Skip to main content
Access keys Home News Site map Site help Complaints Terms Contact us

Section 3 – Business and financial information

Target audience: Management committee

Subject

Suggested practice

1 Bank accounts
1.1 Cheque signatories Identify at least 4 cheque signatories drawn from your management committee
2 out of 4 cheque signatories identified should sign each cheque
A member of the management committee should sign each cheque
1.2 Bank statements Ask your bank to provide you with a bank statement for each of the accounts held each month
1.3 Bank reconciliation A reconciliation between your cashbook and bank statement(s)
A copy of each bank reconciliation should be investigated and resolved at the time the reconciliation is performed
A copy of each bank reconciliation should be presented to the management committee for approval
1.4 Security Cheque books, receipt books and bank statements should be kept in a secure (locked) location when not in use
Access to the secure location should be limited to known committee members
2 Cash management
2.1 Cash kept on the premises The value of cash kept on the premises at any one time must not exceed the amount shown in your organisations insurance policy
2.2 Receipting cash A sequentially numbered receipt should be issued each time payment is received. Your organisation should retain a copy of the receipt
2.3 Banking cash Cash should be banked on a regular basis and must always be banked when the value of cash kept on the premises exceeds the amount shown in your organisations insurance policy
Cash should be banked ‘intact’. Cash received in respect of an activity should not be used to fund purchases e.g. fees received in cash should not be used to purchase materials. It should be recorded against fees in your cashbook and banked ‘intact.’
2.4 Security Cash should be kept in a locked container in a locked drawer cupboard.
Access to the locked container should be limited to known committee staff members
The management committee should approve a list of persons authorised to hold keys to containers where cash is kept
3 Petty cash
3.1 Petty cash float The management committee should approve the maximum value of the petty cash float
3.2 Reimbursement from petty cash The management committee should approve the maximum value for a single amount which can be reimbursed from petty cash (suggest £20)
3.3 Proof of purchase Proof of purchase, a till receipt/an invoice must be produced before reimbursement is made. The proof must be retained for audit purposes
3.4 Receipting petty cash A sequentially numbered receipt should be issued each time a payment from petty cash is made. Your organisation should retain a copy of the receipt
3.5 Petty cash reconciliation A reconciliation between the float and the balance of cash remaining in petty cash should be carried out each week
All differences arising from the reconciliation should be investigated and resolved at the time the reconciliation is performed
A copy of each petty cash reconciliation should be presented to the management committee for approval
3.6 Security Petty cash should be kept in a locked container in a locked cupboard or drawer
Access to the locked container should be limited to known committee and staff members
The management committee should approve a list of persons authorised to hold keys to containers where petty cash is kept
4 Recording income and expenditure
4.1 Recording income Each type of income received and payments made should be recorded in a manual or electronic cashbook
The number of receipt issued when cash is received should be recorded alongside that item of income when entered in the cashbook
The bank paying the book reference should be recorded alongside each item of income when banked
4.2 Recording payments An order or invoice number should be recorded alongside each payment entered in the cashbook
Each type of expenditure should be recorded separately in your cashbook
Each invoice should be stamped with the cheque number and date it is paid
Paid invoices should be filed in a paid invoice file
4.3 Retention of documents Documents supporting income received (e.g. receipts) and payments made (e.g. orders and/or invoices) must be retained for 6 years
4.4 Security Prior years documents supporting income received and payments made should be kept in a secure (locked) location
5 Authorisation of goods/services
5.1 Authorised signatories The management committee should approve a list of members who can authorise the purchase of goods and/or services from the organisations funds
The management committee should approve the number and type of authorised signatories who can authorise the purchase of good/services from the organisations funds
5.2 Authorisation limits The Management Committee should approve a list of the maximum and minimum amounts that signatories can authorise and the number and type of signatory who can authorise those amounts
6 Segregation of duties
6.1 Payroll All payments to staff must be authorised by 2 authorised signatories irrespective of the value of the payments
The calculation and authorisation of staff pay must not be carried out by the same person
6.2 Internet All purchases made via the internet must be approved by two authorised signatories irrespective of the value of the payments
7 Fees
7.1 Fee policy The management committee must approve the fee policy of the organisation
The fee policy should be reviewed and re-approved annually
The fee policy should contain:

  • The fee payable (full and discounted if applicable) for each type of session and service provided (e.g. lunch)
  • The criteria to be met to qualify for discounted fees
  • The dates when fees are due
  • The options available to pay fees e.g. instalments, standing order, cheque, cash
  • The action the organisation will take if fees are not paid
  • The date the policy was approved
  • The length of time the policy is applicable for
  • The date the policy will be renewed
The fee policy should be displayed in a prominent place within the organisation and a copy provided to a parent of each child in attendance
7.2 Recording fee income A separate record of fees collected from each parent should be maintained
8 Salaries and wages                      
8.1 Terms and conditions of employment Changed to an employee’s terms and conditions of contract must be authorised by the management committee
8.2 Payslips Employee’s should be issued with a payslip which itemises:

  • Gross pay
  • Deductions
  • Net pay
8.3 Recording receipt of salaries/wages Employees who are paid by cheque or cash should sign to record receipt of their salary/wage
9 Financial review
9.1 Annual Budget An annual budget of planned income and expenditure should be produced
The management committee must approve the annual budget of planned income and expenditure
9.2 Monitoring income and expenditure Actual income/expenditure should be regularly monitored against the budget
9.3 Financial report Financial reports that compare actual income/expenditure against budget (include a forecast of income/expenditure for the year) should be produced monthly and latest version presented at each management committee meeting
9.3 Financial report Financial reports that compare actual income/expenditure against budget (include a forecast of income/expenditure for the year) should be produced monthly and latest version presented at each management committee meeting
10 Assets
10.1 Lease/buy Where the option is available, preferred method is leasing. The decision should be made by management committee

 

10.2 The purchase of the assets Purchases of equipment over £500 should have at least three separate quotes
10.3 Asset register An asset register of all assets valued over £500 and over contains details of all the assets owned
Items should be added/deleted when appropriate
The register should be checked periodically (quarterly)
10.4 Sale of assets All sale of assets should be approved by the management committee
The items should be deleted from the asset register
The funds should be then paid into the company account

Charitable Incorporated Organisation (CIO)

A Charitable Incorporated Organisation is an incorporated form of charity which is not a company. It only has to be registered with the Charity Commission and not Companies House and is only established when it has registered with the Charity Commission.

A CIO can enter into contracts in its own right and its trustees will normally have limited or no liability for any debts of the CIO. A CIO will have to submit an annual return regardless of income, although smaller CIO (any with an income below £250,000) will be expected to provide simpler receipts and payment accounts. A register of all members and trustees must be kept.

There are two models for the CIO:

The foundation model and the association model

Foundation model

Uses the only voting members which will be the charity trustees. In practice they will operate like a charitable trust, run by a small group of people (the trustees) who make all the key decisions.

Association model

Uses a wider membership including voting members other than the trustees.

CIO need to have both members and trustees in the same way that companies have members and directors. A trustee of a foundation model will automatically become a member.

You will need to first form a board of trustees, decide which model best suits your business and then you need to complete a constitution. Model constitutions are available from the Charity Commission. The application is an online process and you will need to prepare your constitution and documents prior to completing the timed application. The Charity Commission have advised that as this is a new legal structure, applications could take at least 28 days before a decision is made.