FAQs about Reserves

1. Why does the PCC need to have a reserves policy?

The Charities Act requires charities to have a purpose in holding on to money. A reserves policy shows the purpose for which reserves are held and in some instances the amount that should be held.

2. What will happen if a PCC doesn’t comply?

Whilst the Charity Commission could insist that large reserves held without a policy be spent on meeting the charitable objects of the PCC, this is unlikely. It is however, good practice for a PCC to be clear how it is going to use the money entrusted in it. Without such a policy, the PCC may find it difficult to make decisions on expenditure. It could also affect the giving of church members if they felt that the PCC was sitting on large sums of money without a reason for doing so.

3. We have no money so why do we need a reserves policy?

If the PCC aspires to hold greater reserves than it currently has, it can work towards this over time.

4. What if a PCC has very large reserves (say, over £100,000)?

There is no limit on the reserves that a PCC can keep, but they should be split into identifiable or designated chunks. For instance, there may be a general reserve set at so many months of operating expenditure, plus a building reserve to meet anticipated costs of maintaining the church. There may be designated projects that have been approved by the PCC, but where the money is waiting to be spent.

If a PCC is holding large reserves, members have a duty as trustees to ensure they are satisfied that the reserves have been invested appropriately, and that there is a reasonable return on their investment.

5. We have more than we need – what should we do?

Here, the policy should both identify the appropriate level of reserves, and also how the surplus reserves will be spent. Whilst reserves must be spent on meeting the charitable objects of the PCC, there is no rush to spend them – a clear plan identifying spending plans and timescales should be developed.

6. We know the roof will need replacing eventually. Should we build up reserves for this?

It is advisable to have some sort of fabric/maintenance fund. Into this fund monies from specific fund raising events (restricted funds) could be put. It may also be possible to add some money from the annual budget (designated funds). This fund should not be allowed to grow to an extent that it holds more money than would reasonably be needed to effect such repairs for which a timescale is known.

7. What are designated funds?

Designated funds are sums of money that are available for general purpose spending, but which have been earmarked for some specific future purpose, ideally with a timescale for spending them. Funds can be undesignated (or re-designated) at a later stage.

8. Why should we consider having a mission opportunities fund?

One of the main aims of our churches is to spread the word of God i.e. mission. If funds allow it is advisable to allocate some money to a Mission Opportunities Fund, which becomes a designated fund, so that mission opportunities are not stifled by the lack of funds.

9. How do I handle property assets in a Reserves Policy e.g. church halls, houses?

Property would not usually be part of a reserves policy, which is more concerned with liquid, rather than fixed, assets. However, the PCC might develop a property policy, regularly reviewing whether it is best to receive income from renting the property or it would be better to sell the house and invest the income.

10. What about unrestricted legacies?

When an unrestricted legacy is received, it is advisable for the PCC to put together a proposal that shows how the money will be used. It might be advisable to designate some if not all of the money to a specific project. The money can always be undesignated at a later date if the need arose.

11. What if the PCC employs staff?

If the PCC employs staff, it is advisable to allocate some reserves to meet the costs of salary to cover any notice period should the PCC lose the income needed to pay for these staff.

 

 

pcc-sidebar

Links

Email Newsletter

Get the latest news and updates by signing up to our quarterly newsletter Subscribe