Operating Reserves Policy

Section 1Purpose

The purpose of the Operating Reserves Policy for Being The Cure is to ensure the stability of the mission, programmes, employment and ongoing operations of the charity. The Operating Reserve is intended to provide an internal source of funds for situations such as a sudden increase in expenses, one-off unbudgeted expenses, unanticipated loss in funding, or uninsured losses. The Reserve may also be used for one-off, non-recurring expenses that will build long-term capacity, such as staff development, research and development, or investment in infrastructure. Operating Reserves are not intended to replace a permanent loss of funds or eliminate an ongoing budget gap. It is the intention of Being The Cure for Operating Reserves to be used and replenished within a reasonably short period of time. The Operating Reserves Policy will be implemented in concert with the other governance and financial policies of Being The Cure and is intended to support the goals and strategies contained in these related policies and in strategic and operational plans.

Regulatory basis. The Charity Commission’s guidance The essential trustee (CC3) states that trustees should have an appropriate reserves policy, and its guidance Charity reserves: building resilience (CC19) sets out what such a policy should contain. Being The Cure is not subject to a statutory audit, so the requirement in regulation 40 of the Charities (Accounts and Reports) Regulations 2008 to include a reserves policy statement in the trustees’ annual report does not apply to it as a matter of law. The trustees nevertheless include a reserves statement in the annual report as a matter of good practice and of transparency to funders.

Reporting. The level of reserves, measured against the target in this policy, is reported to every meeting of the Strategy, Finance and Risk Committee, and in the trustees’ annual report. Where reserves fall below the target, the trustees will record in the minutes the reason, the plan for rebuilding them and the date by which the target is to be met.

Restricted funds and fixed assets. Restricted funds, endowment funds and the value of fixed assets held for the charity’s own use are not available as reserves. Grant income carrying conditions as to its use is restricted and is not available as reserves.

Section 2Definitions and goals

The Operating Reserve Fund is defined as a designated fund set aside by action of the Board of Trustees. The minimum amount to be designated as Operating Reserve will be established in an amount sufficient to maintain ongoing operations and programmes for a set period of time, measured in months. The Operating Reserve serves a dynamic role and will be reviewed and adjusted in response to internal and external changes.

The target minimum Operating Reserve Fund is equal to three months of average operating costs. The target is measured against the charity’s unrestricted funds less the value of fixed assets held for its own use: that is, its free reserves together with the designated Operating Reserve Fund. The calculation of average monthly operating costs includes all recurring, predictable expenses such as salaries and related costs, premises, office, travel, programme and ongoing professional services. Depreciation, in-kind and other non-cash expenses are not included in the calculation. The calculation of average monthly expenses also excludes some expenses, for example one-off costs or capital purchases.

The amount of the Operating Reserve Fund target minimum will be calculated each year at the meeting at which the trustees approve the annual accounts, reported to the Strategy, Finance and Risk Committee and the Board of Trustees, and included in the regular financial reports.

The three-month target was set when the charity was smaller and before the 2026–27 expansion of Saturday School provision. At the same meeting, the trustees will re-test the target against the current budget and record the conclusion.

Section 3Accounting for reserves

The Operating Reserve Fund will be recorded in the financial records as a designated fund, the Operating Reserve Fund. The Fund will be funded and available in cash or cash equivalent funds. Operating Reserves will be maintained with the general cash and investment accounts of the charity.

Section 4Funding of reserves

The Operating Reserve Fund will be funded with surplus unrestricted operating funds. The Board of Trustees may from time to time direct that a specific source of revenue be set aside for Operating Reserves. Examples may include one-off gifts or bequests, special grants, or special appeals.

Section 5Use of reserves

Use of the Operating Reserves requires three steps:

5.1Identification of appropriate use of reserve funds

The CEO and staff will identify the need for access to reserve funds and confirm that the use is consistent with the purpose of the reserves as described in this Policy. This step requires analysis of the reason for the shortfall, the availability of any other sources of funds before using reserves, and evaluation of the time period that the funds will be required and replenished.

5.2Authority to use Operating Reserves

Authority for use of Operating Reserves is delegated to the CEO in consultation with the Treasurer and/or the Chair of the Strategy, Finance and Risk Committee. The use of Operating Reserves will be reported to the Board of Trustees at their next scheduled meeting, accompanied by a description of the analysis and determination of the use of funds and plans for replenishment to restore the Operating Reserve Fund to the target minimum amount. The CEO must receive prior approval from the Board of Trustees if the Operating Reserves will take longer than 12 months to replenish.

5.3Reporting and monitoring

The CEO is responsible for ensuring that the Operating Reserve Fund is maintained and used only as described in this Policy. Upon approval for the use of Operating Reserve funds, the CEO will maintain records of the use of funds and plan for replenishment. They will provide regular reports to the Strategy, Finance and Risk Committee and the Board of Trustees of progress to restore the Fund to the target minimum amount.

Section 6Review of policy

This Policy will be reviewed every year, alongside the annual accounts, by the Strategy, Finance and Risk Committee, or sooner if warranted by internal or external events or changes. Changes to the Policy will be recommended by the Strategy, Finance and Risk Committee to the Board of Trustees.