Is research saying that charities should not have reserves?

Every week I get newsletters from NFP Synergy with titbits of information that relate to the voluntary and community sector (VCS). They carry out research with the public on their perceptions of the sector and most recently they had been asking what level of reserves people think charities should have, and have posed the question ‘why financial reserves are bad for beneficiaries and deceitful to donors’. Check out the slides below for their results.



The research is accompanied by, an often insightful, Blog that can be read here. In this Joe Saxton argues that holding more than 3-6 months reserves is appropriate and having any more is misleading donors and the public. I think that this time he is wrong. Firstly he states that the storms caused by austerity and the economic downturn are over now we are in a period of recovery. I do not believe this is the case, especially for small organisations that have relied on local authority funding and small donations. I believe that for those groups the storm is still overhead and that in some case the most violent affects are still to be felt. I think that reserves are something that trustees should give serious thought to. They need to set reserves that are appropriate to the organisation and clearly justify their arguments for the money they hold back. Organisations need reserves to smooth out the often uneven flow of grant funding and donations. The amount will inevitably be different for everyone. As Joe points out this is in line with what the charity commission says in leaflet CC19.

So the bottom line is that reserves are good BUT too many reserves, or reserves that are held for no reason, are bad.

Want to know more or want help with your reserves policy contact CCVS