FINANCE NEWS: Commission criticises lack of sufficient reserves in charities

Mathew Little

One in three charities have smaller reserves than they need, a new report from the Charity Commission has found.

And the number of charities with income above £1 million whose reserves stand at "less than the planned level" is even higher at 40 per cent.

The Commission's regulatory report Charity Reserves was based on analysis of charity accounts as of December 2001.

Director of policy Rosie Chapman warned that the drop in the stock market since this snapshot was taken means that the proportion of charities with fewer funds in reserve than they need is "probably a lot higher now".

The report found that nearly 70 per cent of charities have no policy to establish what level of reserves the charity needs and how to maintain them. "This position is unacceptable," the report states.

"Many of the policies that were in place were insufficient and of poor quality," it adds.

Chapman told Third Sector: "Don't think we won't shine a torch on this. We will come back in 18 months. We expect improvement and if we don't get it it will be a good reason to go in more firmly."

She said that the fall in charity investments would have encouraged moves to establish reserves policies. "But the Commission can't come up with a formula. It is for trustees to think about what they want to do."

According to the report, 33 per cent of charities do not have reserves policy because they had "no funds to keep as reserves".

According to the survey, 75 per cent of medium-sized charities and 46 per cent of large charites said they did not have a reserves policy. Among large charities 33 per cent did not have a policy.

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