# Strategic management of charity reserves could enhance stability & agility of sector - Link: https://fundraising.co.uk/2022/10/18/strategic-management-of-charity-reserves-could-enhance-stability-agility-of-sector/ - Published: 2022-10-18T09:00:00+01:00 - Author: Melanie May **As charities, funders and regulators consider how to respond to the cost of living crisis, a new report from IVAR and the Scotland Funders’ Forum has found that strategic management of charity reserves could enhance the voluntary sector’s stability and agility.** [The report](http://www.ivar.org.uk/publication/thinking-about-charity-reserves/) explores charity reserves management in Scotland and looks at whether it could unlock money to support change and development while also providing a protective financial buffer. The Scotland Funders’ Forum commissioned IVAR to ‘understand how charity reserves can contribute to a dynamic and resilient third sector’ and explore ‘how charities can manage reserves for stability, but also how they can make reserves work harder’. The research focused on four key questions: ## Advertisement * What is/are the purposes of charity reserves? * How do charities currently build, maintain and deploy reserves? * How could charities manage reserves better (e.g. what are the opportunities)? What are the barriers to better reserves management? * What can funders, commissioners and other sector organisations do to support effective management of charity reserves? To find out, the researchers reviewed academic and practitioner literature on charity reserves; analysed data from the published annual reports and accounts of 40 Scottish charities; undertook semi-structured interviews with representatives from 13 Scottish charities; and ran a focus group with Scottish funders and policy makers. They found considerable variation in charities’ reserves management practice, from‘ basic’ to ‘strategic’ and that strategic reserves management is a core element to enhancing charities’ ability and agility to meet changing needs. However, charities face three key barriers/opportunities: * Access to finance management skills * Funding practices and income types * Trustee caution and confidence In looking at how to make the most of charity reserves, they found that funders have a critical and central role to play in continuing to create conditions that encourage more strategic reserves management. In particular through the provision of more flexible funding and the adoption of more nuanced approaches to due diligence and scrutiny of charities’ reserves. Regulatory bodies can also make an important contribution by offering more practical guidance and training to charities. Charities, the report advises, can take immediate steps themselves to implement strategic reserves management, including: * Accessing training and support * Reviewing reserves policies more regularly, in concert with their budgeting and risk * management processes * Where possible, by encouraging their funders towards providing more unrestricted income. Commenting, Elaine Wilson, Lynn Hendry and Nick Addington from the Scotland Funders’ Forum said: > “We welcome the suggestions for how funders and charities can move towards an > environment where organisations are empowered to determine their own, forward- > looking reserves policies based on their specific strategies and circumstances. > At the same time, we recognise the need to maintain proportionate expectations > of smaller charities that lack specialist financial staff or trustees.” * **[Financial challenges to close collective body for children’s charities after 81 years](https://fundraising.co.uk/2023/09/20/financial-challenges-to-close-collective-body-for-childrens-charities-after-81-years/)**( 20 September 2023) * **[Public services charities seeing £1bn funding cut as Government spend increases fail to reach them](https://fundraising.co.uk/2023/09/27/public-services-charities-seeing-1bn-funding-cut-as-government-spend-increases-fail-to-reach-them/)**( 27 September 2023) * **[Around 230k under 35s have net assets above £100k – & majority keen to support good causes](https://fundraising.co.uk/2024/08/05/around-230k-under-35s-have-net-assets-above-100k-majority-keen-to-support-good-causes/)**( 5 August 2024)