All registered charities must explain their reserves policy including how much they need to hold and why. Where income is > £500,000 they must expand this statement to include a comparison of the amount held to that stated in the policy and any steps being taken to bring this in line if applicable.
It is therefore important that Trustee’s both: set a policy that maintains the charity’s financial resilience, monitor this policy to ensure it remains fit for purpose and is reflective of the charity’s changing needs.
The best policies provide readers with confidence that Trustees have assessed the risks the charity faces and the impact of these when setting their policy.
Following a review of filed accounts the Charity Commission is concerned that too many charities are failing to provide the appropriate disclosure either in their accounts or when filing their annual return.
The Charity Commission have issued guidance to support Trustee’s which clearly explains how “free reserves” (the amount to be disclosed) should be calculated.
Please click here to find out how to develop and report on your charity’s reserves policy.