Financial reserves are important in the operation of an association for the stability and flexibility they can provide in unanticipated circumstances. This policy establishes a financial reserves policy for the Association of American Veterinary Medical Colleges (AAVMC). The AAVMCs’ financial reserves are to provide funds for maintaining operations in a carefully planned way during times of unanticipated emergencies including financial or other stress, until a particular emergency situation can be fully assessed and a longer term strategy developed.

The reserve fund balance should eventually equal at least 50% of the annual unrestricted operating expenses of the AAVMC.  The Finance Committee will recommend a plan that outlines how the AAVMC Reserve goal of 50% can be achieved to the AAVMC Board of Directors. This plan will include a time frame for the reserve goal to be achieved, based on a philosophy of making a planned, budgeted contribution to the fund each year, while taking into funds that will be required for AAVMC to achieve its Strategic Goals and Objectives as described in the AAVMC Strategic Plan  into consideration. The Finance Committee will review the level of the reserve fund annually to balance the needs of the Association against the need to achieve the reserve target, and make recommendations to the AAVMC Board of Directors regarding potential adjustments to this plan.

 

As recommended by the AAVMC Finance Committee, and approved by the AAVMC Board of Directors, the AAVMC will build in a minimal annual contribution of $25,000 to the reserve fund into its annual expense budget. Pending unanticipated, special circumstances that may arise, the Finance Committee may recommend to the Board that the annual funding requirement be waived for specific purposes that are of benefit to AAVMC. Earned interest shall remain in reserves.

 

Once the reserve goals are met, in the event that the reserve fund drops below 50% of annual unrestricted operating budgeted expenses, the Executive Director will immediately inform all members of the Finance Committee and the AAVMC Board of Directors. The Executive Director, in consultation with the Chief Operating Officer, will recommend options for corrective action to be taken by the Board.

 

In the case of an organizational emergency, the Executive Director, with approval by the AAVMC President and Chairperson of the AAVMC Board of Directors, may make a one-time withdrawal of up to $100,000 from the Reserve fund to cover immediate emergency expenses. At the time of withdrawal, the Executive Director will immediately notify the Finance Committee of the need for and details of the emergency withdrawal. The Chairperson of the Finance Committee may convene the full committee to discuss the implications of the withdrawal and respond accordingly, which may include meeting with the AAVMC Board of Directors. Further withdrawals of any amount from the AAVMC Reserve Fund for unanticipated events will require approval by the AAVMC Board of Directors.

 

Up to 10% of reserve funds may be used as venture capital or seed money for new programs, initiatives and/or services.  A recommendation to borrow reserve funds to support unanticipated projects that would be important for achieving AAVMC’s Strategic Goals may be submitted to the AAVMC Finance Committee by AAVMC staff, members of the AAVMC Assembly, AAVMC Committees, or any other AAVMC body. Each loan request must be accompanied by a project proposal that describes the purpose of the project, its relationship to an AAVMC Strategic Goal, and how the funds will be used and repayed to the Reserve. After consideration of the loan request and plan for repayment, the Finance Committee will recommend approval (with or without modification) or disapproval of the request to the AAVMC Board of Directors, which will have final authority to approve, modify, disapprove, or take other action on the recommendation. 

 

Not less than 50% of the reserve fund will be maintained in cash instruments such as money market funds, short-term US Treasury bills, or certificate of deposits. The remaining funds may be invested in a balanced formula in stocks, bonds, and/or real estate investment trusts on the advice of the organization’s independent investment advisor.

 

Pending approval by the AAVMC Board of Directors, the Finance Committee, will appoint an independent investment advisor and/or firm to manage the investments of the reserve fund. The independent advisor/firm’s investment strategy will be reviewed quarterly by the Finance Committee and a report submitted annually (or upon request by the Board) to the AAVMC Board of Directors for approval.