and not applied to purchasing assets in accordance with a Board approved budget may be transferred into the Reserve Fund.

The Board will consider the transfer out of the RACGP Reserve Fund when the upper limit of the range is met.  This is to take account of the desirability of using funds to deliver objectives rather than held in reserves.

The RACGP Reserve Fund can be used for following purposes:

• Shortfall due to significant changes to funding and/or market conditions such as changes in government funding and where the Board believes it is critical to the mission of the College that the activities continue and cannot be funded in any other way
• To fund disaster management and recovery (such as a natural disaster or other event which might trigger the incident management plan)
• Shortfall in total operational funds available for approved budgeted spend including complete utilisation of the overdraft facility
• Payment of a deductible or excess on an existing policy or an occurrence of an uninsured loss if not budgeted; 
• Any other reason consistent with the overall purpose of the RACGP Reserve Fund

Where the use is for capital purposes, the full capital value will be transferred out of the Reserve at the time of approval.

The use of funds should be consistent with the RACGP charitable purposes.

• Source of funds (surpluses, asset disposal etc)
• The alternate use of those funds
• The balance of the RACGP Reserve Fund compared to the target range.

• The purpose of the transfer out (as detailed above)
• The intended use and consistency with the overall purpose of the fund and purposes outlined in this policy statement.
• The quantum of funds to be used and sufficiency and appropriateness of the request in the circumstances, including alternate sources of funding to meet the request.
• The resulting balance of the RACGP Reserve Fund compared to the target range.

The CFO will approve transfers of donations into the Research Foundation Fund.

For uses of the Research Foundation Fund, the Board will consider the distribution of income/accumulated income taking account of:

• The intended use and consistency with the overall purpose of the fund and purposes outlined in this policy statement (e.g. the nature of the research).
• The quantum of funds to be used and sufficiency and appropriateness of the request in the circumstances, including alternate sources of funding for the request.
• The consistency of the use with RACGP strategic objectives and charitable purposes.
• The alternatives for funding the requested research proposal in whole or in part.

Target minimum $2 million

The Board will determine a target balance annually as part of the approval of the Annual Budget.

The Board may determine that transfers from Accumulated Surpluses to the RACGP Futures Fund should occur at any stage during the year.

Increases in the value of the underlying assets of the RACGP Futures Fund should be accounted for as increases in the reserve value.

Proceeds from the disposal of unrestricted assets in excess of $100,000 and not applied to purchasing assets in accordance with a Board approved budget may be transferred into the Futures Fund.

The Futures Fund may be used to fund specified capital allocations or projects as part of strategic financial planning for the RACGP.

The Board may approve transfers out where the RACGP Futures Fund balance is below the minimum target.

The Board may approve transfers out where the Reserves Fund has been exhausted and where a transfer out of the Reserve Fund would have been sought.

• Source of funds (surpluses, asset disposal etc)
• The alternate use of those funds
• The balance of the RACGP Futures Fund compared to the possible uses of those funds over a 3-5 year period.

• The intended use and consistency with the overall purpose of the fund and purposes outlined in this policy statement and in furthering the strategic objectives of the College.
• The intended use and consistency with the RACGP charitable purposes.
• The quantum of funds to be used and sufficiency and appropriateness of the request in the circumstances, including alternate sources of funding.
• The resulting balance of the RACGP Futures Fund compared to the target range.