Draft Financial Reserves Policy
Prepared by the Executive Director for 26 August 2006 Council meeting
At the Executive Committee meeting on 2 June, it was agreed that:
“the financial reserves policy should specify reserves based on:
- Covering wind-up obligations
- Allowing for “large-item contingencies”
- Allowing for take up of new business opportunities”
| 1. Calculation of wind-up obligations: | |||
| INZ | DNC | Total | |
| Building Rental | $192,000 | $373,000 | $565,000 |
| Equyipment leases | $8,000 | $17,000 | $25,000 |
| Staff redundancy | $80,000 | $40,000 | $120,000 |
| 1 month creditors | $5,000 | $10,000 | $15,000 |
| Potential contractors obligations | $33,000 | $67,000 | $100,000 |
| Legal and accounting fees | $13,000 | $27,000 | $40,000 |
| Sale of Assets | ($10,000) | ($10,000) | |
| Total Wind up obligations | $855,000 | ||
|
2. Large Contingency Items Allow 10% contingency | $85,500 | ||
|
3. Allowing take up of new business opportunities - Say | $500,000 | ||
| Total | $1,440,500 |
DRAFT FINANCIAL RESERVES POLICY
InternetNZ wishes to exercise prudence in ensuring it will be able to meet all of its liabilities, and potentially to establish a new business model, should the existing funding model cease. In establishing the policy, calculation has been made to ensure the cost of meeting all building and operational lease payments, creditor payments and staff redundancies, whilst also enabling the possibility of establishing a new business.
- That InternetNZ plans to retain cash reserve of $1,450,000 for the 2006/07 financial year
- That the financial reserve calculation be reviewed annually
- That the financial reserve excludes the specified requirement for the DNC’s litigation contingency of $540,402 (comprising the budget under-runs for the DNC for 2002 -2005)
- That InternetNZ will retain net current assets exceeding the planned cash reserve figure
- Note that the calculation specifically excludes the value of INZ’s shareholding in NZRS
Recommendation:
1.That this report be received.
2.That the Financial Reserves Policy be adopted.
