AFRINIC Financial Reserves

Reserves as per Resolution 200801.60

In January 2008, the AFRINIC Board passed a resolution, Reference 200801.60, regarding the accumulation of reserves, as follows:

QUOTE:

“AFRINIC should endeavour to build a reserve fund sufficient to cover two years of operational expenses.”

UNQUOTE

(REDACTED)

 

Financial Reserves & Cash Holdings

At the end of every financial year, the net Surpluses (and Net Loss) are accumulated to derive what is called in the Balance Sheet as the Revenue Reserves. The balance on the Revenue Reserves as at the end of the financial year ended December 2018, stood at US$ 4,755,574; which represents the undistributed accumulated surpluses since AFRINIC’s incorporation in 2004. It must be pointed out that Revenue Reserves is NOT equivalent to Cash Holdings.

A Board Resolution dated 27 November 2015, authorized Management to create a Strategic Cash Reserve from AFRINIC own cash holdings. By the end of Quarter 3 2019, the Strategic Cash Reserves consist of multiple fixed deposits totalling US$ 3,202,624. In addition to the Strategic Cash Reserves, AFRINIC cash holdings amounted to US$ 3,418,647 as at the same date.

 

Definitions

In order for the provisions of resolution 200801.60 to be consistently applied, year in year out, it is important that the intention of the Board is defined and clarified as follows:

  • Build a reserve fund
  • Sufficient to cover two years of operational expenses
  • Operational expenses

 

Build a reserve fund

For the purpose of resolution 200801.60, the building of a reserve fund shall constitute the setting aside of actual cash from AFRINIC own cash holdings into specially designated bank accounts which Management shall open and manage.

Funds sitting in normal operational bank accounts shall not be counted as reserve funds. Balances on such bank accounts shall be disclosed separately in the balance sheet, from operating holdings. Investment into assets other than cash can be treated as part of the reserve fund, provided it is supported by a Board resolution. Withdrawal from reserve funds shall be strictly controlled and subject to Board approval and shall follow laid down rules.

 

Sufficient to cover two years of operational expenses

The two years being referred to here is assumed to be two years of operational activities triggered by a major event which will prevent AFRINIC from continuing operations either temporarily or in the long term, during which no or limited fees or any other source of income will flow in. The two years of operations will be required to continue operational activities until closure or until the event leading to the suspension of normal operations no longer prevails. The event may also result in a substantial change in the existing business model or a permanent cut back on services. It is important to note that should such an event result into the dissolution of the organization, all the funds available shall be applied (not only the buildup reserves for the purpose)

Such a trigger is expected to be initiated by a Board Resolution which will provide guidance as to the way forward.

 

Operational Expenses

In the case where the trigger event results in temporary curtailed operational activities during which zero or limited inflow of funds from fees is anticipated (for a foreseeable future), the operating costs profile shall have to reflect such reduced operations. Some fixed costs, already contracted shall have to be incurred until the expiration of the contractual period, while other types of expenses may become due to complying with existing legislation (Labor laws etc). A simple approach is to assign a percentage (%) reduction or increase to each expense type for two years. The percentages can then be applied to the latest set of actual expenses in order to assess to what extent the reserve fund holding covers the two years of adjusted operating expenses as defined by resolution 200801.60.

 

 

 

Last Modified on -
Date and time in Mauritius -