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How much should large charities hold on reserve?

15/11/2018

The Charity Commission has published a review of the reserves held by over 100 of the largest charities.

Trustees of all registered charities are required to explain their policy on reserves in their annual report, and should state the level of reserves held and explain why they are held. More detailed reporting is expected of larger charities with an income over £500,000.

The regulator found that, while almost all charities in their review included a reference to their reserves policy in their annual report, less than a quarter gave the correct reserves figure (based on information in their accounts) and a third failed to include any figure at all.

The Commission is concerned that this suggests that charities have an incomplete understanding of what reserves are, which could lead charity trustees to make poor decisions about their charity’s finances (including about whether the charity is a going concern).

Following this review, the Commission has updated its guidance, Charity reserves: building resilience (CC19),  but if you would like to discuss this with our charity team please get into contact with us.

Sources: Charity Commission: Most large charities are unclear about the level of reserves they hold (21 November 2018) and Charity reserves policies: demonstrating and building resilience (21 November 2018).