Finance Policy

Salem Congregational Chapel - Martin Top

Finance Policy – 2020

Date accepted by Trustees: 14 December 2020

Date accepted by Church Members: 4 January 2021

Contents

1. Self-assessment checklist 1

2. Some key issues, monitoring arrangements and risk of fraud 1

3. Income 4

4. Purchases and payments 7

5. Assets and investments 12

Appendix A – Policy relating to Payment and Reimbursement of Expenses 16

1. Self-assessment checklist

The questions in this checklist are designed to help the Charity’s Trustees and their advisers to evaluate the Charity’s performance against the legal requirements and good practice recommendations set out in the Charity Commission’s guidance on internal financial controls for charities.

Not all the controls listed are relevant to Martin Top, but this document will nevertheless retain details of all the recommended controls, for possible future use or reference.

Charities must always comply with legal requirements and these requirements are identified in the checklist. A ‘yes’ answer for good practice recommendations does not mean there is no scope for further improvement. A ‘no’ answer does not always indicate a problem. It may be that the Charity has not put in place a particular control because the risk involved is small and the potential loss is acceptable, given the cost that would be involved in putting in place stronger internal controls.

Finally, the answers in the checklist should be based on the Trustees’ knowledge of what actually happens in the Charity and not what they expect to happen. Having an internal control in place is only part of the picture. It must operate in practice to be effective.

2. Some key issues, monitoring arrangements and risk of fraud

2.1 Financial controls throughout the Charity

2.1.1 Is there segregation of duties to provide automatic ‘double check’?

Currently, this only applies to counting weekly offerings; this is considered to be acceptable by the Trustees.

This is done by three people, usually the Treasurer, the Church Secretary and a nominated Deacon. When one is missing, another Deacon or the Pastor will stand in.

Process:

The Deacon empties the Offertory Boxes and records Gift Aid donations in an exercise book. The book contains only a number that is assigned to the donor.

The numbers in the Gift Aid exercise book are linked to individuals via a list which is maintained by the Treasurer.

Cheques and cash are counted and recorded in a duplicate book prepared by the Church Secretary. The details are signed off by the Treasurer and Deacon. A copy is put into the money bag with the cheques and cash and is given to the Treasurer. The book is normally stored in the Vestry drawer.

Gift Aid:

The Treasurer holds the Gift Aid Declarations (details of the individuals’ willingness/ability to Gift Aid) in a file at home in a lockable cabinet/desk. Also held are the white envelopes which may be used for one-off gifts.

Where this is not practical, the details should be held in a lockable cabinet at the chapel.

Donations are normally provided in one of three ways:

Monies placed weekly/monthly in the numbered blue envelopes provided by the Treasurer
Monies placed in the white envelopes placed in the pews
Direct transfer into the chapel’s bank account

Any cash payments are made at the chapel by the Treasurer or the Deacon on production of invoices, travel claims, etc. The Treasurer takes the remaining money home to bank.

2.1.2 Do the Trustees carry out an annual review of the internal financial controls?

Currently, the Trustees believe that it is adequate to carry out a review of the internal financial controls every two years. If the circumstances of the Charity change significantly, however, consideration will be given to this being an annual review.

2.2 Monitoring activities

2.2.1 Are annual budgets of income and expenditure prepared, and approved by the Trustees?

The Trustees believe that the carrying out of regular reviews of the current income/expenditure situation will provide adequate control of the Charity’s finances.

2.2.2 Is performance measured against budgets at regular intervals and explanations sought for variances?

As above, the Trustees believe that the carrying out of regular reviews of the current income/expenditure situation will provide adequate control of the Charity’s finances.

2.3 Internal audit and audit committee

2.3.1 Have the Trustees considered the need to appoint an internal auditor or set up an audit committee?

The Trustees consider that internal auditing should be carried out by one person on an annual basis. This person must not be an Officer of the Charity. The Trustees will invite an appropriate person each year. The Treasurer holds the details of the relevant individual.

