Thursday, September 23, 2010

Catching up before my holiday

Nearly a month of trying to get my computer sorted - it wouldn't start, got fixed, wouldn't start, got fixed and then everything was different - discovered my on-line back-up wasn't working and so have had a happy few weeks reacquainting myself with my beloved computer, buying a laptop that works and trying to sort out the back-up. Not quite done that yet.

So where was I? Ah yes reserves policies. Here's one I did earlier - it's for an organisation which gets income from renting its building to businesses, has that building to maintain and is in the throes of major improvements hence needing to build up a capital reserve.

XXX Organisation
Reserves Policy


XXX Organisation reserves policy is to maintain sufficient level of reserves to enable operating activities to be maintained, taking account of potential risks and contingencies that may arise from time to time. These risks may include

• Rent arrears;
• Tenants leaving and units left vacant being unable to rent them; or
• Needing to leave units untenanted to ensure building works may be carried out safely and efficiently.

Additional contingencies

In addition, amounts are set aside to meet financial risks associated with potential contingencies and uncertainties relating to XXX Organisation’s operating activities. These include:

• The funding of unforeseen major projects that have not been provided for in the normal financial planning process in particular building works to ensure health and safety; and
• The provision for an orderly winding-down of operations in the event of a significant adverse event that is outside the control of XXX Organisation.

The reserve fund

Currently all XXX Organisation’s reserves are unrestricted and are therefore free reserves. The unrestricted reserves of XXX Organisation are designated and allocated to meet the above risks and contingencies and is set at £18,000 to be kept in a high interest account.

Capital fund

XXX Organisation is aiming to build up a capital fund to finance building works. It intends to keep back about £20,000 per annum from its income to add to this until a maximum of £250,000 is reached. This fund will be invested in a high income account.
Review of Policy

The policy is reviewed annually by XXX Organisation’s Trustees.

Signed: Dated:

You may of course make it much longer and more comprehensive but I think that it is about what works for your organisation. Most of our Meeting Houses and Chapels have very straightforward finances with similar amounts of money coming in each year from live-giving, legacy income, investment income, income generation and grants; and similar annual outgoings to fund ministers/lay leaders/worship leaders, running the congregation, building maintenance and building improvements.

And if it's a matter of having a more comprehensive policy but taking many months to decide on it or having something quite simple to be going on with, then I would suggest having something simple at first. The other thing about short and simple is that people will read it and have a chance of understanding it. As with any policy it needs to be understood and taken on as the policy by all trustees/management committee members.

Once you have a reserves policy you then need to look at your books to see if you have that amount and if not work out how to build up the appropriate reserve. Conversely if you have too much money in reserve you need to be talking about how to spend the money. As said in the previous post, money held by charities is meant to be spent on their charitable purposes.