Reserve Fund

1. Purpose

The purpose of this policy is to outline the procedures for managing the RACGP Reserve Fund (RF).

2. Application

This policy applies to all members of the Board, the CEO and any other delegates.

3. Purpose of the fund

The RF is a fund designed to ensure the long term sustainability and stability of the mission, programs, employment, and ongoing operations of the RACGP. The 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.

The RF may also be used for once-off, non-recurring expenses that will build long-term capacity. The RF forms part of the RACGP’s general business continuity arrangements.

The RF is not intended to replace a permanent loss of funds or eliminate an ongoing budget gap. It 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 RACGP for the Reserve Fund to be used and replenished within a reasonably short period of time.

4. Source of the fund

The Board may determine that the RF is to be funded by, in whole or in part:

  • Surplus unrestricted operating funds; or
  • Specific once-off funding sources generated from bequests or special appeals.

5. Target Minimum Balance

The Target Minimum Balance of the RF should be at lease 3 months Operating Expenditure which can be built up over time. The initial Target Minimum Balance is set at $15.3M, 3 months Operating Expenditure calculated from 12 months average for FY18.

6. Use of fund moneys

The RF may be used for the following occurences:

  • Shortfall due to significant changes to funding and/or market conditions such as changes in government funding.
  • To fund disaster recovery (such as a natural disaster or other event which might trigger the incident management plan)
  • Payment of a deductible or excess on an existing policy or an occurrence of an uninsured loss;
  • Purchase of a significant asset, or group of assets;
  • Long term strategic investments in education, staffing, research and development, technology, merger or to implement major change.

7. Operating Expenditure

Operating Expenditure for the purposes of establishing the size of the RF comprises:

  • Recurrent expenditure as defined in the prior year's financial statements but does not include:
    • Depreciation;
    • Non-cash or in kind expenditure; and
    • Grants

8. Approval for use of the fund

Before any RF funds may be used, the Board must:

  • Identify the purposes for which the funds are to be used;
  • Satisfy itself that at least one of the criteria in clause 6 of this policy is applicable to the circumstances for which the funds are to be used;
  • Satisfy itself that the purposes for which the funds are to be used are a reasonable response to the applicable criterion or criteria in clause 6;
  • Consider whether other available funding sources might be more appropriate;
  • Determine the quantum of funds to be used and satisfy itself that that amount is sufficient and appropriate in the circumstances;
  • Approve the transfer of funds to an operating cash account for application; and
  • Determine an appropriate time within which the RF is to be replenished if drawn upon.

Where the Board considers the use of RF funds it must:

  • document all the deliberations concerning the proposal to use funds; and
  • if approved, must inform the CEO as soon as practicable of its decision.

9. Exercise of delegation

Where the Board has delegated authority to approve use RF funds to a delegate, the delegate must:

  • Apply clause 8 of this policy in making a decision about RF funds as if it were the Board;
  • Where a decision to use the funds is made, report the details of that decision to the Board at the next scheduled meeting including:
    • a description of the analysis and determination of the use of funds; and
    • plans for replenishment to restore the RF to the target minimum amount; and
  • Only make a decision affecting RF funds consistently with their delegation.

10. Monitoring and reporting

Upon arrival for the use of RF funds, the CEO will maintain records of the use of funds and any plan for replenishment. The CEO will provide regular reports to the Board of progree to restore the RF to the target minimum amount.

11. Management of the RF

The CEO is responsible for managing the RF in whatever way he/she sees fit except that the RF funds must be sequestered from normal cash operations and invested in a short term financial instruments in accordance with the Treasury policy.

12. Amendment of this Policy

The CEO may, without the consent of the Board, make Minor Amendments to this policy at any time.

If the CEO makes Minor Amendments, he/she must advise the Board of those amendments at the next scheduled Board meeting. Major Amendments require the consent of the majority of the Board.

13. Responsibilities

Board Responsible for approval of policy and Major Amendments. approves use of RF funds.
Members Must comply with the policy.
CEO Must comply with the policy. Responsible for Minor Amendments. Monitoring and reporting on the RF.
Delegates Must comply with the policy. Must exercise delegations within specified limits.

14. Glossary

Major Amendment An amendment which materially changes the operation of the policy which is not otherwise a Minor Amendment.
Minor Amendment An amendment to style, to correct grammatical mistakes, to change overall formatting, to make updates which do not materially change meaning, or any other amendment, which in the opinion of the CEO, does not materially alter the operation of the policy.
Operating Expenditure Recurrent expenditure not including depreciation, non-cash or in-kind expenditure or grants.
Reserve Fund A fund designed to ensure the stability of the mission, programs, employment, and ongoing operations of the organisation. The RF is intended to provide an internal source of funds for unforeseen financial situations.
Target Minimum Balance Funds in the RF equal to at least 3 months Operating Expenditure on prior year’s 12 month average or target established by the board, whichever is the greater.

15. Realted documents, legislation and policies

Treasury Policy

Incident Management Plan

RACGP Investment Policy

Delegations Policy and Instrument

16. Policy review and currency

This policy will be reviewed every year from the last approval date. This policy is new.