Eating into reserves
Reserve levels appear to be falling, according to new research from NCVO, which suggests that one in three operating charities have no funding at all in reserve.
And for the 38,000 organisations that do have some sort of relationship with the state, the median reserve level is just one month’s worth of expenditure.
While housing associations typically hold nearly 20 months’ worth of expenditure in reserve, this falls to 4.5 months for employment and training and organisations and again to 1.4 months for playgroups and nurseries.
At the upper end of the sector, CaritasData’s Top 3000 Charities 2010/2011 recorded a drop from nine to eight months net asset cover for expenditure excluding land and buildings in the last year.
Ian Oakley-Smith, makes the point in his article ‘The road ahead’ (see Caritas, issue 29, April 2010, page 28) that charities responding to the Managing in a Downturn survey are continuing to use reserves in order to maintain service delivery. ‘All charities, and in particular small ones, need to think carefully about what contingency plans they have in place in the event that the reserves are run down’, he says.
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