- From: GAGS <gags.nw@xxxxxxxxxxx>
- Date: Wed, 6 Feb 2008 03:26:10 -0800 (PST)
On 5 Feb, 21:57, "chris.5th" <chris....@xxxxxxxxx> wrote:
our group has a similar amount in the bank... and we need it... it is
part of our disaster management plan...
Disaster Management Plan (DMP)!!!!!??
hut burns down...
And how often does that happen?
where do we go?
whole new world of bills to pay.
A DMP is stretching things a little too far imo.
If you keep say £10k in the bank for when the hut burns down (note:
when not if) then this is a designated fund, it's not reserves.
But I somehow don't think you're thinking along these lines!
You manage reserves by having a Reserves Policy (RP). This might apply
differently to different funds, e.g. unrestricted fund reserves are
treated differently to restricted fund reserves.
The RP is nothing more than a risk assessment.
There is no specific law or even rule of thumb saying what amount of a
charity's funds should be held as reserves. Activities (nature, level,
and extent), funding sources (subs, grants, fundraising, sponsorship,
etc), future needs, contingencies, etc are factors which determine a
charity's reserves level. The most appropriate level of reserves is
found by assessing risk. IIRC, trustees are legally required to
publish their charity's reserves policy in their annual report
(Charities Act 1993?)
For most the core of a RP will be a simple statement of reserve level
to yearly income, e.g. the reserves will be 2 years income.
As regards the hut burning down, you cover this with insurance not
reserves! You insure against loss and for temporary re-housing costs,
and total replacement, etc. The 'risk' then is to ensure you have
enough funds to cover the premium(s) on this policy. Something like 1
or 2 years of premiums in reserves is likely to be ok for most. (£20k
is way too much unless of course you have a super-size hut!)
In my current group the RP sets the reserves level at 18 months
average income +10%.
(Note: There is no rule of thumb. The level will be different for
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