Upload
walescva
View
121
Download
2
Tags:
Embed Size (px)
DESCRIPTION
From the Wales Charity Law and Governance Conference 2014.
Citation preview
Watts Gregory LLP in association with WCVA
Pool of resources
NOT
Pot of cash
WHAT IS A FUND?
Watts Gregory LLP in association with WCVA
Property Fixed assets – IT kit, office equipment,
vehicles etc Debtors – sums due to the charity Cash Creditors – sums owed by the charity
WHAT DOES A FUND INCLUDE?
Watts Gregory LLP in association with WCVA
Unrestricted Designated Restricted Endowment
WHAT TYPES OF FUND ARE THERE?
Watts Gregory LLP in association with WCVA
This is often referred to as a “general fund” and represents funds that are available to the trustees to be applied for the general purposes of the charity.
In other words you are free to use these funds for ANY of the charity’s purposes.
WHAT IS AN UNRESTRICTED FUND?
Watts Gregory LLP in association with WCVA
This is a type of unrestricted fund comprising of amounts of unrestricted funds set aside or earmarked by the charity for a specific purpose. It is NOT a restricted fund.
The designation is made by the trustees and can be altered or rescinded by the trustees.
WHAT IS A DESIGNATED FUND?
Watts Gregory LLP in association with WCVA
To provide for future costs / issues To recognise that some components of
unrestricted funds cannot be spent – e.g. fixed assets
To reduce reserves that look “too healthy”
WHY SET UP DESIGNATED FUNDS?
Watts Gregory LLP in association with WCVA
Fixed asset fund – representing NBV of fixed assets Stock fund – representing NBV of stock Project in deficit fund – to cover the likely future losses
on ongoing restricted fund projects. Future maintenance fund – to cover major cyclical type
costs such as re-roofing, replacement of windows etc. Project fund – to cover the costs needed to establish a
particular new project
DESIGNATED FUND EXAMPLES
Watts Gregory LLP in association with WCVA
These are funds subject to specific trusts which may be declared by the donor. This means that the donor has specified how the funds are to be used. In other words they are gifts with “strings attached”.
Funds received as a result of a special appeal would also be restricted as the money is collected for a specific purpose.
e.g. Oxfam cannot run an appeal for a relief effort in Somalia and then spend the monies raised on a project in Brazil.
WHAT IS A RESTRICTED FUND?
Watts Gregory LLP in association with WCVA
Funds received to be held as capital – e.g. a portfolio of investments
2 TYPES
Permanent – no power to convert to income Expendable – power to convert to spendable
income
WHAT IS AN ENDOWMENT FUND?
Watts Gregory LLP in association with WCVA
The basic definition of what is commonly known as “free reserves” is “that part of the charity’s income funds that is freely available.” This definition used to exclude :
Permanent endowment funds Expendable endowment funds Restricted funds Designated funds Income funds that could only be realised by disposing of
fixed assets held for charity
RESERVES POLICIES
Watts Gregory LLP in association with WCVA
SORP 2005 changed the above in that designated funds can (not must) be regarded as part of free reserves and charities may (not must) be able to view expendable endowment funds as part of reserves. The emphasis now is on flexibility and a consideration of the charity’s circumstances
FREE RESERVES
Watts Gregory LLP in association with WCVA
To fund working capital To fund unexpected expenditure arising out
of e.g. project deficits, unplanned events, emergencies
To fund income shortfalls To develop new functions / projects To underpin long term commitments
WHY HAVE RESERVES?
Watts Gregory LLP in association with WCVA
My grant is 3 months late in arriving The roof needs replacing I want to embark on a new project Project 1 has cost overruns Etc etc
THINK – WHAT IF!!
Watts Gregory LLP in association with WCVA
The Status Quo approach
The Armageddon approach
2 APPROACHES
Watts Gregory LLP in association with WCVA
Consider risks Analyse current position Look ahead at income streams Look ahead at expenditure expectations Consider future projects
A BETTER WAY
Watts Gregory LLP in association with WCVA
Why the need
How much
How to get there
Review & Monitor
DRAFTING THE POLICY
Watts Gregory LLP in association with WCVA
The Trustees report should clearly state the main activities of the charity within the section “objectives and activities”
The SOFA or the related SOFA notes should analyse income and expenditure by activity
ACTIVITY BASED REPORTING
Watts Gregory LLP in association with WCVA
No clear link between TR and accounts
Analysis by “natural” classification NOT by activity
PROBLEMS ENCOUNTERED
CORRECT
Watts Gregory LLP in association with WCVA
Correct analysis
Cost of charitable activities
Staff Other direct
Grants Support
Total
Activity 1
Activity 2
Activity 3
INCORRECT
Watts Gregory LLP in association with WCVA
Incorrect analysis This year
Last year
Project salaries
Admin salaries
Rent
Rates
Travel
Etc
Etc
Correct analysis This year
Last year
Incoming resources from charitable activities
Activity 1
Activity 2
Activity 3
CORRECT
INCORRECT
Watts Gregory LLP in association with WCVA
Incorrect analysis This year
Last year
Welsh Assembly Government
Arts Council for Wales
Cardiff City Council
Lottery
Europe
Sales
Watts Gregory LLP in association with WCVA
Confusing funds with activities
Confusing projects with activities
OTHER SIMILAR ISSUES
2 SORPS
One for large charities
One for small
THE NEW SORP 2015
If you satisfy 2 of the following 3 criterion you are SMALL
Annual income < £6.5mill Total assets < £3.26mill <50 employees
SMALL CHARITIES
Thinking “small first” Core modules that apply to most charities Other modules that you use if applicable
SORP MODULES
Periods starting post 1/1/15 For most that means the first year end is 31/3/16 Need comparatives to 31/3/15
EFFECTIVE DATE
Fair and balanced – disclose successes and failures
Public benefit – cover activities and performance not just aims and objectives
Going concern – state nature of uncertainties
CHANGES TO TRUSTEES REPORT
SORP 2005 NEW SORP
Incoming resources Income and endowments
Voluntary income Donations
Incoming resources from charitable activities Earned from charitable activities
Activities for generating funds Earned from other activities
Investment income Now combined with “other income” unless materialResources expended Expenditure
Costs of generating voluntary income – fundraising trading: cost of goods sold and other costs – investment management costs
Cost of raising funds
Charitable activities Expenditure on charitable activities
Governance costs No longer a separate heading - Now included in support costs
Other resources expended Other expenditure
CHANGES TO SOFA
Income recognised when “probable” not “virtually certain”
Donated goods recognised on receipt if practicable Disclose remuneration of key personnel in total Extended definition of related parties
OTHER CHANGES
Stock that is given away may still be included in stock at cost
Multi employer defined benefit schemes – recognise liability on balance sheet
Holiday pay accruals
OTHER CHANGES
THE END