The most prominent UK charities in the sector hold an average of almost four months’ expenditure in reserve, analysis by Third Sector has found.
Examination by Third Sector of the accounts of 157 charities that make up its Charity Brand Index of the most best-known charities in the sector found that the mean amount of money those charities had in reserve was £23.3m.
The same charities had a mean annual expenditure of £71.7m, meaning they had an average of almost four months’ spending in the bank.
The accounts that feature in the research were the most recent ones published by each charity on either the Companies House website, the Charity Commission website or on their own websites before a cut-off point of 1 December.
The total amount of money held in reserve by the charities in the analysis was £3.7bn. In comparison, total expenditure among the 157 charities was £11.3bn, and total income was more than £11.4bn.
The analysis showed that the median amount of money held in reserve by the charities in question was £11.6m.
Andrew O’Brien, director of policy and engagement at the Charity Finance Group, said: "This data provides a valuable perspective on the financial position of the largest charities. There is no ‘correct’ level of reserves for the whole sector, but our engagement with members indicates that levels of reserves have fallen over recent years."
O’Brien said some of the fall in reserve levels could be accounted for by charities "freeing up resources through better financial management to do more good", whereas others had invested their reserves in service provision to make up for cuts in public funding.
"The most important thing that charities can do is consider their business models and think about what level of reserves they need, rather than aiming for a ‘sector standard’ such as six months or a year’s worth of reserves," O’Brien said.
"We also need to do more in the charity sector to explain reserves policies. Charities must have confidence in their decisions and be able to educate the public, stakeholders and funders about why they hold reserves. Otherwise we leave our sector open to the risk of being accused of wasting money."