Charity Support Division
Evaluations Section
Investigation Division

1. Liaison with trustees

If professional advice confirms that the charity's policy or practice on reserves is inconsistent with our published guidelines you should attempt to secure the trustees' agreement that they will comply with those principles in future. For many charities the fact that we have noticed the level of reserves and asked for something to be done about them will be sufficient to persuade the trustees to rectify the position.

If this is not the case you may need to consider offering to meet the trustees and/or their professional advisers to discuss our concerns in detail - this will often be the most effective way to deal with the issue. In this case be careful not to give the impression that we are satisfied with explanations if we are not. You should always follow up the visit with a letter explaining our post-meeting position.

2. Amendment of charity's governing document

You may need to help the charity widen its objects or otherwise change its constitutional arrangements in order to help them to spend resources that are excessive.

3. Requests from charities for us to intercede with a third party

You may receive a request from a charity to intercede on their behalf with a third party who considers their level of reserves to be inappropriate. For example the charity may have been refused a grant by a funding institution on the grounds that their reserves are so high that they do not "need" extra funding or that they are so low that the charity is unstable. Alternatively the charity itself may be being pressed to fund a project by reducing their reserves to a level they consider imprudent.

4. Referral for evaluation

Exceptionally where advice and encouragement have failed to persuade trustees to modify their policy in line with the principles set out in CC19 we may need to consider whether there are grounds for opening an enquiry into its affairs.

You will need to consider all the circumstances of the case including:

• the scale and nature of the reserves in relation to the charity's overall operations;

• whether the charity has held reserves in excess of its needs before;

• the attitude of the trustees; and

• whether there are other causes for concern in the way in which the charity is being managed.

The likely effectiveness of a range of sanctions will need to be considered. Depending on the circumstances these might include:

• suspension and removal of trustees;

• vesting of property in the Official Custodian;

• the appointment of an interim manager; or

• new constitutional arrangements.

5. Publicity

The effectiveness of public criticism as a sanction (with or without the support of other sanctions) should not be overlooked. This might involve liaison with Press Office to consider suitable options - you will need the approval of your Head of Division before exploring this possibility.

The following words and phrases are defined in the Glossary of Terms:

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governing document
Official Custodian
reserves
trustees