Why Does RMASFAA Have all that Money in Reserves?
By John Nutter, Finance & Audit Committee Chair

Periodically, the question arises, "Why does RMASFAA have money held in reserve." Others ask, "Does our association have enough money in reserve?" To answer these and related questions, a task force was establish to review our reserves policy. The task force was chaired by Christy Crenshaw and included Keith Carparelli, Jeff Gregory, Tom Melecki, John Nutter, and David Vikander.

With the encouragement of the Board of Directors, the task force looked at three possible scenarios that could cause our Association to experience financial difficulty. The first scenario considered a drop in revenue due to loss of members, sponsors, or event participation (through tightening budgets, mergers, etc.). The second scenario was related to having to cancel a major RMASFAA event - a Summer Institute or annual conference - at the last minute due to an unforeseen factor (weather, airline or facility strike, etc.). The third scenario was based on a combination of the first two.

For calendar year 2001, our operating budget is $337,633. Membership dues, sponsorships, exhibit fees, and event registrations account for $288,000 of our budget. That represents 85%. The most expensive liability for cancellation of an event would be $30,000, which is less than 1% of our budget.

Our reserves are currently split into two parts-a Restricted Reserve to cover unforeseen liabilities, dissolution of the association, and other emergencies, and an Unrestricted Reserve to provide money for one-time activities, for seed money to try a new service, and to balance the annual budget if needed.

The combined reserves are composed of three types of investments, shown in the table below.

Money Market	$23,816	9.9 % of reserves	7.0 % of budget
Mutual Funds	$107,292	44.5 % of reserves	31.8 % of budget
Certificates of Deposit	$110,000	45.6 % of reserves	32.6 % of budget
TOTAL	$241,108	100.0 % of reserves	100.0 % of budget

The question posed to the Board was how much should be held in the Restricted Reserve to meet an emergency. Currently the $107,292 in mutual funds represents our Restricted Reserve. This is 32% of our operating budget. Our Policy and Procedures Manual requires 30%, which is $101,290. If we set aside 50% of our operating budget in the Restricted Reserve, it would require $168,817. Both Restricted and Unrestricted Reserves combined equate to 71% of our operating budget.

How do we compare with others? Based on research done by Joan Zanders, NASFAA policy calls for a 50% reserve, but NASFAA has been unable to set aside that much in the last two fiscal years. SASFAA region has a 75% policy. MASFAA sets aside enough to cover core functions for one year. WASFAA reserves an amount equal to 100% of its annual budget.

The Finance and Audit Committee reviewed the research conducted by the task force. The Committee recommended making no change at this time in our reserves policy. The Committee felt that changes in membership, sponsorship, or participation levels would demonstrate a trend for which budget adjustments could be made at Board meetings or at least once each year as the budget is prepared and adopted. A last minute cancellation of an event could easily be covered from the current reserve. With prudent monitoring of income and expenses by the Treasurer and the Finance and Audit Committee, the association should be able to fiscally adjust to any likely scenario.

This begs the question of what RMASFAA is doing with its reserve money. A major effort of the Board is to provide services to the members. This is being done in several ways.

• First, RMASFAA subsidizes the actual cost of the Decentralized Training, which is offered to all states in the region. Two Decentralized Training sessions are now available each year.
• Committee chairs and officers meet for a weekend retreat which results in better cooperation among committees and gets the program year off to a good start, rather than waiting until the winter board meeting that is half way through the year.
• The annual conference fee and membership dues have not been raised in several years, although related expenses have gone up. The difference is taken from the Reserve, thereby keeping registration fees affordable for all our members.
• Scholarships are offered to the Summer Institute to help people from schools with small budgets be able to get our first-class training.
• RMASFAA pays for our President-Elect to travel to another region's conference to exchange ideas and help us stay on the leading edge. Similarly, we assure that our President, President-Elect, and Immediate Past President are able to attend the NASFAA annual conference to represent our region.
• RMASFAA has one of the best web sites in the financial aid profession. This quality comes with a cost, but makes services - such as an up-to-date membership directory, on-line event registration, and a newsletter all members or an organization can read at the same time - readily available.

Hopefully your association is doing what you want it to and meeting your needs. We have set aside some of our income to be prepared for emergencies. At the same time, we have kept funds available to response to new initiatives and requests for additional services. If you have a different point of view about our approach, please share it with a Board member or email the Finance and Audit Committee chair, John Nutter, at nutter@uwyo.edu.