KCHC-AR-2023 Final Signed - Flipbook - Page 45
2022/23 Financial Review
Reserves
A) Unrestricted General Funds
The Board formally reviews its free reserves (general
funds) policy annually, the implications of which
are reflected in the balance sheet at 31 March 2023.
This review is intended to ensure that the reserves
arrangements continue to be appropriate in the
constantly changing strategic and financial context and
support the Charity’s strategy.
The objectives of our free reserves (general funds)
policy are to:
1 Safeguard the long-term financial sustainability
of the Charity by maintaining a minimum level of
general reserves.
2 Set aside and then release resources to fund our
strategic grants programme.
3 Support the investment required in the Charity’s
growth strategy.
4 Comply with accounting principles and the
requirements of the Statement of Recommended
Practice applicable to charities (FRS 102
Charities SORP).
5 Comply with donor requirements where those
are specified.
The targeted level for the general funds is reassessed
annually by estimating the potential impact of the risks
included in Charity's risk register on the long-term
financial projections of the Charity. Specifically:
1 Risks that might result in a significant and
sustained downturn in income in the following
three years; or
2 Risks that might result in unbudgeted expenditures;
3 The risk of a downward readjustment in global
investment values.
Items 1) & 2) are covered by holding 12 months of
operating expenditure, and item 3) is covered by 10% of
the equity value of the investment portfolio.
The targeted level of reserves to cover these risks
is £6.4m (2021/22: £5.8m) comprising an operating
risk component to cover the first two items assessed
as £3.9m (2021/22: £2.4m), which is equivalent to
twelve months budgeted expenditure for 23/24, and
a component for investment risk of £2.5m (2021/22:
£3.4m) assessed based on applying historic market
volatilities to the value of the Charity’s investments.
The actual value of the general reserve of £5.7m
(2021/22: £6m) represents 89% (2021/22: 103%) of the
target.
B) Unrestricted Designated Funds
At 31 March 2023, £13.5m (2022: £17.7m) was held in
designated funds.
£9.0m (2022: £9.7m) was held in designated funds set
aside for named clinical specialties or hospital wards,
where the donor has indicated they wish the funds to
be used for that purpose. The Trustees expect these
funds to be spent within a reasonable timeframe –
there is a process in place for closing funds where
there is no further planned activity and transferring
any remaining balance back to general funds.
Spending takes place with advice from ‘Designated
Fund Advisors’, subject to compliance with the
Charity’s policy and procedures. Funds are available
for spending in full, with no reserves figure set.
Designated Fund Advisors are encouraged to fundraise
to replenish funds for future developments.
There is a further £3.5m (2022: £6.9m) designated
as strategic grant funds. We wish to develop our
capability to support the Foundation Trust in
delivering some major strategic and transformation
projects. These projects typically have a long lead
time and require time and resources before they can
be progressed for approval and fundraising. The value
of the reserve is based on the Charity’s medium-term
grant-making plan, with the expectation that further
funds would be raised from fundraising appeals to
fund a series of strategic projects. The value of this
fund reflects the amount required over the next
three years to support the Charity’s strategy and
allow regular and sustained investment in growing
the Charity and increasing its ability to support its
beneficiaries.
A further fund to support the pump priming of pipeline
capital projects was established in 2018/19 and an
initial sum of £1m was transferred. Capital projects
by their nature require a large amount of funding to
be raised over a relatively short period of time. The
Trustees believe that in order to support King’s in
progressing projects currently at the planning stage,
funds should be set aside for this purpose. The fund
has not been drawn down during the year although a
number of capital projects are now being evaluated.
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