The Annual Accounts are audited. No other auditing is carried out at present.

2.4 Information and communication

2.4.1 Are the Trustees provided with regular information about the financial performance
of the Charity?

Bank and Building Society account totals are given to the Trustees at each quarterly meeting. Larger amounts of expenditure and income are also given and are listed in the Minutes.

2.4.2 Do the Trustees discuss the financial performance of the Charity at each of their meetings?

The Trustees will discuss ‘performance’ only where a relevant trend is noticed and suggested as an agenda item.

2.4.3 Are terms of reference in place for any finance sub-committee, or similar sub-group of the Trustee board?

The Trustees do not consider that there is a permanent need for any such sub-committee or sub-group. Where, from time to time, a group of Trustees will meet to discuss a particular issue, the context will be agreed and minuted by the full meeting prior to this being done.

2.4.4 Does any finance sub-committee report to the full board of Trustees for final decision making?

Although a group (see the previous condition) may bring a proposal to the Trustees, final decisions on new payments must be made at a Church Members Meeting.

2.5 Trustees’ responsibilities

2.5.1 Are sufficient accounting records kept of all transactions? (legal requirement)

Yes.

2.5.2 Have the Trustees considered the need for a reserves policy and put in place a reserves policy if one is needed? (legal requirement)

The Trustees currently believe that the Charity’s current circumstances do not indicate that a reserves policy is needed.

2.5.3 Do the accounts comply with legal requirements? (legal requirement)

Yes.

2.5.4 Are the accounts formally approved by Trustees at an annual meeting?

The accounts are approved by church members at the Members’ Annual General Meeting.

2.5.5 Have the Trustees appointed an auditor or independent examiner? (legal requirement)

Yes. See Section 2.3 for relevant details.

2.5.6 Are newly appointed Trustees given a copy of the latest accounts?

Yes.

2.5.7 Do the Trustees file the annual report and accounts and annual return on time? (legal requirement)

Yes.

2.6 Managing the risks of financial crime and abuse

2.6.1 Are Trustees and Staff made aware of why the Charity is at risk from financial crime
and abuse and of typical examples of potential fraudulent activities?

New Trustees are encouraged to read the guidance provided for charities at the following link: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/571158/Chapter3_Summary.pdf

We do not currently employ any Staff.

2.6.2 Does the Charity have an anti-bribery policy, policies on the acceptance of hospitality, the acceptance of donations and a register of interests in place?

The Trustees do not currently believe that the Charity needs such policies.

2.6.3 Does the Charity have policies and controls over access to and storage of electronic information?

These details can be found in our Data Protection and Confidentiality Policy.

2.6.4 Does the Charity have computer programmes to protect its data and systems from external interference?

These details can be found in our Data Protection and Confidentiality Policy.

2.6.5 Does the Charity have procedures for reporting suspicions internally, and to the commission and the police?

In such instances, the Trustees will follow the guidance provided by the Charity Commission at: https://www.gov.uk/guidance/how-to-report-a-serious-incident-in-your-Charity

3. Income

3.1 Income received in the post

3.1.1 Is incoming post opened in the presence of two unrelated people?

The Trustees consider that, as the receipt of income via the post is a rare event, this is not a necessary requirement for the Charity.

However, it is considered relevant that any such receipt should be acknowledged by the Treasurer with a letter and a receipt.

3.1.2 Are all incoming cheques and cash recorded immediately?

These receipts are usually recorded within one week of their occurrence. The Trustees accept this as being reasonable practice.

3.1.3 Does the Charity keep unopened mail secure?

The Trustees consider that, in line with the above comment about the opening of incoming post, this is not a necessary requirement for the Charity.

3.2 Income from public collections and fundraising events

The Trustees take the view that public collections are such as street collections. The Charity does not currently – and does not plan to - undertake such collections.

