…………………………………………………….
Registered Charity No. ……………………………
Reserves Policy
1.0 ……………………………………….. needs reserves to:
1.1 Meet contractual liabilities should the Association have to close including redundancy pay and amounts due to creditors.
1.2To meet unexpected costs like breakdown of essential office machinery, staff cover re illness, maternity leave, parental leave, and legal costs defending the Associations interests.
1.3To replace equipment as it wears out.
1.4Ensure that the Association can continue to provide a stable and quality service to those who need them.
1.5To provide working capital when funding is paid in arrears.
1.6Certain funding has restrictions which mean that by law it must be held in restricted reserves until it is spent in line with the funding agreement.
2.0…………………………………………….. funding
2.1…………………………………………………….. is currently funded by a grant from ...... , income from lettings and …………………………………...
2.2The Association plans it’s fund raising requirements in advance having a twelve month view of cash flow. It could take up to twelve months to secure a new funder from the initial research through the application process to receiving the first cheque.
2.3...... repeat their funding each year and the trustees are of the view that this pattern is likely to continue. However due to the current financial crisis the risk to this funding might be higher.
3.0Analysis of income
Income / Amount / Pattern / RiskCity Council Grant / £19,800 / Annual / Medium
Lettings / £13,000 / Annual / Low
Fundraising / £ 810 / Variable / Medium
Members subscription / £ 200 / Annual / Low
Donations / £ 100 / Variable / High
4.0A prudent level of reserves
4.1 ……………………………………………………. aims to have reserves in the band of 15 % to 25 % of current expenditure
4.2Were …………………………………………….. to close the Association would incur and number of winding up costs
4.3Costs of closure
Redundancy costs / £1,400.00Notice period to staff / £4,560.00
Other running costs / £1,000.00
Creditors / £ 500.00
Audit Costs / £ 500.00
Running costs incurred during the time it takes to
convene an EGM / £ 500.00
4.4This represents 23.5 % of the current year’s forecast expenditure of £33,639.00
4.5Assuming an ongoing organisation
There are a number of events that could occur during a year that are generally not budgeted for and would typically be funded from reserves.
Redundancy / £1,400.00Sickness / £7,000.00
**Other types of leave requiring cover: maternity leave; parental leave; adoption leave etc.
Unexpected replacement of machinery / £1,000.00
Unexpected repairs to buildings / £2,000.00
Provision to cover the unexpected loss of a regular funder / £5,000.00
**Since it is not likely that any of these types of leave will occur in the near future; a figure has not been included.
4.6 The likelihood of all the above events happening in one year is negligible; therefore the Trustees consider a reserve of 15% of the current years forecast expenditure of £33,639.00 to be prudent
4.7It is assumed that most capital purchases will be funded from specific grants for capital purchases.
5.0Potential for short time working.
5.1Whilst the trustees have to take a prudent position and allow for redundancy in the event of a financial crisis the Association does have a good relationship with its staff and the options for short time working and lay-offs would also be considered.
6.0Restricted funds
Eg Income includes a city council grant of £19,800 towards Community Workers salaries which is restricted
7.0 Establishing and maintaining a prudent level of reserves.
7.1 In the event of reserves dipping below the target. ………………………………………. will aim to restore its reserves by at least 3% of expenditure per year over the next five years. This could be achieved by increased fund raising, increasing earned income and/or reducing expenditure.
7.2If unrestricted reserves exceed 25%…………………………………………………. will consider the likely expenditure over the next two years and aim for its reserves to be less than 25%of turnover by the end of two years. This could be achieved by reducing fund raising activities, reducing prices, or increasing “free” activities.
8.0Bringing actual reserves in line with the policy.
8.1Unrestricted reserves were£ 11,891.00 at 31/3/10 being 35 % of expenditure. Proposed renovations including a new suspended ceiling, lagging and new carpet are likely to cost in excess of £3,000.00 which will bring reserves in line with the policy
9.0Monitoring and reviewing of reserves policy.
9.1The Trustees will consider current costs of closure and examine the level of reserves when setting the next year’s budget.
9.2The reserves policy will be reviewed every year.
Signed……………………………………………………………
Date approved…………………………………………………………..
Next review date …………………………………………………………..
Compiled by Hampshire County Council Community Support Team
To be used as a guide only- Hampshire County Council takes no responsibility for policies, procedures and practice within an external organisation in relation to this policy