A couple of years ago, the American Anthropological Association was in an enviable position: "We had way more in our reserves than our policy stated," says Elaine Lynch, AAA's deputy executive director and CFO.

But surplus revenue can be both a blessing and a curse. The benefits are obvious: The association has more than what it needs to carry out its day-to-day operations. In this case, Lynch says AAA had 100 percent of its annual operating budget in reserves, which would help weather any unforeseen economic downturns or financial turbulence, as well as fund strategic initiatives that further the association's mission. But, on the flip side, once members and leadership see that the association is in such a positive financial situation, they might start thinking of ways to spend their savings.

After surveying the association landscape, Lynch says AAA noticed some flattening of standard revenue areas, such as membership dues and conference registrations. As a result, the association decided it wanted some more cushion in its reserves. To achieve that, AAA decided to do away with a target percentage for reserves and instead create a minimum and maximum reserve range. It set the minimum to 100 percent, while the maximum is set at 200 percent of its annual operating budget.

"That gave us some flexibility," Lynch says. "And it helped guard against the 'Oh, we have 100 percent of our annual budget. What should we spend the rest on?'"

AAA decided to do away with a target percentage for reserves and instead create a minimum and maximum reserve range.

But what should associations do with surplus reserves after they've exceeded their maximum percentage?

In AAA's case, staff can approach the executive board with a list of proposed activities or initiatives that would require part of the excess reserves. These proposals must meet certain criteria, such as being able to spend any funds given within a year. "It's a one-off thing," Lynch says. "If we needed to do a study, we'd do it in one year … because then we'll take another look at the end of the next year and see where we stand."

For associations considering following AAA's approach, Lynch recommends having a written reserve policy that clearly states those minimum and maximum percentages. That policy should also be approved by the executive board and reviewed regularly in order to manage expectations when it comes to reserves.

"Because our reserves are so healthy, we're able to say, 'Here's what we think we need to have in reserves—here's the minimum and here's the maximum—and if we have more than that, here's the process for how we access those funds,'" Lynch says.

Associations that don't have a lot in reserves might want to focus on saving a minimum amount. Lynch suggests either adding reserves as a line item in the annual budget or fundraising to generate some unrestricted donations that could be used in reserves. On the more extreme end, associations could sell an asset, such as a building. AAA did that in 1993, and the proceeds helped to increase reserves.