Annual Budget and Operating Reserve Policy (2021)

The Finance Committee is responsible for reviewing and recommending the annual budget to the Council for approval.  The annual budget should adhere to the following policies and procedures.


Budgeting Procedures

The AHA utilizes a bottom-up budgeting approach in which department managers prepare their own budget requests, often seeking input and participation from their teams to create a departmental budget proposal.  With assistance from the AHA's accounting manager, the deputy director and executive director develop a collated budget to be presented for approval by the Finance Committee and AHA Council.   The budgeting process begins in March for the following fiscal year. The collated budget is submitted to the Finance Committee in May for review, and a final annual budget is recommended by the Finance Committee for Council approval each June.   After completion and approval of the budget by the Council, the budget will not be modified for subsequent activities unless amended by Council. At the same time, the budget is a tool for planning and responsible management, rather than a strait-jacket.

Allowable Surplus/Deficit Policy

The long-term budgetary objective seeks overall balance, with expenses roughly matching revenues. In any given year, the annual surplus or deficit of the annual operating budget should normally be no greater or less than 5% of the gross budgeted revenue. The AHA Council will be notified immediately if the Association's anticipated surplus/deficit exceeds this established boundary.  The Finance Committee will discuss with the executive director and relevant staff the potential options and decisions for returning the surplus/deficit into the permissible range, or whether an extraordinary circumstance justifies an exception. A 3- to 5-year pattern of repeated surplus or deficit close to the limit should generate a committee review of budgeting practices.

Operating Reserve Guidelines

The AHA has established an operating reserve to maintain an adequate level of unrestricted funds to support the organization's day-to-day operations in the event of unforeseen shortfalls. Annual operating surpluses/deficits are recorded in the operating reserve. The AHA strives to maintain cash or liquid funds to support three months of basic operating expenses in the reserve, but this is not a requirement. Reserve funds may support expenditures beyond the 5% limit only in extreme situations or for major capital investments, in either case, only with the approval of Council.

Adopted by Council January 7, 2021.