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.
Ends.
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.
