Reserves are not the same as total cash in the bank. Free reserves exclude restricted gifts, endowments, and money tied up in buildings. The useful donor figure is months of operating costs: free reserves divided by typical monthly spend.
There is no legal minimum. A common healthy range is about 3–24 months. The Clarity Score awards full marks in that band and tapers on both sides, because a single cutoff would punish honest models (long-term care commitments, volatile fundraising, or a building-heavy hospice).
- Very low — one late grant can force cuts. Ask how the charity would manage a bad year.
- Very high — may be prudent, but should match a published reserves policy. Unexplained hoarding is a reason to read the trustees’ report, not an automatic “do not give.”
Restricted vs unrestricted funds are explained in restricted vs unrestricted. The longer guide is charity reserves explained.