Charity trustees need to open up when it comes to their policy on reserves, according to the Director of Policy and Communications Sarah Atkinson.
The commission has recently updated its key finance guidance to put the responsibility for a charity’s financial wellbeing on its trustees. The commission also says trustees need to be better informed when it comes to their legal requirements on finance due to the competitive climate many charities now exist in.
The update also calls on trustees to be more proactive, calling for monthly financial reviews instead of merely annual reviews.
Sarah Atkinson, Director of Policy and Communications at the Charity Commission said: “We recognise that charities operate in a very challenging environment, with some charities heavily reliant on single sources of funding. So it is all the more important that trustees are in control of their charity’s finances.
“This means actively taking steps to manage their charity’s finances through regular monitoring, asking the right questions and getting professional help where needed. Donors and beneficiaries rightly ask questions about issues such as reserves, and want to understand why charities do or don’t have them. Reserves policies help tell that story clearly and demonstrate that trustees are aware of the real risks.
“These guidance updates are designed to help trustees make the right call and support them, not to overburden them. That’s why there are also guides on how to set a good reserves policy for small and large charities.
“As regulator there is a limit on how much we can do as these are individual decisions for trustees to make. But these tools will help them manage any difficulties properly and with confidence.”
The statement issued by the commission says: “The reserves guidance confirms that there is no single level or even a range of reserves that is right for all charities. Any target set by trustees for the level of reserves to be held, or decision that there is no need for reserves, should reflect the particular circumstances of the individual charity.
“However trustees should not simply monitor their level of reserves annually, but keep them under review throughout the year. Where a charity hasn’t got the reserves it thinks it needs, it is exposed to greater risk and the commission expects the trustees to address this actively.”