OG43 E6 - Need for and purpose of reserves clearly explained but no comment on level of reserves

The Charity Commission for England and Wales

The Regulator for Charities in England and Wales

In this section...


OPERATIONAL GUIDANCE CHARITY INCOME RESERVES Need for and purpose of reserves clearly explained but no comment on level of reserves OG 43 E6 - 24 May 2000

Divisional responsibility
For information:	Charity Support Division

Contents
1. Objects of charity 2. Approximated figures from SOFA 3. Stated reserves policy 4. Comment
Meaning of expressions - list of Glossary terms used in this Guidance Index to further related information

	1. Objects of charity
	To relieve sickness.

	2. Approximated figures from SOFA
		Unrestricted	Restricted	Total
		£	£	£
	Incoming resources	350 000	200 000	550 000
	Resources expended	475 000	250 000	725 000
	Net incoming resources	(- 125 000	(- 50 000	(- 175 000

	Fund balances carried forward to next year	1 0 000	500 000	1 500 000

	3. Stated reserves policy
	The trustees have decided that there is a need to maintain reserves over the next two years for the following reason:
	the infirmary which is the main beneficiary hospital of the charitable trust is being rebuilt on an adjacent site and has a planned opening date in 2000. A substantial amount of expenditure on patient care equipment is needed to ensure that the new hospital meets the health needs of the local population and the trustees have agreed that the charitable funds will make grants to ####### hospital NHS Trusts to assist with the purchase of patient care equipment.

	4. Comment
	This as a reasonable explanation of a reserves policy in that the need for and purpose of the reserves is clearly spelt out.
	It could be improved by:
	a fuller explanation of what is meant by reserves and the interaction between free reserves and designated funds;
	the inclusion of comment on the level of reserves required; and
	confirmation that the policy is subject to review.

	The following words and phrases are defined in the Glossary of Terms:
	• • •	designated funds reserves SOFA

Go to:	Other examples
		OG 43 E1	a good explanation but reserves above charity's stated optimum;
		OG 43 E2	general justification for maintenance of reserves but rationale for particular level questionable;
		OG 43 E3	purpose and level of reserves explained shortfall identified;
		OG 43 E4	policy clearly explained but reserves currently over planned limit;
		OG 43 E5	purpose and required level of reserves clearly set out; policy has recently been reviewed;
		OG 43 E7	general principles understood and set out but no detail as to how these will be applied;
		OG 43 E8	income apparently being converted into endowment; amount of reserves actually held not clear;
		OG 43 E9	reserves apparently being built up to produce income;
		OG 43 E10	designated fund apparently being used as endowment; unclear why reserves are needed for purposes stated;
		OG 43 E11	danger that building up reserves may become an end it itself.

	Index to further related information