The UK is fortunate in having over 60,000 grant-making trusts on whose generosity many charities – especially small ones – largely depend for funding core activities, projects, vehicles and other equipment items.
Many of these trusts give out their entire income to charities each year, and those that do not make a range of substantial grants to specific charitable activities or for general charitable purposes.
However, larger trusts have recently come under fire from the Financial Times, following research by the think-tank Pro Bono Economics, because of the large reserves they hold whilst allegedly give relatively small sums in grants.
“Relatively” in this context indicates small in relation to the reserves rather than small in absolute terms. For example, the FT cites the Kusuma Trust UK which had assets worth £510 million in 2021, yet spent only £5 million that year – £3 million running the Trust and £2 million to charity.
Holding large reserves may demonstrate prudence on the part of trustees. A former client of Minerva encountered difficulties in raising money for a capital campaign because, despite being a small charity, it held reserves in excess of £2 million. However, the trustees were able to demonstrate that this represented good housekeeping and forward planning because the charity’s premises was situated under the flight path of one of the UK’s busiest airports, and low flying aircraft had in the past caused structural damage needing costly and often unpredicted repairs.
Furthermore, many trusts owe the size of their reserves to one or a small number of donors or legacies, which often set down detailed restrictions on what projects the funds may be used. If supply exceeds demand in such restricted areas, large reserves are likely to build up.
Whether grant-making trusts should spend more of their reserves or not is a matter for considerable debate. But some grant-making trusts could alleviate criticism by making the sums they do give more accessible to a wider range of charities with easier application processes and fewer restrictions on how their grants may be used.