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Groundwork UK
• Groundwork UK is a national environmental charity which seeks to transform lives and places in communities in need
• The Federation of Groundwork Trusts had an aggregated turnover of £149 million in 2011-12
Reserves Policies for Charities
• Why do Charities need to hold Reserves at all?• Charity Commission Guidance• Groundwork UK’s Reserve Policy
The Effect of Inflation on the Reserves Policy
• Operating Costs will continue to increase Year on Year if inflation exists
• Reserves will need to increase to comply with the Reserves Policy
Assume 4% Inflation
48
49
50
51
52
53
54
£'000
Year 1 Year2 Year 3
Reserves
6 months Operatingcosts
The Effect of Low Interest Rates on the Reserves Policy
• If Operating costs are increasing at 4% due to inflation, reserves will also need to grow by at least this amount to comply with your Reserves Policy
• However, if bank interest rates are lower than this,say 2%, reserves will struggle to keep pace with increases in your operating costs
Inflation at 4% - Interest Rates at 2%
48
49
50
51
52
53
54
£'000
Yr1 Yr2 Yr3
Reserves
6 months OperatingCosts
Investment Options
• Bank / Building Society
(Low Risk / Low Reward)
• The Stock Market• Property• A mixture of the above in a managed fund
• The Horses
(High Risk/ High Reward)
The Relationship between Risk & Return
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1012141618
Low Medium High
Return
Ris
k Risk
Return
Investment Considerations
• The need for cash in the short term • Understanding the risk & return relationship• The current level of reserves• The Board’s appetite for risk• What did Groundwork UK do? And was it a
successful strategy?
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