New report on Charity Reserves Management
A new report from IVAR and the Scotland Funders’ Forum finds that strategic management of charity reserves could enhance the stability and agility of the voluntary sector. As charities, funders and regulators consider how to respond to the cost of living crisis – could reserves management unlock money to support change and development while also providing a protective financial buffer?
Key findings
There is considerable variation in charities’ reserves management practice, which was identified along a spectrum from ‘basic’ to ‘strategic’. The report found that strategic reserves management is a core element to enhancing charities’ ability and agility to meet changing needs; however they experience three key barriers/opportunities:
- Access to finance management skills
- Funding practices and income types
- Trustee caution and confidence
How can we make the most of charity reserves?
Funders have a critical and central role to play in continuing to create conditions that encourage more strategic reserves management, in particular through the provision of more flexible funding and the adoption of more nuanced approaches to due diligence and scrutiny of charities’ reserves.
Regulatory bodies can also make an important contribution by offering more practical guidance and training to charities.
Charities themselves can take immediate steps to implement strategic reserves management, including:
- Accessing training and support
- Reviewing reserves policies more regularly, in concert with their budgeting and risk management processes
- Where possible, by encouraging their funders towards providing more unrestricted income.
OSCR's 'Investments: Guidance and good practice' is available here.
Elaine Wilson, Lynn Hendry and Nick Addington from the Scotland Funders’ Forum said:
‘We welcome the suggestions for how funders and charities can move towards an environment where organisations are empowered to determine their own, forward-looking reserves policies based on their specific strategies and circumstances. At the same time, we recognise the need to maintain proportionate expectations of smaller charities that lack specialist financial staff or trustees.’