Financial Governance is crucial for all organisations – but don’t take my word for it!...
Quote from the Charity Commission “The Essential Trustee”
“All charities must produce accounts and provide a copy to anyone who asks.”
Quote from the Companies Act 2006:
(1) Every company must keep adequate accounting records.
(2) Adequate accounting records means records that are sufficient—
(a) to show and explain the company’s transactions,
(b) to disclose with reasonable accuracy, at any time, the financial position of the company at that time, and
(c) to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation).
(3) Accounting records must, in particular, contain—
(a) entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place, and
(b) a record of the assets and liabilities of the company.
Failure to do this is a criminal offence!
Grants and financial governance
When applying for a significant grant (over £50k, say) the size of your project is such that it merits thinking more widely about the associated costs. Of course there are the direct project costs to calculate - such as salaries, room hire and capital costs. These alone can be complex; salary costs will now need to include pension costs (following auto-enrolment) and employer’s NI will need to be adjusted for the allowance (increasing to £3,000 for the financial year from April 2016). Remember too that minimum wage levels will increase from April 2016 (to £7.20 per hour for over 25s – from £6.70). By 2020 the minimum wage will increase to £9 per hour, in line with the living wage. This may impact upon your organisation’s salary budget. Are you confident to cost out your salaries, or do you need some help / assurance?
You do need to think about the expert advice and support you are going to need in order to run and manage your project. This will cost money – and if the funding is not in your bid it can be a significant drain on your organisation’s unrestricted funds. You may need legal advice if contracts are a part of your project, for example, or property development advice if a major building project is planned. Plus you are likely to need finance advice, to ensure you are fully monitoring your project spend and are able to confidently complete the monitoring returns to your funder. Building a cashflow forecast for the life of the project may require assistance. Remember to get quotes for the advice and support work and build in the costs of this training / support to your project budget.
This should be built into your bid as a component of the project’s management fees; the larger funders will accept a % add-on to the salaries costs to cover the additional management fees (although the % add-on which is acceptable will vary).
And finally, if your project income pushes the organisation’s turnover over a threshold for independent examination or audit you will need to increase your budget for annual accounts work.
Where to get finance help?
West Yorkshire Community Accounting Service (WYCAS) www.wycas.org.uk is a charity with objects to provide training in financial and management skills. Although support is currently free to smaller groups (less than £100k turnover), the funding climate is changing so that – in order to help you to an appropriate extent for your organisation’s size and skill set – WYCAS now needs to charge larger groups for support. Contact your community accountant to discuss what support can be offered, how it will be delivered and how to cost that support within your funding bid.
“WYCAS have provided expert financial advice which breeds confidence in funders and trustees, allowing New Wortley Community Association to grow its turnover by over 400% in the last 3 years.”
For more information see these pages http://doinggoodleeds.org.uk/advice-explorer.html
For support and advice contact WYCAS (West Yorkshire Community Accounting Service) - a charity that supports organisations to manage their finances.
http://www.wycas.org.uk/ or telephone 0113 2706269.
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