A recent decision at a Members Meeting means that the Charity is unlikely to need to hold fundraising events in the future. The following responses are based on such an event being likely to be based on an admission fee and/or income from stalls.

• are public collections undertaken within legal requirements? (legal requirement) Not applicable.

• are collection boxes numbered and their allocation and return recorded? Not applicable.

• are all collection boxes sealed? Not applicable.

• are all collection boxes regularly opened and counted by the Charity and a record kept of their locations and history of takings? Not applicable.

• are collections counted in the presence of the collector and a receipt given to them? Not applicable.

• are two unrelated people involved in counting and recording the income? Yes.

• is cash banked as soon as possible and without deduction of expenses? Yes.

• are records maintained for each fundraising event? Yes.

For ticket incomes are:

• tickets pre-numbered? Not applicable.

• records kept of all persons issued with tickets to sell, and which ticket numbers they have been allocated? Not applicable.

• records kept of which tickets sold? Not applicable.

• reconciliations made of money received against tickets sold? Not applicable.

Has the Charity complied with Part II of the Charities Act 1992 where professional fundraisers are engaged? (legal requirement) Not applicable.

3.3 Gift Aid donations

3.3.1 Are regular checks made to ensure all eligible tax repayments are obtained?

Annual repayment claims are made in arrears.

The Trustees are aware that, if the circumstances require it, claims may be submitted on a more regular basis.

Included in this process are claims submitted by the Treasurer via the GASDS (Gift Aid Small Donations Scheme).

3.4 Legacies

3.4.1 Does the Charity identify and monitor the receipt of large legacies and ensure that they are correctly included in the accounts?

Yes. Details are recorded in the accounts and a letter of thanks and a receipt are usually sent.

3.5 Tainted Charity donations and substantial donors

3.5.1 Has the Charity kept the necessary records to identify transactions with ‘substantial donors’ for donations received up to April 2011? (legal requirement).

No such conditions occurred up to April 2011.

3.5.2 From April 2011, have the Trustees put in place procedures to identify ‘tainted Charity donations’?

The Trustees are aware of the three ‘tainted Charity donations’ conditions that are identified at: https://www.gov.uk/government/publications/charities-detailed-guidance-notes/annex-viii-tainted-Charity-donations https://www.gov.uk/government/publications/charities-detailed-guidance-notes/annex-viii-tainted-Charity-donations

It is considered extremely unlikely that all three conditions will ever apply to donations to the Charity; however, the guidance provided in the article above will be used if ever questionable donations are made.

3.6 Trading income

If the Charity undertakes trading activities (either trading in furtherance of its objects or non‑charitable trading):

The Charity does not undertake trading activities. The following notes have been retained for possible (but improbable at the current time) future reference.

• if the level of non-charitable trading is significant is it carried out in a trading subsidiary?

• does the Charity have a pricing policy for the goods and services supplied?

• does the Charity have invoicing procedures for goods and services supplied?

• does the Charity review outstanding debts and collection procedures?

• are there procedures to reconcile amounts invoiced and cash received to outstanding invoices?

3.7 Banking and custody procedures

3.7.1 Are incoming receipts banked promptly? Yes.

3.7.2 Is insurance held to cover the contents of the safe or cash box and cash in transit?

We are insured for any loss of money:

In the premises, not in a safe but in the custody and presence of church officials, for any one loss with a limit of £3,500.
In a locked safe in the premises for any one loss with a limit of £3,500.
In transit directly from the premises to a bank or to the home of a church official, or in transit directly from a bank or from the home of a church official to the premises for any one loss with a limit of £3,500.
In the home of a church official or in a bank night safe until the bank have accepted responsibility for any one loss with a limit of £3,500.
In any other circumstances for any one loss with a limit of £500.
Misappropriation, deception or false accounting by church officials discovered within 60 days of the occurrence, in any one period of insurance in total with a limit of £10,000, or any one period of insurance in respect of any person with a limit of £5,000.

