# How to explain charity reserves in a grant application

Explain charity reserves in a grant application with dated figures, a clear policy and a worked example showing why your project still needs funding.

- Author: OpenGrant
- Topic: [Grant applications](https://opengrant.co.uk/blog/category/grant-applications)
- Published: 2026-10-26
- Updated: 2026-10-26
- Source sites checked: 2026-10-26
- Canonical URL: https://opengrant.co.uk/blog/charity-reserves-grant-application

To explain charity reserves in a grant application, give the figure the funder asks for, its date, your reserves target and the reason you still need the grant. Having reserves does not necessarily rule out funding: [Hampshire & Isle of Wight Community Foundation (HIWCF) says it wants the context behind the figure](https://hiwcf.org.uk/why-we-ask-about-reserves-and-why-they-matter/). Check each programme's rules before assuming that approach applies elsewhere.

This guide helps you prepare the application answer. The Charity Commission guidance cited below applies to England and Wales; it is not a statement of charity reporting requirements across all four UK nations.

## Start with the exact question and date

Copy the funder's question into your working notes. Underline the accounting period, the type of funds requested and any instructions about supporting documents. For example, [HIWCF asks about unrestricted reserves at the end of the last financial year](https://hiwcf.org.uk/why-we-ask-about-reserves-and-why-they-matter/). A current bank balance would not answer that question.

Prepare a small evidence pack before drafting:

- The accounts covering the requested date, with the relevant page marked.
- The calculation behind the reserves figure, checked by your finance lead or treasurer.
- The approved reserves policy and the date it was reviewed.
- A short note explaining any material change since the accounts date.
- The proposed project budget and the amount you are asking the funder to contribute.

Keep historical and current figures separately labelled. If your latest accounts show £20,000 but a more recent calculation shows £16,000, state both dates and explain the movement. Do not silently substitute the newer number because it makes the funding case look stronger. Our [grant due diligence guide](https://opengrant.co.uk/blog/grant-due-diligence-checks) covers checking consistency across application documents.

## Distinguish reserves from money in the bank

[The Charity Commission's CC19 guidance](https://www.gov.uk/government/publications/charity-reserves-building-resilience-cc19/charities-and-reserves) describes reserves as unrestricted funds freely available for the charity's purposes. Restricted funds are outside that definition. It also identifies exclusions such as operational fixed assets and certain designated funds and commitments. Use its calculation guidance with your accounts; do not treat every unrestricted asset as spendable cash.

For the application, write a reconciliation that another person can follow. Start with the relevant accounts figure, identify each adjustment and point to the supporting note or calculation. Ask your finance lead to resolve any uncertain classification before submission. Avoid deducting a cost twice, for example once as a recorded liability and again as an additional commitment.

If you mention funds designated for a future purpose, explain the purpose and evidence behind the designation. [HIWCF says it asks for the statement or purpose, signed off by trustees](https://hiwcf.org.uk/why-we-ask-about-reserves-and-why-they-matter/). That is this funder's stated expectation; read the requirements of the funder you are approaching.

## Explain the target instead of quoting a universal rule

[CC19 says there is no reserves level or range suitable for every charity](https://www.gov.uk/government/publications/charity-reserves-building-resilience-cc19/charities-and-reserves). The target should reflect the organisation's circumstances, including income reliability, spending plans, commitments and risks. A generic claim that all charities need three or six months of costs does not establish your own target.

In your draft, connect each reason to something concrete. Replace “to ensure sustainability” with an explanation such as “to cover the period between our scheduled rent payments and receipt of our main annual donation”. Only use that explanation if your own forecasts support it.

If you express reserves in months, show the calculation and identify the expenditure measure. Say whether it uses total annual spending or a defined set of operating costs. Check that the denominator matches the funder's instructions and your policy; do not switch between measures within the application.

## A worked example of an application answer

The following is a fictional drafting example, not a recommended reserves target or a prediction of a funding decision.

