Reserves & Policies | Finance Toolkit

Finance Toolkit / Section 5

Section 5

Reserves & Policies

Assets and Liabilities

As charity trustees, all members of the Ministry Area council are responsible for the assets and liabilities of the charity that is the Ministry Area. One of the first tasks for the MAC will be ascertain what assets and liabilities exist within the MA.

The assets of the Ministry Area are likely to be:

  1. Property (e.g. church halls, houses, land etc.) recorded as a fixed asset.
  2. Investments held as shares (e.g. Funds held with external fund managers, Common Investment Fund via the RB or Diocesan Trust).
  3. Investment held as cash (e.g. deposit accounts, bonds) recorded as current assets.

NOTE: With very few exceptions church buildings and vicarages are owned by the Representative Body of the Church in Wales (RB). These were not parish/benefice assets and are therefore not assets of the Ministry Area Council. In some cases this also applies to Church Halls.

Properties and Investments held as shares, will usually be held in Trust either by the RB or the Diocesan Trust on behalf of the parish (now MA). These should be recorded as MA assets.

Asset Categories

Assets fall into three categories:

  • Restricted – the asset can only be used for the purpose laid down by the donor (this includes funds or gifts that have been given by donors for use by a particular church).
  • General (unrestricted) – the asset can be used for any work of the charity.
  • Designated – the asset has been set aside for a particular purpose by the MAC, with the designation being recorded in the minutes. Assets can also be subsequently undesignated by the MAC.

As well as assets, liabilities are also the responsibility of the MAC, and so MAC members need to be aware of any outstanding debts.

Gifts and Legacies

All charities are required to deal with gifts (made during the donor's lifetime) and legacies (specified in a Will after the donor's death) according to the wishes of the donor. Donors are encouraged not be overly specific about how they wish the money to be used, but to rely on the trustees to know how best to use such gifts.

Important: It is important to remember that the Charity Trustees, i.e. the members of the MAC, are legally responsible for all the assets and liabilities of the charity. This means that the MAC must review all restricted funds to ensure that they continue to be used for their specified purposes.

It is recommended that all MAC adopt a legacy policy to encourage legacies and make sure that they are managed correctly. An example and template are provided as Appendix II.

Reserves Policy

Each Ministry Area may keep money aside as a reserve to protect the charity against drops in income or to allow it to take advantage of new opportunities. A charity's reserves can be spent on any of its aims. A charity can also choose not to hold reserves.

The MAC must write a reserves policy to explain to others why they are setting money aside rather than spending it on the charity's aims.

Your reserves policy should set out:

  • How much your charity needs to hold in reserve and why
  • How and when your charity's reserves can be spent
  • How often the reserves policy will be reviewed

You can set aside enough money to meet a potential need, such as an unexpected drop in income. If you set aside money for a specific purpose, such as building works, make it clear that this is separate from the charity's general reserves.

Four sample policies are provided as Appendix III.

← Section 4: Bank Accounts Section 6: Ministry Share →