Disclosures – Unspent Funding and Reserves

The way ‘tagged’ funds have to be disclosed in the Notes has changed with the last update of the Tier 3 standard.

‘Tagged’, or dedicated, funds come in two types:

a) External Commitment

You have agreed with another party to spend funds they have given you in a certain way. This covers most grants, some other donations and some sponsorships. Such funds are considered liabilities.

b) Internal Commitment

Your organisation has set aside a portion of its own funds for a specific future purpose. This may be donations you have collected over the year for a building upgrade, money set aside to pay staff in case you have to wind up, or a range of other purposes. Because the commitment is internal, and not to an external party, this is not a liability, but can be portioned out as a reserve in equity.

Disclosures required in the Notes

External Commitment (s A221)

For grants, donations or similar with an external commitment, where there is an unexpended amount at balance date, you have to disclose in the Notes:

  • what purpose or items you are expected to spend the funds on.
  • when you expect to have fully expended these funds.

It is not necessary to name individual funders, although they generally do appreciate it.

Internal Commitments (s A232-A235)

For any reserves, organisations now have to give an explanation about the purpose of the reserve and how it is managed. Note that ‘reserve’ does not mean your general accumulated funds, or any money you may have invested in term deposits or portfolios for no particular reason other than generating investment return.

For ‘discretionary’ reserves, i.e. money that is internally set aside for a purpose, the standard asks specifically that the purpose of the reserve is specified in the Notes, as well as how and when the organisation plans to spend it.