Majority of large charities don’t how much reserves they hold, warns regulator

Only a quarter of large charities accurately reported the correct level of financial reserves they hold, according to a review by charities regulator the Charity Commission.

In January 2018, the Commision selected a random sample of 106 sets of accounts of charities with an income of over £500,000.

There are just over 11,500 charities of this size on their register and they account for approximately 90% of the sector’s income.

The Commission says its findings suggest an incomplete understanding of what reserves are, which could lead trustees to make poor decisions about their charity’s finances.

They believe the main reason why the reserves figures were incorrect is that many trustees believe that reserves are the same thing as total unrestricted funds.

Sarah Atkinson, director of policy, planning and communications at the Charity Commission said: ‘The public, who generously donate to charity, rightly hold charities to high standards and expect them to manage funds in a way that maximises their benefit to society.

‘As regulator, we therefore expect charities to steward their resources effectively; to protect their charity’s future and safeguard the money donated to them by the public or through public funds.’

‘Reporting financial information accurately is an essential part of this responsibility, so it’s concerning that so few larger charities appear to fully understand what reserves are or how to disclose them correctly.’

The regulator has produced new guidance for charities to better understand reserves, which you can read here.

Read the full report here.