Reserves Policy

The Executive Committee, on behalf of the Board of the UK charity, has reviewed the IPA’s needs for reserves in line with the guidance issued by the UK Charity Commission.

Assessment of the Need for Reserves – IPA

1. $1 million (about £525,000 at November 2006) from the UK charity should be set aside for self insurance of IPA Congresses. The environment for the financial management of Congresses has changed in recent years. Both the occurrence of health scares (such as SARS and Bird Flu), and terrorism mean that it is no longer possible at reasonable premiums to insure for cancellation on these grounds. The maximum financial exposure that the IPA faces is in the days leading up to a Congress, when commitments could reach $1 million at 2007 prices, and no income would be forthcoming in the event of cancellation. Thus the reserves figure seems prudent. This sum should be increased by 3% per annum from 1 January 2008 onwards to ensure capital preservation. The set aside element from reserves would thus be: $1.00 million in 2007; $1.06 million in 2009; $1.13 million in 2011; and so on.

2. Between $800,000 and $1.6 million (about £450,000 to £850,000 at November 2006) from the UK charity should be set aside to cover income and expenditure risks in running the UK charity. The sum represents 4 to 8 months’ normal activity of the charity and is thus deemed to be the prudent figure. (The actual reserve sum in September 2006 after deducting the $1 million to cover Congress risk was $1.140 million, so within the range). The risks to be covered by this reserve range are assessed as almost total income reliance on the payment of IPA dues, which are subject to considerable financial volatility around the world, witnessed by the recent financial problems in Latin America, and dues concerns in Europe when the dollar was at a high level. There is also a significant terrorism risk in running international activities at this time. Access to these reserves would give the Board sufficient time to plan for significant income shortfalls, provide for exceptional payments, such as staff redundancies if necessary, and to cope with the consequences of unforeseen disruptions to operations, or damage to property. This reserve sum should be increased by 3% each year from 1 January 2008 onwards to ensure capital preservation. Excess funds above the stated limit will, on the advice of the Investment Oversight Committee, be committed to the objects of the charity.

3. The range of these two requirements within the IPA is thus $1.80 million to $2.60 million for 2007. They are the IPA’s “Risk Reserves”.

Managing reserves

4. The reserves will be managed by the Investment Oversight Committee, appointed by the Board of the UK charity. This Committee will review all reserves against the above policy on at least an annual basis. It will report to the Board every six months, with recommendations, annually.

5. The Investment Oversight Committee will manage the reserves held in IPA in accordance with the Investment Policy.

 

Change Log

Approved by the Board January 2007
Revised and split between the two companies in January 2012

 

*This change record is for background information only and does not form part of the Procedural Code. If there is any conflict between a statement in the Procedural Code and a statement in this change record, the change record will be disregarded.

 

IPA Fund Inc
Reserves Policy

The Board of IPA Fund, the US charity, has carried a review on behalf of the reserves held in that company.

Assessment of the Need for Reserves – IPA Fund Inc

1. Up to $3 million may be accumulated within the US charity to fund those activities conducted by the charity, in addition to the income donations received from the UK charity. The aim should be to maintain the value within the range of $1 million to $3 million. The US charity has very little independent income, and thus requires its own endowment fund to cover continued expenditure in the event that the UK charity is not in a position to make annual grants to the US charity. This reserve range should be increased by 3% each year from 1 January 2012 onwards to ensure capital preservation. It is expected that the accumulated figure within the range will generate between $50,000 and $150,000 annually, sufficient to cover a significant part of the US charity’s outgoings.  Excess funds above the stated range limit will, on the advice of the Investment Oversight Committee, be committed to the objects of the charity.
 
2. The income from the Lectureship (Restricted) fund in the US charity will be dispersed to the two IPA awards so as to maintain the capital value of the fund in the range of $100,000 to $150,000. This range should be increased by 3% each year from 1 January 2012 onwards. (The actual value of the fund was $117,000 in early 2006, so within the range.) To maintain the Fund within the intended value range, the Investment Oversight Committee will recommend that the Executive Committee vary the value of the awards from time to time.

3. The range of these two requirements within IPA Fund Inc is thus $1.10 million to $3.15 million for 2007. They are the IPA’s “Income Reserves”.

Managing reserves

4. The reserves will be managed by the Investment Oversight Committee, appointed by the Board of the US charity. This Committee will review all reserves against the above policy on at least an annual basis. It will report to the Board every six months, with recommendations, annually.

5. The Investment Oversight Committee will manage the reserves held in IPA Fund Inc in accordance with the Investment Policy.

 

Change Log

Approved by the Board January 2007
Minor change to paragraph 5. to record the need to vary the value of awards approved by ExCom July 2007
Revised and split between the two companies in January 2012

 

*This change record is for background information only and does not form part of the Procedural Code. If there is any conflict between a statement in the Procedural Code and a statement in this change record, the change record will be disregarded.