Charity reserves

PGM

When charities re-invest reserves into projects, what's the correct way to display this?

Only way I can think is to show the activity as a loss, then explain the reserves policy as a note to the accounts. Downside is that at first glance it will look like poor performance, rather than just using income generated in previous years to deliver projects.

Thanks

stevef

In Local Govt, you would dr reserves and credit general fund balance in the movement in reserves statement. If revenue project is charged to comprehensive income account, if capital, the project is charged to capital and to fund it, a debit to general fund in movement in reserves (contribution from revenue to capital outlay) and a credited to capital adjustment account.

I assume charities are similar.

PGM

stevef wrote: »

If revenue project is charged to comprehensive income account

Thanks Steve.

I don't think theres any better way of presenting it than this. All we can do is explain in notes to the accounts that the cost which appears as a loss in the accounts relates to desginated reserves. We obviously can't show that designated reserves as revenue income.

RAS

Probably the most important part of a charity set of accounts if the trustees report. If as a result of spending the resrves there is a deficit for the year this would need an explaination in the report and also explain the reserve policy going forward.

Also, you will need to consider whether these reserves had were restricted in the first place.

PGM

RAS wrote: »

If as a result of spending the resrves there is a deficit for the year this would need an explaination in the report and also explain the reserve policy going forward.

Also, you will need to consider whether these reserves had were restricted in the first place.

The reserves aren't restricted, and have been desginated by trustees to be spent on community projects. (an amount)

So if the amount of reserves spent is a large figure, you'd expect a deficit for the year. ie the reserves amount spent won't be recorded as revenue income, so on the face of it performance for the year will look bad.