Reserve Fund

(This is intended to be an informative page about the Reserve Fund. None of this has been voted on, unless explicitly stated otherwise. - parker, treasurer, Jan 2012.)

What is the Reserve Fund?

The Reserve Fund is the money we have left over after all of our budgeted expenses are paid for.

Here are some definitions of the term "reserve fund" I found online:

An account set aside by an individual or business to meet any unexpected costs that may arise in the future as well as the future costs of upkeep.
A fund of money created to take care of maintenance, repairs or unexpected expenses of a business.
In the simplest terms, operating reserves are savings accounts — and organizations should have reserves for the same reasons that people should have savings: to serve as a cushion against unexpected but necessary expenses or a sudden loss of income and to build up money for long-term goals and future plans.
Synonyms: Rainy day fund, operating reserves.

Sasona has a Reserve Fund included in the budget, in the line "Income Minus Total Expenses." This can be used to determine the Debt Service Coverage Ratio (See: TheBudget).

Where does the Reserve Fund come from?

Here are some areas the Reserve Fund might come from:

Written into TheBudget ("Income Minus Total Expenses")
Labor fines & late fees (which are not included in the budget and thus are "gravy")
If our expenses are lower than we projected

What do we spend the Reserve Fund on?

In the first 6 or 7 years of Sasona's existence, we didn't talk much about the Reserve Fund because we were living hand to mouth -- we didn't have any extra money left over.

After we started solving our member debt problems and passed viable budgets for several years, our reserve fund built up.

Here are some things we have spent the Reserve Fund on:

Paying off balloon payment of Kagawa loan debt ($12,000)
Energy efficiency ($1750)
New oven ($1000)
New dryer ($828)
Donations to the cooperative community ($800 total -- $500 to Cooperation Texas and $300 to Jim Jones' documentary)
Various smaller items that didn't come from any specific budget

If the IRS had not dropped its fines against us for late filing, we would have used our Reserve Fund to pay for them.

How do you calculate the Reserve Fund?

It is most meaningful to calculate the Reserve Fund at the end of the fiscal year, after all the yearly expenses have been paid.

Here is a spreadsheet listing a Reserve Fund calculation in the middle of the year: Reserve Fund calculation spreadsheet, 1-31-12

To calculate the Reserve Fund, every single credit and debit for the organization must be accounted for.