1. Statement of Purpose
Kinect CIC is committed to strong financial stewardship, effective risk management, and long‑term sustainability. This Reserves Policy outlines:
- Why the organisation holds reserves
- How reserves are calculated
- The target level of reserves
- How reserves may be used
- How reserves are monitored and reviewed
This policy ensures that Kinect CIC operates with the financial resilience and stability expected by regulators, partners, and grant funders.
2. Definition of Reserves
Reserves refer to the unrestricted funds that are freely available for general use and are not:
Restricted for specific projects or grant conditions
Designated for a stated purpose by the Board
Committed to ongoing contracts or liabilities
Reserves do not include fixed assets, restricted funds, or assets that cannot be readily converted into cash.
3. Purpose of Holding Reserves
Kinect CIC maintains reserves to:
3.1 Protect the organisation against unexpected financial risks
Including:
Delays in grant payments
Sudden loss of a major contract or funder
Unplanned increases in costs (e.g., utilities, insurance)
Emergency expenditure
3.2 Support business continuity
Ensuring delivery of essential activities and services without interruption.
3.3 Enable strategic development
Reserves allow careful investment in:
New programmes or pilot services
Staff training and capacity building
Infrastructure or digital systems
3.4 Respond to crises affecting the communities we support
Such as:
Community emergencies
Rapid increases in demand for support
Family hardship
4. Target Level of Reserves
Kinect CIC aims to hold unrestricted reserves equivalent to:
3 to 6 months of core operating costs, including:
- Staffing and management
- Rent and utilities
- Insurance
- Essential programme delivery costs
- Administration and governance
This range ensures:
Sufficient flexibility for financial resilience
Responsible, proportionate use of public and grant funding
Alignment with funder expectations
Calculation Method:
Target reserves = (Average monthly core costs × 3–6 months)
The calculation will be reviewed annually.
5. Types of Reserves
5.1 Unrestricted Reserves
Funds available for general use at the discretion of the Board.
5.2 Designated Reserves
Funds set aside by the Board for a specific future purpose, such as:
Organisational development
Capital purchases
Strategic projects
5.3 Restricted Reserves
Funds tied to specific activities are not included in reserve calculations.
6. Use of Reserves
Reserves may be used when approved by the Board to:
- Cover short-term cash flow issues
- Respond to emergencies or unexpected expenditure
- Manage temporary income shortfalls
- Protect staff and service continuity
- Support planned strategic investment
Reserves must NOT be used for:
- Routine overspending or poor financial planning
- Activities outside the organisation’s legal objects
- Long-term commitments without a replenishment plan
When reserves fall below the minimum target, a recovery plan must be developed.
7. Monitoring and Reporting
The Finance Lead will:
Monitor reserves monthly
Provide quarterly updates to the Board
Highlight risks or variances
Ensure restricted and unrestricted funds are clearly distinguished
The Board will: - Review reserve levels quarterly - Approve use or designation of reserves - Ensure funder compliance where relevant
8. Risk-Based Justification
The target reserve level is based on risk assessments including:
- Funding stability and diversification
- Fixed contractual obligations
- Exposure to income delays
- Economic conditions and inflation
- Likelihood of unexpected operational disruption
This ensures reserves remain proportionate and evidence-based.
9. Review of the Policy
This policy will be:
Reviewed annually or earlier if financial context changes
Approved by the Board of Directors
Adjusted to reflect organisational growth, new risks, or funder expectations
10. Approval
Signature (Directors):
Date: _________________________
Questions about this policy? Email contact@kinectcommunity.org.