CHARITY RESERVES: BUILDING RESILIENCE IN 2019
Agenda Item Speaker(s) Nick Sladden and Hannah 9:00 Welcome and reserves overview Catchpool, RSM 9:25 Smart deployment of reserves CAF 9:45 Break Break 9:55 Investment strategy Tilney 10:15 Investor challenges Vanguard 10:35 Questions and close
WELCOME AND BUILDING RESERVES Nick Sladden
Kids Company was not unique amongst charities in its low level of reserves. William Shawcross, Chair of the Charity Commission, stated that a responsible approach to reserves “is a problem for all charities”. He explained: We advise charities that they should spend their money, and at the same time they must have adequate reserves, so it is quite a hard act for them to follow THE COLLAPSE OF KIDS COMPANY, HOUSE OF COMMONS 1 FEBRAURY 2016
Charity Commission for England and Wales • CC19 Charity reserves: building resilience (January 2016) • RS3 Charity reserves (March 2003)
Three golden rules
Definitions and language matter Total funds Restricted funds Endowment funds Unrestricted funds Designated future Unrestricted funds used Available reserves spending for fixed assets
Disclosure – SORP FRS102 Amounts held at year-end for: • Total funds; • Restricted funds; • Designated funds; • Funds representing tangible fixed assets or programme related investments; • The balance of reserves held; and • Then compare with the reserves policy and explain steps required and future activities to bring in line.
How charities measure up? Size doesn’t matter (average scores out of 37) RSM’s analysis of 66 charities shows many are struggling to deliver an effective policy. Widespread improvements are now needed.
How charities measure up? Sector variations Overseas aid and Animals and the Relief of poverty famine relief environment Medical, health Education and Arts and culture and sickness training General charitable purposes
STEP BY STEP GUIDE Hannah Catchpool
RSM Assessment 24 Questions Weighting Average Score Fundamentals 11 63.6 Restricted funds 3 65.7 Designated funds 4 76.5 General reserves 2 65.7 Strategy 9 69.7 Target levels 8 67.4 37 67.6 Review of latest Annual Report and Accounts from charity register or charity’s website
How much? End game Beneficiaries Optimum Could funds Going Trustees’ Activity be spent on judgement concern level beneficiaries? Funding Strategy model
Common mistakes Disclosures Poor or no Unclear on No explanation of: omitted explanation of impact of No link to • targets chosen; designations subsidiary strategy • how to bridge funds the gap No clearly defined section Plain Careless within the English not Amounts not report use of used reconciling to terminology/ the balance Not evident sheet when policy language was last reviewed
Action plan Action Plan Review at least annually Annual report and accounts Strategic plan Funding sources and financial model Understand current position and agree target Draft policy
Thank you
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