A small charity has checked that its free reserves at 31 March 2026 were £18,000. Its trustees have approved a £15,000–£20,000 target. The charity proposes an additional £8,000 workshop programme, with £2,000 already confirmed and a £6,000 grant request. Its planning documents support this explanation:

> At 31 March 2026, our free reserves were £18,000, within our approved target of £15,000–£20,000. Our policy provides for a gap in annual donation income while existing venue and staffing commitments continue. The calculation and policy are attached. The proposed workshop programme costs £8,000, of which £2,000 is confirmed from a separate donation. We are requesting £6,000 for the remaining delivery costs. Our forecast does not allocate reserves to this additional programme.

The figures reconcile: £2,000 plus £6,000 funds the £8,000 programme. The answer explains the proposed use of reserves without presenting the charity's own policy as a funder rule. In a real application, identify the costs covered by the confirmed donation and check that its conditions allow that use.

If the form has a tight word limit, retain the dated figure, target, specific reason for holding reserves and funding gap. Put the detailed calculation in an attachment only if attachments are accepted.

## What if reserves are above or below the target?

Do not hide the difference. [CC19 advises trustees to investigate significant departures from their target and consider whether action is needed](https://www.gov.uk/government/publications/charity-reserves-building-resilience-cc19/charities-and-reserves).

For your application, prepare a factual explanation of what changed and what has been agreed. If reserves rose after a one-off donation, identify when it arrived and how it appears in the accounts. If reserves fell, distinguish an agreed drawdown from an unexpected shortfall. Use actual decisions and forecasts; do not invent a spending plan to make the balance appear lower.

Where the position has changed materially, ask whether the funder wants updated management figures alongside the historical accounts. If it publishes a reserves threshold, check the definition, calculation period and whether it allows an explanation or enquiry. A good narrative cannot guarantee an exception to an eligibility rule.

## Check the answer against the rest of the bid

Before submission, ask someone who did not prepare the answer to trace the figure back to the accounts. Then compare the reserves explanation with the project budget, funding plan and organisational narrative. Resolve any claim that the same money both protects existing commitments and pays for the new project.

Finish with four checks: the figure answers the question; the date is explicit; the policy explanation reflects an approved decision; and the grant request matches the remaining project costs. For wider drafting help, see [how to write a grant application](https://opengrant.co.uk/blog/how-to-write-a-grant-application). If you need support for running the organisation, our [core funding guide](https://opengrant.co.uk/blog/core-funding-for-charities) explains how to frame that request.

Use [OpenGrant's charity and community grant search](https://opengrant.co.uk/grants?applicant=vcse&ftype=grant) to build a shortlist, then read each funder's financial eligibility guidance before preparing a full bid.

## Frequently asked questions

### What should a grant application answer about reserves include?

Give the figure requested, its date, your approved target and the reason for holding that amount. Explain the remaining project funding gap and check that the figures agree with the accounts and budget you submit.

### Should I give the latest figure or the figure in last year's accounts?

Answer for the date the funder requests. If the position has changed materially, explain the change with separately dated figures and ask whether updated management figures would be useful. Do not silently replace the requested historical figure.

## Find grants

- [Search charity and community grants](https://opengrant.co.uk/grants?applicant=vcse&ftype=grant)

## Related guides

- [Grant due diligence: what do funders check?](https://opengrant.co.uk/blog/grant-due-diligence-checks): Prepare for grant due diligence with a practical checklist covering organisation records, accounts, named contacts and replies to funder questions.
- [Core funding for charities: what it covers and how to apply](https://opengrant.co.uk/blog/core-funding-for-charities): Understand core funding for UK charities, how it differs from project funding, and how to prepare a clear running-cost request with a worked example.
- [How to write a grant application: a practical UK checklist](https://opengrant.co.uk/blog/how-to-write-a-grant-application): Plan a grant application around funder fit, community evidence, outcomes, a credible budget and the exact questions asked.
- [How to apply for a grant as a partnership](https://opengrant.co.uk/blog/how-to-apply-for-grant-as-partnership): Plan a joint grant application: check partner eligibility, choose a lead organisation, divide the budget and agree how you will deliver and report.

## Sources and further reading

- [Charity Commission: Charity reserves, building resilience (CC19)](https://www.gov.uk/government/publications/charity-reserves-building-resilience-cc19/charities-and-reserves)
- [Hampshire & Isle of Wight Community Foundation: Why we ask about reserves](https://hiwcf.org.uk/why-we-ask-about-reserves-and-why-they-matter/)

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