FINANCE NEWS: Large reserves are a 'comfort blanket' warns finance boss

NSPCC finance director John Graham has cautioned charities against hanging on to huge reserves following the recent stock market recovery.

The charity decided recently to wind down its equity investment over the next five years and instead invest in short-term bonds or cash. It says other charities should also take a critical look at their reserves policies.

"Reserves are like a comfort blanket and we grow used to their security.

Some charities facing funding problems would rather cut costs than dip into their reserves," said Graham.

His views are echoed by Fiona Shaw, finance director at Friends of the Earth, who questioned whether organisations like Guide Dogs for the Blind needed reserves of £70m, equalling two years' spending.

Guide Dogs' finance director Jonathan Molyneux defended the charity's reserves policy, arguing that charities like Friends of the Earth could more easily adapt to a fall in income.

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