Financial reserves

Find out how to set a reserves policy and what you need to say about reserves in your trustees’ annual report.

About reserves

Keeping money aside as a reserve can protect your charity against drops in income or allow it to take advantage of new opportunities. Your charity’s reserves can be spent on any of its aims.

This means you need to be clear about the reasons for keeping reserves and draw up a reserves  policy. Having a policy will also help you explain to others why you are setting money aside rather than spending it on your charity’s aims.

Read our detailed guidance on reserves for more information:

Charities and reserves (CC19) Explains what reserves are, the trustees' responsibility to consider whether their charity needs reserves, and what to bear in mind when developing a policy on reserves.

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Setting a reserves policy

Your reserves policy should set out:

  • how much your charity needs to hold in reserve and why
  • how and when your charity's reserves can be spent
  • how often the reserves policy will be reviewed

You might decide to set aside enough money to meet potential needs, for example unexpected drops in income. If you set aside money for a specific purpose, such as building works, you should make it clear that this is separate from the charity’s general reserves.

As things change

A regular review of your reserves policy will help make sure you aren't setting aside too much or too little.

Reporting on reserves

You should use your trustees’ annual report to tell donors, funders and other stakeholders:

  • why you need to keep money aside instead of spending it on your charity’s aims
  • how much your charity holds in reserve
  • why your charity needs to hold this amount in reserve
  • what your charity’s reserves can be spent on
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