Organisations’ Reserves policy

  1. Background: in the past SCBF has found it difficult to establish a consistent policy towards funding applicant organisations who hold funds, and also which have assets to maintain. Specifically, these latter have been Farr Hall, Strathnairn Hall, SCATA and Strathnairn Community Woodlands, although the latter has significant revenue raising opportunities. It is good policy (as set out by NCVO) for voluntary organisations to establish policies and practical measures to build reserves for both operational and longer term maintenance expenditure. To counter this, there is also guidance that charities should not build up excessive reserves. It is not clear the extent to which local organisations have such specific policies or are taking steps to develop reserves, although they may well informally be aware they need to carry some reserve.
  2. History: SCBF has tended to reject an application if an organisation has funds. By encouraging/requiring applicant organisations to meet their own expenditure, and by hinting that if disaster should occur SCBF would help, SCBF is not demonstrating good practice in line with NCVO and indeed is preventing organisations from building reserves.
  3. Proposal in principle: SCBF should be seen as taking a lead in encouraging local organisations to adopt good practice in building reserves both for operational purposes and to meet longer term capital asset maintenance or replacement. This will also help to build stronger local organisations more capable of longer term survival once SCBF has smaller funds available for grant support.
  4. Another example: a Village hall have set up 2 reserves, an operational reserve and a Capital reserve. They have set their operational reserve at a level of one year’s operational costs, so that if something happened which cut off their normal income they would have enough funds to meet a year’s costs. Their policy on the Capital reserve is less tangible: it is designed to cover costs of periodic significant repairs as well as eventual replacements, and such costs would be met out of this reserve, so the balance on this reserve could fluctuate significantly. The reserve is built up to cover anticipated expenditure over the remaining useful life of the relevant asset.
  5. Proposal in practice: when reviewing accounts of applicant organisations, SCBF should allow applicants to hold funds sufficient to cover a year’s operational costs before determining whether that organisation has sufficient funds to meet the expenditure being applied for. For those organisations with capital assets to maintain, SCBF should also encourage them to develop and implement a policy to build, and draw from, a capital reserve. Such a policy should be presented along with any application, coupled with demonstration of progress in building such a reserve.