11.1 Managing Money

Managing the Money

We can only hope to touch on the subjects which voluntary management committees need to be aware of in respect of managing the finances.  Each area in itself would constitute many pages.

All charities must:

• Prepare and maintain accounting records. These records (cash books, invoices, receipts etc) must be retained for at least six years (at least three years in the case of charitable companies).
• Prepare accounts.
• Make the accounts available to the public on request. This is vital underpinning to the principle of public accountability, and must be complied with in all cases. It is open to trustees to make a reasonable charge to cover the costs of complying with the request (e.g. photocopying and postage). As a matter of good practice we recommend that a copy of the Trustees' Annual Report should, wherever possible, be sent with the accounts.

There are three major influences on charity accounting and financial reporting:

• The minimum requirements for keeping accounting records applying to all charities (other than charitable companies) are set out in the Charities Act 1993.
• Every charity must also comply with the legal requirements for the preparation of accounts and reports. In the case of some categories of charity (for example, charitable companies or those registered social landlords which are exempt charities) these requirements will be set out in legislation appropriate to that type of organisation. Charities which are not covered by specific legislation must comply with the requirements set out in Part VI of the Charities Act 1993 and, where appropriate, the related Charities (Accounts and Reports) Regulations issued in 2005 ("the Regulations").
• The Statement of Recommended Practice: Accounting and Reporting by Charities (“SORP 2005”) explains how charities, whose accounts must show a true and fair view, should prepare their accounts and apply accounting standards. It applies to all charities in the UK unless a separate SORP exists for a particular class of charities. The SORP also provides recommendations for annual reporting that are relevant to sector and stakeholders needs and are in line with wider developments in reporting.

Reporting Requirements

Annexe (i), at the end of this section, shows the reporting requirements for charities with income or expenditure of over £1000 in any one year.  This is the figure at which charity registration becomes compulsory by law for organisations carrying on charitable activity.

For small organisations, under £100,000 income or expenditure, the option to keep Receipts and Payments accounting, with independent examination of accounts, remains.

The option to have independent examination of accounts is an important one since this can be far less costly than audit.  Dependent on what is required within the constitution (governing document) of the organisation then an amendment may be necessary to facilitate this.  Advice on appropriate wording can be obtained from the Community Accountancy & IT Unit at Voluntary Action Luton.