Mosaic LGBT+ Young Persons’ Trust, Charity Number 1166676

 

Policy Owner: FRG Committee

Review Cycle: Biannually or sooner if legislation/guidance changes

Next Review Date: May 2028 (Updated and re-approved May 2026)

 

M Mindful

O Open

S Safe

A Agile

I Inclusive

C Community

Policy background and objective:

 

Reserves are the part of a charity's unrestricted funds that are freely available to spend on any of the charity's purposes. The Charity Commission for England and Wales' lays out key points for charity Trustees when setting or reporting on their charity's reserves policy: 

 

- Charity law requires any income received by a charity to be spent within a reasonable period of receipt. Trustees should be able to justify the holding of income as reserves. 

-The guidance from the Charity Commission is that a 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

- Trustees should regularly monitor and review the effectiveness of the policy in the light of the changing funding and financial climate and other risks. 

 

The objective of this policy is to set out what Mosaic LGBT+ Young Persons’ Trust aims to achieve through the maintenance of reserves, how the level of reserves is established, and the process of reserves monitoring. 

 

Maintenance of reserves:     

 

By maintaining reserves, we aim to balance spending the maximum amount of income raised as soon as possible after receipt with maintaining the minimum level of free reserves to ensure uninterrupted operation and provide time to adjust to a change in financial circumstances. Such circumstances include (but not limited to): 

 

• Increased need among beneficiaries 
• Unexpected operational costs 
• Unforeseen changes in income levels 
• Short-term cash deficit 

 

In addition, we wish to put aside funds to ensure continuity of activities and manage emerging risks.. To that end, excess funds, which are not needed for the service or for the reserves, may be designated by trustees for specific purposes. In order to maximise these funds, we will hold them in a secure investment account.

 

Size of reserves:

 

Reserves are held to cover 12 months of salaries and 9 of expenses to run the full service and necessary operational costs. 

 

Recognising that free reserves fluctuate depending on the timing of income receipt and the crystallisation of risks, Mosaic regards its target range as between 9 and 15 months of salaries and between 6.75 and 11.25 months of operational expenses. The FRG Subcommittee will use this range when assessing whether reserves are at an acceptable level.

 

Note: free reserves are calculated from unrestricted funds only. Restricted funds - those given by donors or funders for a specific purpose - are excluded from this calculation, as they are not available for general use.

 

When to review reserves:

 

Reserves will be reviewed at the end of each quarter by the FRG committee. 

 

Action to be taken if the free reserves fall below the target range: 

 

The Finance, Risk and Governance committee will review reserves quarterly, and if the Trust’s reserves are below the lower end of the target range, FRG  will present it as an item for discussion at the Board. It is expected that the Board would take urgent steps to bridge the gap while monitoring expenditure and, if necessary, limiting spending on things that do not immediately impact the service.

 

To support effective monitoring, FRG will receive a rolling forward projection of free reserves quarterly, enabling the board to anticipate and respond to emerging shortfalls, rather than responding retrospectively. 

 

Action to be taken if free reserves exceed the target range: 

 

Where free reserves exceed the upper end of the target range, FRG will consider whether the surplus should be designated for a specific strategic purpose, and propose to the full board for decision. This may include investment in infrastructure, staffing capacity, or project development, in line with Mosaic’s strategic plan. Staff may be invited to contribute an operational wish list aligned to strategic priorities to inform discussion. The full Board will make any designation decision. 

 

Policy Review:

 

The policy should be reviewed annually by the FRG committee (ideally during the same time as we work the new FY budget), paying attention to resetting the size of reserve for the year ahead.

 

Designating  £20,000 of Free Reserves for Tenancy Security Contingency

 

Purpose:

 

This proposal seeks approval from the Board of Trustees to designate £20,000 of the charity’s free reserves as a contingency fund for tenancy security. This allocation will provide financial protection in the event of unexpected changes or challenges related to the charity’s premises.

 

Background:

 

As a small charity, our operational stability and continuity are closely tied to our premises. The charity currently occupies 1000 Cumberland Market at no cost with full knowledge of the landlords/leaseholders, Camden Council.  Mosaic has spent considerable funds on improving the premises, also with full knowledge of Camden Council.  It is recognised as a key risk that we do not currently have any agreement for occupancy, and we must plan for the eventuality that this critical risk materialises.

 

The designation of £20,000 from our free reserves would provide us with a financial safety net should unforeseen tenancy-related expenses arise, ensuring that we can continue our work without disruption. This would enable Mosaic to pay any unexpected rental costs, or secure alternative premises should we be faced by a short notice eviction. 

 

Proposal Details:

 

We propose to allocate £20,000 from the charity’s unrestricted free reserves to a designated contingency fund specifically for tenancy-related security. This fund would be used for the following purposes:

 

• Legal and/or professional costs associated with the premises: should Mosaic decide to engage legal or other professionals to advise on any change of approach by the landlord
• Back paying rent: If the landlord decides to charge Mosaic rent for the past period of occupancy 
• Rental costs in the event of a short notice eviction: to provide funds for deposit and rent in advance should Mosaic face eviction from the current premises

 

Rationale for Designating £20,000:

 

Given the potential risks associated with our premises, including but not limited to sudden eviction, request for back payment of rent, unforeseen rental costs and associated professional fees, it is prudent to have a designated fund that ensures continuity of our operations. Furthermore, setting this money aside for tenancy security ensures that it will only be used in situations where it is directly related to the security of the charity’s premises.

 

Impact on Charity Operations:

 

By setting aside these funds, we will mitigate the risk of tenancy-related disruptions affecting the charity’s ability to operate effectively. This contingency fund will not impact the charity’s day-to-day operations but will enhance our resilience in case of an emergency related to our premises.

The Board will receive regular updates on the status of the contingency fund and its use, ensuring transparency and effective stewardship of the charity’s finances.

 

Recommendations:

 

The Board is asked to approve the following actions:

 

• Approve the allocation of £20,000 of the charity’s free reserves to a designated contingency fund for tenancy security purposes.
• Agree that FRG will monitor the contingency fund as part of FRG meetings to ensure it remains sufficient for any potential tenancy-related issues.
• Review and reassess the need for this contingency fund annually to ensure it is appropriately adjusted based on the charity’s financial position, occupancy terms, and operational needs.

 

Conclusion:

 

In conclusion, the designation of £20,000 for tenancy security contingency is a prudent and responsible action to safeguard the charity’s operations in the event of unforeseen occupancy related issues. By creating this safety net, we enhance our financial resilience and ensure that we can continue to serve our community without disruption. We recommend that the Board approve this proposal for the benefit of the charity’s long-term stability.