Tag: Annual Report

Developing A Reserves Policy

Charity ReservesThe following 3 questions are designed to help guide trustees of smaller charities through the issues that need to be considered when developing their reserves policy.

Question 1. Why might you need reserves for the charity to be effective?

The basis of a good reserves policy is thinking through exactly why you might need to hold back some funds as reserves.  If you conclude that your charity does not need to hold any reserves, then you must explain that in your annual report.

Question 2. How much do you need in reserve?

The reserves level may be a target amount or a target range.  Any financial risks you identify should influence the amount of reserves you target to hold and be explained in your reserves policy.

Question 3. Have you got any funds in reserve at the end of the year?

The final step is to compare what you might need in reserve with what you actually hold.  Where the difference is small, no action may be needed.

Information about the reserves policy and the level of reserves held must be included in the trustees’ annual report.

More detailed information and advice can be found here in Annex 1

Why is a reserves policy important?

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.

You can find out much more here

News from the Charity Commission

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?

You can find out more details here