Downtown Chattanooga Alliance Adds $230,000 Reserve Fund

Wednesday, September 16, 2020 - by Joseph Dycus

The Downtown Chattanooga Alliance agreed to amend their 2020-21 budget ever so slightly, putting in a reserve fund after some discussion from the board. The reserve fund will contain an amount of $230,000.

“We might want to consider having a reserve fund in the range of three months’ worth of operating expenses, I think that’s a very worthy consideration,” Chairman Steve Hunt said.

Chairman Hunt was not the only board member who liked the idea. Gordon Stalans, who presents the finance report during each month’s meeting, said having a reserve fund is common practice for nonprofits.

“I think that would be prudent for us to do just in case we were to have something to happen where we had to operate for a time with no revenues or reduced revenues, just to give us a little bit of security going forward,” Mr. Stalans said. “Three months is kind of the rule of thumb. Especially in the nonprofit world, to at least have that much set aside as reserves.”

“For us, that amount would be approximately $230,000, and we would say we’d maintain that amount minimum as a fund balance for that reserve. So that’s a proposal that I would make for the board to consider.”

Chairman Hunt said this reserve fund would be seen as a separate line item. Matt McGauley also advised that the DCA should take those reserves out of the operating account and into a CD instead, something Mr. Stalans agreed with.

“It’s certainly prudent to keep a reserve for security for the organization, but not necessarily a large fund balance,” Mr. Stalans said. “What we’re doing is collecting assessments from our property owners, and then using those funds to provide services to them. So our interest is not in building a large fund balance, but I think the financial reserve is prudent for us.”

Donald O’Connor asked for more information on where the money would come from, and how it would affect future budgets.

“All we would do is take $230,000, and it would show a fund balance that is $230,000 less and an operating reserve that would be $230,000,” Mr. Stalans replied. “It comes out of the fund balance at the bottom, and that fund balance represents money we have in the bank. It’s a segregation of cash, not a segregation of revenue or expenses.”

Mr. Stalans also said the fund balance can be used wherever the Alliance sees fit, saying they could use the balance to “either to provide services to property owners, whether those services are there to be performed in 2012, 2022, or 2023.”

The chairman also said he would prefer for the finance committee to be able to use what is in the fund balance “as they see fit.”

The Downtown Chattanooga Alliance board then voted and approved the amended budget unanimously.


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