Reserves Policy

1. Purpose

This policy sets out how Nottingham Study and Education Mentoring and Mediation (NSEMM), a Charitable Incorporated Organisation (CIO), manages its financial reserves. Maintaining adequate reserves is essential to ensure the charity can continue to meet its charitable objects, manage financial risk and respond to unforeseen circumstances.

This policy complies with Charity Commission guidance (CC19 – Charity Reserves: Building Resilience).

2. Scope

This policy applies to all unrestricted funds held by NSEMM, including:

• General unrestricted funds
• Designated funds (unrestricted funds earmarked by trustees for a specific purpose)

Restricted funds are excluded from the reserves calculation as they must be spent in accordance with donor conditions.

3. Definition of Reserves

For the purposes of this policy, reserves are defined as the portion of NSEMM’s unrestricted income funds that is freely available to spend on any of the charity’s purposes. This excludes:

• Restricted funds
• Designated funds already committed to specific projects
• Fixed assets and tangible property
• Funds tied up in commitments or contractual obligations

4. Target Reserves Range

The trustees have determined that NSEMM should maintain free reserves equivalent to three to six months’ operating costs. This range has been set after considering:

• The charity’s income streams and their reliability
• Fixed and committed expenditure (staffing, premises, programme delivery)
• Known and anticipated risks
• Seasonal variations in income and expenditure
• The time needed to adjust operations if income falls

As at the last annual review, this equates to approximately three to six months of core operational expenditure.

5. Calculating Reserves

The Finance Manager prepares a reserves calculation at each quarter-end and presents it to the Board of Trustees. The calculation includes:

• Total unrestricted funds per the latest management accounts
• Less: designated funds committed to specific purposes
• Less: the net book value of fixed assets
• Less: amounts committed under contracts or obligations
• Equals: free reserves

Financial data is managed through the Admin app at admin.nsemm.org.uk.

6. Monitoring and Action

6.1 Above Target Range

If free reserves exceed six months’ operating costs, trustees will consider:

• Increasing programme delivery or expanding charitable activities
• Investing in organisational development or infrastructure
• Designating funds for specific future projects
• Reducing fundraising activity temporarily

6.2 Below Target Range

If free reserves fall below three months’ operating costs, trustees will:

• Conduct an immediate review of income and expenditure forecasts
• Consider reducing or deferring non-essential expenditure
• Explore additional funding opportunities
• Prepare contingency plans for potential service reduction
• Report the position to the Board at the next meeting

6.3 Critical Level

If reserves fall below one month’s operating costs, the Chair and Treasurer must convene an emergency Board meeting to agree immediate action.

7. Investment of Surplus Funds

Where reserves exceed the target range, surplus funds may be invested in accordance with the Investment Policy. Any investment must:

• Preserve the capital value of the reserves
• Provide reasonable liquidity to access funds when needed
• Comply with ethical investment principles aligned with NSEMM’s objects

8. Reporting

8.1 Internal Reporting

The reserves position is reported to the Board of Trustees:

• At every Board meeting as part of the financial report
• In detail at the annual budget-setting meeting
• Immediately if reserves fall below the minimum threshold

8.2 External Reporting

The reserves policy and current reserves position are disclosed in the Trustees’ Annual Report in accordance with Charity Commission requirements. This includes:

• The level of reserves held and the reasons for holding them
• The target reserves range and the basis for setting it
• Any plans to increase or decrease reserves

9. Trustee Responsibilities

The Board of Trustees is collectively responsible for:

• Setting and reviewing the reserves policy annually
• Monitoring the reserves position at each Board meeting
• Taking appropriate action if reserves fall outside the target range
• Ensuring reserves are reported accurately in the annual accounts

10. Review

This policy is reviewed annually by the Board of Trustees, or sooner if there is a significant change in the charity’s financial position or operating environment. The review considers whether the target range remains appropriate given current and forecast income, expenditure and risk.

Policy owner: Board of Trustees
Last reviewed: March 2026
Next review: March 2027