Background

In mid-2020, the board had a detailed discussion around budget, expenses, and our financial reserve goals.

A financial reserve goal is an amount of money held in reserve by the co-op to cover unexpected expenses. The financial reserve might be used to cover increased costs for budgeted expenses (such as an increase in monthly costs at our ISP) or might be used to cover one-time emergency costs (such as the large Cogeco network surcharge levied in 2019). Any large one-time expenses outside of the budget still need board approval (per the ExpensesPolicy).

Once the reserve goal has been met and expenses are known to be stable, the board will need to decide, with the help of the membership at large, how to best use the co-op's excess revenue.

Reserve Goal

The board has decided to structure the reserve goal in terms of budgeted expenses, because we need to pay those expenses in order to remain solvent. Knowing our monthly budget gives us something concrete to plan against.

The reserve goal is calculated as:

• $reserve_goal = $reserve_months * ($yearly_budget/12) + $fixed_reserve

The related goal for cash on hand is then:

• $cash_on_hand = $member_balances + $reserve

2020 Numbers

In August of 2020, the board set the reserve goal to:

• 12 months * $(4700/12) + $300 = $5000

Current cash on hand was approximately $5000, including $4000 of member balances, leaving a current reserve of approximately $1000. With dues steady at $7/month, we expected to reach the reserve goal by the end of 2021.