Despite best practice guides from both the Charity Commission and the ESFA on the matter of reserves the knowledge gap continues to be vast with people still thinking that “reserves” is the bank balance at the year end. Reserves is clearly defined by the Charity Commission in the publication “Charity reserves: building resilience (CC19)” as the “charity’s unrestricted funds that is freely available to spend on any of the charity’s purposes”. It goes on to explain what “freely available” means. Within an academy setting this definition needs to be extended to include the Restricted General GAG funds. The ESFA, through the Financial Handbook, has mandated the inclusion of “cashflows” in the monthly management accounts but what does this require? In the context of financial reporting this would normally be a historical statement explaining where the cash has been spent in the last month. This doesn’t seem to be particularly insightful for management or the Trustees, the inclusion of a forward-looking cash flow forecast would appear to be more beneficial for the purposes of working capital management and ensuring the Trust doesn’t run out of cash, particularly given the tightening of funding in the school sector.
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