Financial Procedures

 

Policy Review Date: 17 January 2018

Date of next review: January 2019

 

  1. Purpose of this document
    • To define the financial systems used by The Thanet Youth and Community Centre (The Thanet) and how they relate to all areas of the organisation (sometimes referred to as Financial Standing Orders).
    • Relevant to directors, volunteers and staff. All suggestions for amendments to Coordinator. Minor amendments/updates to be agreed by Coordinator; major amendments by board of directors.
  2. Ordering supplies and services
    • All staff need to be aware that expenditure is committed when an order is placed on behalf of The Thanet, not when the cheque or direct payment is requested. Therefore, it is important that all orders are placed properly, and are within delegated powers.
    • All payments through The Thanet’s bank account require the approval of a second account signatory (currently the Treasurer, being William Perry, Derek Purcell and Fiona Brown).
    • Larger contracts or purchases (over £1,000) should not be entered into without the approval of the full board of directors, having taken adequate advice from a relevant professional adviser (e.g. accountant, solicitor, surveyor) if the board of directors believe such advice to be necessary.
    • While claims for small items of expenditure may be made via petty cash (see section 5), adequate supporting documentation, preferably receipts, must be obtained. Large items requiring cash payment must be checked with the Treasurer before the arrangement is confirmed.
  3. Payment authorisation
    • All invoices above £150 must be authorised for payment by the Treasurer or another account signatory (by way of counter-approval of online payments or counter-signature of cheques), although the actual checking of details may be delegated to the Coordinator. The Coordinator is responsible for checking invoices for accuracy in terms of figures and conformity with the order placed, that the services or goods have been received, and following up any problems. The Treasurer must be informed if there are queries delaying authorisation or if payment is to be withheld for any reason.
  4. Cheque writing and signing
    • All cheques are to be signed by two authorised individuals, being the Co-ordinator, the Treasurer, Fiona Brown and Derek Purcell.
  5. Handling of cash
    • Petty cash will be topped up on the ‘imprest’ system, where the amount spent is reimbursed. It is intended for small items, up to £50. Anything over this should be paid by cheque or bank transfer where possible. The imprest has a balance limit of £100. The petty cash balance will be reconciled when re-storing the imprest balance, or monthly if this is more frequent.
    • Any cash income may be used for petty cash expenditure, but the treasurer should be informed in writing of the amount received.
    • Cash will be kept in the office, which should be kept locked when unstaffed.
  6. Salaries, payroll and freelancers
    • The Thanet is required to operate the PAYE system in the event that it engages full- or part- time employees, and make annual returns to the Inland Revenue. All people working directly for The Thanet, whether permanent or temporary, must provide a P45, or sign a P46 or student exemption certificate, or give reasons why they can’t. All payments will be made by cheque or direct bank credit.
    • It is the nature of The Thanet’s activities that a large number of freelance consultants will be used. Freelance contractors will only be taken on when authorised in accordance with section 2 With a few exceptions, they will be treated as self-employed, and contracts with such people must clearly indicate this. However, full time work in other areas of activity must be assumed to be employed by The Thanet and so subject to PAYE & NIC. The Coordinator will obtain clarification of any unclear areas as needed.
    • Payments for additional work over and above standard hours must be approved by the directors. Clear written authorisation must be given before work commences.
    • PAYE Payments, if any will usually be made via the Thanet’s bank account by standing order, direct to employees’ bank account. Salary payment listings will be checked by the Coordinator. Salaries will be paid as agreed with staff or as soon as reasonably practicable when freelance contractors have submitted their invoices.
    • Staff loans are not issued, but advances may be made against salary due, by arrangement with the directors.
  7. Income
    • The majority of income received by The Thanet is from hire of space at The Thanet and from grants. Invoices will be issued for every room booking whenever requested, and a copy of this will be placed on file together with the completed booking form. For completeness of user information, receipt of payments will be annotated on invoices.
    • All invoices should be raised on The Thanet letterhead, or in a format agreed with the Coordinator and auditors, and be drawn up in accordance with The Thanet’s standard invoice requirements.
    • Whilst bookings are generally required to be settled in advance, outstanding invoice payments or regular user payments will be followed up at least monthly by the Coordinator.
    • Information about non-routine and all grant income must be passed to the Treasurer with the cheque or remittance advice. This will be filed by The Coordinator for reference, and used to ensure such income is correctly recorded in the accounts and grant conditions etc. Lack of documentation will lead to such items being ‘held on suspense’. It is the responsibility of the person gaining the grant to ensure all grant income is claimed as it becomes due or available, and that all appropriate staff and the Treasurer are aware of relevant grant conditions and exactly how the grant is to be expended.
  8. Bank accounts
    • The Thanet’s bankers are The Co-operative Bank Plc.
    • The Bank account requires two signatories for all cheques and BACS payments. The current authorised signatories are William Perry, Victoria Green, Fiona Brown and Derek Purcell.
    • All income in the form of cheques or large cash receipts will be paid into the current account as soon as possible, not less than once a week. The makeup of each banking will be clearly recorded, for later computer entry.
  9. Books of account and records
    • Proper accounting records will be kept. The accounts system is based around computer facilities using Excel, and cashflow will be monitored regularly.
    • Petty cash, cashflow and bank accounts will be reconciled at least monthly.
    • All fixed assets costing more than £250 (or such other level as may from time to time be agreed by the directors) will be capitalised in the accounts and recorded in a fixed assets register. This register will record details of date of purchase, supplier, cost, serial no. where applicable, description and in due course details of disposal.
  10. Financial monitoring and audit
    • The Board of directors will receive:
      • quarterly snapshots of cash in hand, total creditors and total debtors.
      • quarterly reports of income and expenditure versus budget – within two weeks of monThend.
    • Detailed cash-flow reports will be produced as appropriate.
    • The Thanet’s financial year is from 1 October to 30 September. Annual accounts will be submitted for audit, as required under the Companies Act, charity regulations and grant conditions, prepared in accordance with relevant accounting conventions. It is intended that the final draft should be ready for and passed by the board and members at the Annual General Meeting in December.
  11. Role of Treasurer

