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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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?