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The only sensible way for charities generally to counter criticism about reserve levels is for them to justify and explain their reserves positions. While this is no different for religious institute charities, such charities are rarely understood by the public in the same way as other mainstream charities and so that need for explanation becomes even more important.
All charities, including religious institute charities, bene t from public monies – particularly because their income and gains if applied for charitable purposes are not subjected to direct tax. The public is entitled to be reassured that any charity, including a religious institute charity, has good reason for holding reserves and to know what those reasons are.
The term “reserves” is not one that is always understood. The term “free reserves” is de ned by the Charity Commission as “That part of a charity’s income funds that is freely available for its general purposes”. In simplistic terms, when applied to a religious institute charity, one way of de ning free reserves is, the total of all income given to the charity in the past which has not been spent or committed, which is not subject to restrictions on its use because of stipulations laid down by the person or organisation giving the money, which is not tied up in land, buildings, cars or other furniture and equipment, or which has not been set aside for a speci c purpose by the trustees themselves.
As a result, the trustees’ report of a charity should contain a review of its reserves. This should:
Ÿ State the amount of the total funds the charity holds at the end of the reporting period
Ÿ Identify the amount of any funds which are restricted and not available for the general purposes of the charity at the end of the reporting period (e.g. mission funds)
Ÿ Identify and explain any material amounts which have been designated or otherwise committed as at the end of the reporting period (this should include amounts set aside for the future care of members)
Ÿ Indicate the likely timing of the expenditure of any material amounts designated or otherwise committed at the end of the reporting period (e.g. over the remaining life of the members)
Ÿ Identify the amount of any fund that can only be realised by disposing of tangible xed assets or programme related investments (i.e. the amounts represented by land, buildings, cars, furniture and equipment)
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