A Reserves Policy explains to existing and potential funders, donors, beneficiaries and other stakeholders why a charity is holding a particular amount of reserves.
A good reserves policy gives confidence to stakeholders that the charity’s finances are being properly managed and will also provide an indicator of future funding needs and its overall resilience.
The Charities SORP requires a statement of a charity’s reserves policy within its annual report. In addition, if a charity operates without a reserves policy, the regulations require this fact to be stated in the annual report.
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Do small charity annual reports and accounts meet the reader’s needs?
We are reviewing small charities’ annual reports and accounts because they are the prime means by which the trustees are publicly accountable to donors, beneficiaries and the wider public for the charity’s activities and how they have used the charity’s money. Good reporting is important to public trust and confidence in both the reporting charity and the wider charity sector.
We were led us to focus on the following criteria:
- have the trustees provided us with both an annual report and accounts?
- does the annual report explain what activities the charity had carried out during the year to achieve its purposes?
- do the accounts contain both an analysis of receipts and payments and a statement of assets and liabilities and are these consistent with each other?
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