Charity Reserves – One of The Most Misunderstood Financial Terms!

Charity Reserves – One of The Most Misunderstood Financial Terms!

Debra Allcock Tyler on Twitter, talks about everything you’ll need to know about charity reserves.

Charity reserves are one of the most misunderstood financial terms in our sector generally by people within our sector.

Debra talks you through a number of main points to consider.

1. It is very, very difficult to build up reserves – particularly liquid ones. Remember you need to demonstrate the rationale for having your reserves at the levels you set, as a funder may use this information to base their decision to award your organisation with a grant.

2. Donors do not want their donations to be used to build up reserves.

3. Funders do not want their grants to be used to build up reserves. I have never known a grant application to say ‘We need the money for our reserves’ to which a Funder said ‘ok then’

4. The majority of reserves held by operating charities are not liquid.

5. Even with voluntary insolvency there are very, very strict rules about who gets paid first – and it is always the government.

6. No revenue generating charity can ever guarantee its income – we put in funding applications or create appeals for donors or design services that we can charge for – then we can only use our best judgement as to the likelihood of success.

7. Technically we are not allowed to sit on big reserves – in law trustees are supposed to deploy the money it is given in service of its objects – hanging on to reserves over providing a service is potentially contentious and untested in law.

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