If your charity has a total annual income of less that £500,000 then you may not need to have a full professional audit.  If your income is below £25,000 then there is no requirement to have your accounts independently examined.  However some organisations still choose to do so to satisfy members and funders.  

An independent examiner must be someone who is not connected closely with any of the trustees, has the ability and experience to understand and scrutinise charity accounts, and can devote the time and effort needed in order to undertake a competent examination of the accounts in accordance with relevant regulations in relation to independent examination. If your organisation is required to have an independent examination and the income exceeds £250,000 then there is the additional requirement that an examiner will need to be a member of a specified accounting body.  

Here at the Community Accountancy Service we are fully qualified to carry out independent examinations for organisations with an income of up to £500,000.

For more information, or if you would like the CAS team to undertake an independent examination of your accounts, call 01827 721223 or e-mail paula@wcava.org.uk

 The Role of the Treasurer

All organisations must have a treasurer, who has overall oversight of the financial activities of the group.  Small organisations may have a treasurer who deals with all aspects of finance but still reports back to the board.  Larger organisations may have delegated the day to day financial activities to a paid member of staff who reports back to the Treasurer. 

Key responsibilities of the treasurer are:
• General overview of finances—where money is, how much there is and how and by who it can be spent. 
• Managing the income, fundraising, generating money and banking.
• Budgeting and Financial Planning.  Preparation of budgets, and cashflow, knowing how much income and expenditure is expected.  These budgets should go to the board for approval.   
• Monitoring income and expenditure and preparing financial reports for the board at meetings which are held at least quarterly. Ensuring that the board is kept up to date of organisation’s finances, including all income and how it has been spent and how much is left.  Regular accurate reports help the board to make informed decisions. 
• Presenting audited/independently examined accounts at the AGM.
• Preparing financial reports for funders, Charity Commission and/or Companies House or other stakeholders as required.
• Book-keeping.  In smaller groups this may be done by the treasurer, but must still be checked by other board members.  In larger organisations a paid member of staff may do the book keeping which should be regularly checked by the treasurer.
• Checks on stocks and assets which the organisation owns and is recorded in the balance sheet.

The above is not exhaustive and some aspects of the role depend on the size and make up of the groups.  Remember, the above is the treasurer’s role—the board as a whole retains responsibility for the financial management and activities of the organisation/group.

To find out more contact the CAS team on 01827 721223, or e-mail paula@wcava.org.uk.

Sadly there are a number of groups who will not make it through the current economic downturn for a number of reasons.   Good financial management is the key to assessing your organisation’s financial situation. If you have good financial management in place then you should be able to avert the closure of the group or minimise any risks which may arise should the group cease to operate.

Areas to consider:
• Do you receive regular financial reports and are these discussed at every trustee/directors’ meeting?

• Is there a budget and is income and expenditure regularly monitored against this budget?

• Do your group’s liabilities exceed its assets?  If so then your group may not be able to pay its bills.

• Are there any large liabilities on the horizon that the group may not be able to meet?
 

• Does your group rely on more than one source of income or are there others available? Numerous sources of income will minimise the impact of the loss of one fund.

• What are the group’s employment and other costs? Can it meet these costs?

• What are the group’s reserves?

If you do have any doubts about your group’s financial viability then you must urgently assess the situation in order to decide whether or not there is a real possibility that the group is no longer viable.  A group must not continue to operate if it knows it is unable to meet its debts. 

This doesn't mean that all groups must automatically cease operation when there are payment difficulties.  However you must look very carefully at the financial situation of your group.  If you continue to obtain credit knowing that there is a possibility that debts will no be paid, you may be personally liable for these debts (even if you are a limited company).  Indemnity insurance is unlikely to cover the debts if you continue to operate under these circumstances.

Ignoring the situation won’t make it go away and not taking action is not an option.  If you have any doubts about your group’s viability you need to act.  

If you need further information or advice regarding good financial management contact the CAS Team on 01827 721223 or e-mail paula@wcava.org.uk

Financial Management and Trustees’ Responsibilities

Trustees have a vital role to play in ensuring that an organisation meets its financial responsibilities. This role is  enshrined in law and all Trustees should be aware of their responsibilities, even if the day-to-day financial work is delegated to others.

The financial responsibilities of Trustees can be summarised into three categories:

Duty of Compliance
• Ensure that the charity complies with charity law, and with the requirements of the Charity Commission as regulator; in particular ensure that the charity prepares reports on what it has achieved and submits Annual Returns and accounts as required by law.
• Ensure that the charity does not breach any of the requirements or rules set out in its governing document and that it remains true to the charitable purpose and objects set out there.
• Comply with the requirements of other legislation and other regulators (if any) which govern the activities of the charity.
• Act with integrity, and avoid any personal conflicts of interest or misuse of charity funds or assets.

Duty of Prudence
• Ensure that the charity is and will remain solvent.
• Use charitable funds and assets reasonably, and only in furtherance of the charity’s objects.
• Avoid undertaking activities that might place the charity’s endowment, funds, assets or reputation at undue risk.
• Take special care when investing the funds of the charity, or borrowing funds for the charity to use.

Duty of Care
• Use reasonable care and skill in their work as trustees, using their personal skills and experience as needed to ensure that the charity is well-run and efficient.
• Consider getting external professional advice on all matters where there may be material risk to the charity, or where the trustees may be in breach of their duties..
And, if in doubt, Ask

 

Here at Community Accounting we can offer further information and advice regarding  financial management and trustee responsibilities.   Contact the CAS Team if you wish to discuss further.  

Basic Financial Management - An Introduction

Lets face it, finance and accounting is a bit of a dry subject for most people and trying to make sense of the finances of an organisation can sometimes be quite daunting.  However, if you are looking for funding, you need to get your financial house in order.  Funders will only want to give their money to groups who can demonstrate that they treat finance and accounting as a priority.

Having good financial management in place, is not just a legal responsibility, it is about how you look after the assets (monetary) or otherwise that you have been entrusted with.  If you don’t have good financial management in place then this could lead to a risk of loss or wastage through either fraud or mismanagement.  

The main areas that you will need to take into consideration when setting up financial systems are:

Budgeting: do you have an up to date realistic budget.  Is the budget based on full cost recovery?

Managing and recording income:  what procedures are in place for dealing with income, who has responsibility for recording and monitoring income?  What financial records are kept and where are they kept?

Banking:  does your group have a bank mandate.  Is internet banking used and if so, what checks and procedures are in place to ensure that this is not open to misuse.
Bank Reconciliations.  Do you reconcile your cash book with your bank statements each month.

Expenditure: Do your procedures deal with who can authorise expenditure?  How are payments dealt with?  What records are kept and where?

Cash Flow:  How does your organisation manage its cash.  Are any surpluses invested in higher interest accounts? Is there clear separation of duties between the person keeping the books and the treasurer? Are accurate, understandable financial reports available and discussed at trustees meetings?

Here at Community Accounting we can offer further information and advice regarding good financial management.   Contact the CAS if you wish to discuss further.