4. What should a reserves policy say?

A reserves policy will be unique to your charity and its complexity may well depend on the size and nature of your charity’s transactions. 

Your reserves policy should clearly state:

• A brief description of the charity, its beneficiaries and its funding streams. This will help the reader to understand the context behind the policy. 
  
  
• The rationale behind the reserves policy. This will explain the reasons that the charity trustees believe reserves are required. It will outline areas where there may be shortfalls in funding and how these shortfalls will be met. 
  
  
• Steps taken to establish the level of reserves. This will be a more detailed description of how charity trustees have considered the overall financial position of the charity leading to their conclusion about the level of reserves needed.
  
  
• The level of reserves required.
  
  
• How and when the reserves policy will be reviewed. A reserves policy is not a static document, needs will change, the financial position of the charity may change or plans may alter. It is important that the reserves policy is actively monitored and reviewed.