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Background: CUC Policies regarding the Unrestricted Fund

The CUC maintains a number of fund accounts, the majority of which are restricted in some way. Restricted funds include trust funds (held on behalf of others) and designated funds (for a specific purpose within the CUC’s operations). The Unrestricted Fund represents the net accumulation of any surpluses from operations, investment revenue and losses, and includes the transitional amount given to the CUC when it took over most programs and services from the UUA in 2002. That transitional amount of $1.1M was intended to provide investment revenue to assist in providing CUC member congregations with the services and programs they requested. The Unrestricted Fund, as the name implies, has no specific restrictions on how it is used; it is available for funding of general operations in accordance with direction from the CUC Board.

Until late 2009, the CUC policy was to apply the net amount of investment revenue to the budget of the following year. Although this preserved the “principal” amount of the Unrestricted Fund, it did not provide a predictable or stable basis for budgeting and planning.

Beginning nearly a year ago, the CUC’s Treasurer, John (“Mich”) Michell, canvassed the membership of the CUC for thoughts on what methodology we should use to make regular annual draws from the Unrestricted Fund to support our operational needs. (See 2009 Official Call to Meeting, and May 2009 InfoTopics for more information.)

After reviewing comments received and comparable policies from a number of different institutions, at the December 2009 Board Meeting, Mich recommended that the policy be changed from including the previous year’s investment revenue in the budget to including a specific percentage of the Unrestricted Fund balance. This has the effect of providing a stable and predictable amount for long-term planning, and still ensures good financial stewardship, i.e. living within our means. (Some other organizations apply a 13-quarter moving average of investment income instead of a fixed percentage of the Unrestricted Fund, which is more complex to administer and increases the variability from year to year, so the fixed percentage method was recommended for the CUC.) If you have comments on this choice of policy, please submit them to mich@cuc.ca before April 15, 2010.

The percentage “draw” from the Unrestricted Fund was initially set at 7% pending further review of best practices and feedback from members. 7% of the Unrestricted Fund provides a reasonable amount of income allowance, comparable to long-term investment returns. We have about $4M invested and the unrestricted fund is approximately $2M, so 7% of the unrestricted fund is effectively a 3.5% rate of return. If you want to know more about the Unrestricted Fund policies and percentages other non-profit organizations use, please contact Mich at mich@cuc.ca.

This policy provides a regular annual draw of investment income from the Unrestricted Fund as part of normal operating revenue. From time to time, the Board may also approve additional draws from the Unrestricted Fund to develop new infrastructure and/or programs, and further develop the CUC as an organization. In the 2010/2011 budget, the Board has approved additional draws on the Unrestricted Fund which are, in effect, previously unusued investment revenue to use for this purpose.

Canadian Unitarian Council 2010 Budget and Preliminary 2011 Budget