Most large charities are unclear about the level of reserves they hold
Commission publishes review of charities' reserves policies
Less than a quarter of larger charities accurately reported the level of financial reserves they hold in their trustees’ annual report, according to a review by the Charity Commission.
The Commission says its findings suggest an incomplete understanding of what reserves are, which could lead trustees to make poor decisions about their charity’s finances.
All registered charities must explain their policy on reserves in their trustees’ annual report, and should state the level of reserves held as well as why they are held.
Almost all of a sample of 106 charities with an income over £500,000 included at least a reference to their reserves policy in their annual report. However, less than a quarter gave the right reserves figure, based on the information in their accounts. A third of charities failed to include a figure at all.
Sarah Atkinson, Director of Policy, Planning and Communications at the Charity Commission said:
The public, who generously donate to charity, rightly hold charities to high standards and expect them to manage funds in a way that maximises their benefit to society.
As regulator, we therefore expect charities to steward their resources effectively; to protect their charity’s future and safeguard the money donated to them by the public or through public funds.
Reporting financial information accurately is an essential part of this responsibility, so it’s concerning that so few larger charities appear to fully understand what reserves are or how to disclose them correctly.
We would also expect auditors and independent examiners to report any concerns they have about the reserves held by charities, especially in light of the collapse of Kids Company.
The Commission produces guidance that helps trustees manage their reserves properly.
Sarah Atkinson said:
Our guidance for trustees equips them with the tools they need to improve reporting in this area. All charities should ensure they are up to speed with this, so they can reach their potential by planning effectively for their financial future.
The Commission will be sending a copy of this report to all charities in the sample where there were concerns over the absence or accuracy of the reserves figure in their annual reports.
The full report is available on GOV.UK.
Notes to editors
- Charity reserves: building resilience (CC19), explains what reserves are and sets out the steps that trustees should follow in developing and explaining a reserves policy.
- The Charity Commission is the regulator of charities in England and Wales. To find out more about our work see the about us page on GOV.UK.
- Search for charities on our check charity tool.
Latest News from
Charity chief executive ‘acted in self-interest’ finds regulator17/06/2019 09:20:00
Busoga Association (UK)’s chief executive acted without trustee oversight, with funds unaccounted for, finds Charity Commission
Charity Commission disqualifies trustee from Rigpa Fellowship14/06/2019 09:20:00
Trustee failed to protect people who came into contact with the charity.
Charity Commission reports on inquiry into Oxfam GB: “No charity is more important than the people it serves or the mission it pursues”12/06/2019 09:20:00
Regulator finds culture of "tolerating poor behaviour" at Oxfam GB and concludes charity “failed to meet promises made”
Charity SORP must change to meet “new public expectations”, review panel says07/06/2019 10:05:00
The SORP governance review panel says charity reporting and accounting must be refocussed with the views and needs of the users of charity reports and accounts at its centre
“No evidence of charitable activity” by mismanaged Gaza aid charity, according to critical report07/06/2019 08:20:00
Charity Commission investigation report concludes former trustees of Viva Palestina are responsible for mismanagement and / or misconduct.
New Charity Inquiry: Devon Charitable Trust06/06/2019 09:20:00
Regulator freezes charity accounts following concerns over unexplained transactions.
Regulator undercovers ‘serious abuse of charity’ at Islamic Global Trust05/06/2019 09:20:00
Charity Commission finds funds were spent on gym membership, TV subscription and debts.
The future for charities can’t be guaranteed if today’s challenges are not met30/05/2019 12:10:00
Chair of the Charity Commission, Baroness Stowell, outlines why charities need to change to fulfill their much needed potential in a speech at Charity2020.