Create a complete, CC19-aligned reserves policy for your UK charity in minutes, covering target levels, rationale, and Annual Report disclosures.
A charity reserves policy is a written statement that explains how much money your charity holds in reserve, why you hold that amount, and what you would do if you needed to use those reserves. It is one of the key financial governance documents that funders, the Charity Commission, and independent examiners expect to see.
The Charity Commission's guidance CC19 "Charity reserves: building resilience" sets out what a good reserves policy should include. It does not prescribe a specific number — the right level of reserves depends on your charity's income profile, commitments, and risk appetite. What matters is that your trustees have thought carefully about the question and can explain their reasoning clearly in your Trustees' Annual Report.
Free reserves are specifically the unrestricted funds your charity holds that are not committed to a project, designated by trustees for a particular purpose, or tied up in fixed assets like equipment or property. This is the amount you could access quickly in an emergency — and it is the figure funders focus on when assessing your financial resilience.
The Charity Commission requires charities with gross income over £500,000 to include a reserves policy in their Trustees' Annual Report. Smaller charities are strongly encouraged to do so as good practice. The TAR must explain what the policy is, how much the charity currently holds in free reserves, and whether that amount is in line with the target.
Major grant funders — including the National Lottery Community Fund, Comic Relief, and most large trusts and foundations — review your charity's financial statements as part of due diligence. A clearly articulated reserves policy signals financial maturity and trustee engagement. An unexplained surplus or deficit in reserves relative to your policy can raise questions at assessment stage.
Independent examiners and auditors also check whether the charity has a reserves policy and whether actual free reserves are consistent with the stated target. Inconsistency between the policy and the accounts — without explanation — is a governance concern that may be flagged in their report.
The Charity Commission's CC19 guidance does not set a fixed amount. The right level depends on your charity's specific risks — particularly income concentration, grant renewal gaps, staff notice periods, lease obligations, and any planned major expenditure. A common starting point used by small-to-mid charities is three to six months of operating costs, but some charities with highly volatile income or significant employment liabilities may legitimately target higher levels. What matters is that you can clearly explain your reasoning in your Trustees' Annual Report.
Total funds include everything your charity holds — unrestricted, restricted, designated, and endowment funds. Free reserves are a much narrower figure: unrestricted funds that are not committed to a specific project, not designated by trustees for a particular purpose, and not represented by fixed assets like equipment or property. Restricted grants (money given for a specific purpose by a funder) and endowments are never included in free reserves. When funders ask about your reserves, they almost always mean your free reserves.
CC19 is the Charity Commission for England and Wales guidance document on charity reserves — "Charity reserves: building resilience." It explains what reserves are, why they matter, and what trustees should consider when setting a reserves policy. It does not set a mandatory minimum or maximum but describes the factors charities should weigh up. Aligning your reserves policy with CC19 demonstrates to funders and the Commission that your trustees have fulfilled their financial governance responsibilities.
The Trustees' Annual Report (TAR) should include a section on financial review that explains the charity's reserves policy, the actual level of free reserves at the year-end, whether the reserve is in line with the target, and — if not — what action is being taken. For charities with gross income over £500,000, this disclosure is a legal requirement under the Charities (Accounts and Reports) Regulations. For smaller charities, it is good practice and increasingly expected by major funders reviewing your accounts.
The generated policy is a strong starting point, but you must customise it before adopting it. Replace all [PLACEHOLDER] sections with your charity's specific financial figures, fund names, review dates, and trustee approval details. Your full trustee board should formally approve the policy and record the decision in board minutes. We recommend sharing the draft with your independent examiner or financial adviser before including it in your Trustees' Annual Report. This tool provides a well-structured draft, not financial or legal advice.
A reserves policy is one of the clearest signals that trustees understand financial resilience. FundRobin helps UK charities draft a CC19-aware policy that explains target reserves, risk rationale, designated funds, and annual-report disclosure clearly.
Funders and examiners want to see that trustees have considered income volatility, grant renewal gaps, employment commitments, restricted funds, and planned expenditure. A reserves policy turns that judgement into a clear record.
Free reserves are not the same as total funds. The policy should explain unrestricted funds available for general use, whether actual reserves match the target, and what trustees will do when reserves are too high or too low.
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