The association I work with, the Association of Water Technologies, has had the good fortune of having strong and growing reserves, even in a weak economy. Fears about a stagnant economy had the Board nervous using funds in the reserve. And, because of a very conservative investment policy, like many groups, we were seeing very little return on our investments. Our conservative approach, which made sense when we were solely focused on growing the reserve, was outdated as we began to look at the reserve as a way to fund big projects.
With some research through ASAE and with the advice of our investment advisor, we developed a comprehensive reserve and investment strategy. The policy is aimed at safeguarding funds, providing funding for big projects, and allowing us more aggressive investment options for a limited amount of the reserve.
At our last Board meeting, we approved the policy, which designates funds into four categories – operating funds (2 months of expenses), intermediate funds (4 months of expenses), program development funds and long-term funds. Each fund has its own objective, maximum target amount and investment options, and some require a replenishment plan if money is used from the fund.
This new policy has allowed us to be very strategic in how we manage our reserve and how we re-invest in the Association through new projects.