Charities need reserves policy, argues Charity Commission
Howard Lake | 7 November 2006 | News
The Charity Commission is urging all charities to ensure they have a policy for holding and managing reserves. The watchdog’s latest report, ‘Tell it like it is’, reveals that charities in England and Wales between them hold £3.6 billion of charitable funds without a policy.
While retaining reserves is good business practice for charities, especially when most face unpredictable income streams, the Charity Commission argues that charities need to develop a policy on holding on to this money.
According to the Commission, a policy explaining these reserves helps a charity plan ahead, and explain to supporters and funders alike why they hold this money.
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The report is based on data from 87% of charities with an income of over £10,000. The policy message is getting through, but not to all charities: the proportion of charities with a reserves policy has risen from 27% in 2002 to 40% in 2006, while the amount being held without a policy has dropped from £5.5 billion in 2003 to £3.6 billion this year.
However, since 2002, the value of all charities’ reserves has grown from £26 billion to at least £35.5 billion. Even now, nearly one third of charities with reserves still have no reserves policy in place for their management, amounting to 10% of charities’ total annual expenditure.
Andrew Hind, Chief Executive of the Charity Commission said: “Charities have never been more under the spotlight and it’s key that they are open and account for their reserves. Charities… must get to grips with this issue as part of their plan for long term sustainability.”
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.