The Treasurer works in close co-operation with, and provides support and advice to, the Coordinator. Specific responsibilities are to:

  • Guide and advise the Board in the approval of budgets, accounts and financial statements, within a relevant policy framework.
  • Keep the Board informed about its financial duties and responsibilities.
  • Advise the Board on the financial implications of The Thanet’s strategic plans and key assumptions included in the directors’ operational plan and annual budget.
  • Confirm that the financial resources of The Thanet Youth and Community Centre meet present and future needs.
  • Understand the accounting procedures and key internal controls, so as to be able assure the Board of The Thanet’s financial integrity.
  • Ensure that the accounts are properly audited, that accepted recommendations of the auditors are implemented, and meet the auditor at least once a year.
  • Formally present the accounts at the AGM, drawing attention to important points.

 

  1. Role of Board of directors

The board of directors is responsible for:

  • approving the budget for the year;
  • approving signatories to the bank account;
  • appointments of staff;
  • approving exceptional items of expenditure;
  • monitoring the financial position based on quarterly reports, with advice from the Coordinator; and
  • approving the annual accounts, auditors’ report and appointment.

 

  1. Role of Coordinator
    • The Coordinator is the lead person for processing all changes and exceptional items, and will assist the Treasurer in any financial matter connected with the organisation.
    • The Coordinator will ensure that adequate security precautions are taken to safeguard financial and other assets.

 

  1. Reserve Policy
    • The Thanet’s current operating reserve is £5,000 (five thousand pounds (the “Operating Reserve”). The Operating Reserve serves a dynamic role and will be reviewed and adjusted in response to internal and external changes by the Board of directors on an annual basis.
    • The purpose of the Operating Reserve is to ensure the stability of The Thanet’s mission, programs, employment, and ongoing operations. The Operating Reserve is intended to provide an internal source of funds for situations such as a sudden increase in expenses, one-time unbudgeted expenses, unanticipated loss in funding, or uninsured losses. The Operating Reserve may also be used for one-time, nonrecurring expenses that will build long-term capacity, such as staff development, research and development, or investment in infrastructure. Operating reserves are not intended to replace a permanent loss of funds or eliminate an ongoing budget gap.
    • It is the intention of The Thanet for the Operating Reserve to be used and replenished within a reasonably short period of time. This Reserve Policy will be implemented in concert with the other governance polices of The Thanet and is intended to support the goals and strategies contained in these related policies and in strategic and operational plans.
    • The Operating Reserve Fund is defined as a designated fund set aside by action of the Board of directors. The minimum amount to be designated as Operating Reserve will be established in an amount sufficient to maintain ongoing operations and programs for a period of two months of average operating costs. The calculation of average monthly operating costs includes all recurring, predictable expenses such as salaries and benefits, office, travel, program, and ongoing professional services. Depreciation, in-kind, and other non-cash expenses are not included in the calculation. The amount of the Operating Reserve Fund target minimum will be calculated each year after approval of the annual budget, reported to the board of directors, and included in the regular financial reports.
    • The Operating Reserve Fund will be recorded in the financial records. The Fund will be funded and available in cash or cash equivalent funds. Operating Reserves will be commingled with The Thanet’s general cash account.
    • The Operating Reserve Fund will be funded with surplus unrestricted operating funds. The Board of directors may from time to time direct that a specific source of revenue be set aside for Operating Reserves. Examples may include one-time gifts or bequests, special grants, or special appeals.

 

USE OF RESERVES Use of the Operating Reserves requires three steps:

  • Identification of appropriate use of reserve funds. The Coordinator will identify the need for access to reserve funds and confirm that the use is consistent with the purpose of the reserves as described in these financial procedures. This step requires analysis of the reason for the shortfall, the availability of any other sources of funds before using reserves, and evaluation of the time period that the funds will be required and replenished.
  • The use of Operating Reserves will be reported to the board of directors at their next scheduled meeting, accompanied by a description of the analysis and determination of the use of funds and plans for replenishment to restore the Operating Reserve Fund to the target minimum amount. The coordinator must receive prior approval from the board of directors if the Operating Reserves will take longer than 12 months to replenish.
  • Authority for use of Operating Reserves is delegated to the coordinator in consultation with the Treasurer. The use of Operating Reserves will be reported to the board of directors at their next scheduled meeting, accompanied by a description of the analysis and determination of the use of funds and plans for replenishment to restore the Operating Reserve funds to the target minimum amount.
  • The coordinator is responsible for ensuring that the Operating Reserve Fund is maintained and used only as described in this Policy. Upon approval for the use of Operating Reserve funds, the Executive Director will maintain records of the use of funds and plan for replenishment. She will provide regular reports to the Finance Committee/Board of directors of progress to restore the Fund to the target minimum amount. RELATIONSHIP TO OTHER POLICIES The Thanet’s shall maintain the following board-approved policies, which may contain provisions that affect the creation, sufficiency, and management of the Operating Reserve Fund. CUSTOMIZE: • Financial Policy • Budget Policy • Contingency or Disaster Preparedness Plan • Investment Policy REVIEW OF POLICY This Policy will be reviewed every other year, at minimum, by the Finance Committee, or sooner if warranted by internal or external events or changes. Changes to the Policy will be recommended by the Finance Committee to the Board of directors.