NB: Currently, this is an unlikely occasion, but if the first four situations are during the period of a fete or fundraising event, the limits are doubled.

3.7.3 Are funds banked without deduction of expenses?

See Section 2 relating to the processing of receipts and payments which usually take place after the Sunday services. In all other circumstances, the answer to the above question is “Yes”.

3.8 Checks on income records

3.8.1 Are regular checks made to ensure income records agree with the bank paying-in books and statements?

Yes, by the Treasurer.

3.8.2 Are checks made by someone other than the person who made the entry in the accounting records?

The Trustees currently take the view that the annual audit will satisfy this requirement.

4. Purchases and payments

4.1 Controls and authorisation of expenditure on goods and services

4.1.1 Is there a written policy on the authorisation of expenditure?

Currently any expenditure more than £250 must be approved at the Church Members Meetings. The Trustees consider that this condition – contained in the Minutes of Members Meetings - supersedes the need for a separate written policy.

4.1.2 Are invoices received checked against orders confirming pricing and the receipt of the goods or services ordered?

Yes.

4.2 Controls and authorisation of expenditure on grants

4.2.1 If the Charity makes grants, does it have a grant-making policy?

The Charity does not currently make grants.

4.2.2 Does the Charity make and monitor grants in accordance with the grant-making policy?

The Charity does not currently make grants.

4.3 Payment by cheque

4.3.1 Does the Charity follow any stipulation in the governing document about who can sign cheques?

There is no such stipulation in the governing document. The Trustees agree with the practice that cheques are signed by the Treasurer and a Trustee.

The Pastor is not a signatory.

4.3.2 Does the bank mandate require at least two signatories?

Yes.

4.3.4 Is there a practice of not signing of blank cheques?

Yes; blank cheques must not be signed.

4.3.5 Are chequebooks etc kept in a secure place with access only by nominated persons?

Current practice is that the chequebook is kept at the Treasurer’s home. This is considered by the Trustees to be acceptable practice, along with the practice that two signatories are required on cheques.

If the Treasurer is (or is to be) absent for any reason the chequebook will be made available to a Trustee.

4.3.6 Are any monetary limits placed on an individual’s signing recorded in writing?

The Trustees do not consider that this precaution is required.

4.3.7 Is all cheque expenditure recorded in the cash book and noted with the relevant cheque number, nature of payment and payee?

Yes.

4.3.8 Are cheques signed only with documentary evidence of the nature of the payment (invoice, for example)?

Yes.

4.4 Payments by debit/credit/charge card

4.4.1 Does the Charity have a policy for the use of payment cards, including the criteria for their issue, spending limits and security?

Debit/credit/charge cards are currently not used by the Charity.

4.4.2 Does the Charity communicate the policy for the use of cards to all Trustees and staff using them?

Not applicable – see above.

4.4.3 Are cards cancelled when the holder ceases to work for the Charity?

Not applicable – see above.

4.4.4 Is all card expenditure supported by vouchers and invoices and recorded in the accounting records each time the card is used?

Not applicable – see above.

4.4.5 Are card statements sent to the Charity finance team and checked to supporting records and invoices?

Not applicable – see above.

4,4 6 Is the cardholder’s use of the card independently reviewed periodically to confirm its use is consistent with the policy?

Not applicable – see above.

4.5 Payments by direct debits, standing orders and BACS direct credit

4.5.1 Are only named individuals authorised to set up direct debits, standing orders and direct credits?

Any direct debits or standing orders are set up by the Treasurer only.

No BACS payments are made.

4.5.2 Does the Charity use a dual authorisation system for BACS payments?

Not currently applicable.

4.5.3 Does the Charity monitor the arrangements to ensure that automatic payment arrangements are cancelled when the goods and services are no longer being supplied to the Charity?

Yes.

4.6 Payment in cash

4.6.1 Is every effort made to minimise cash payments?

Currently, a lot of the chapel payments are made by cash, administered by the Treasurer with the help of a Deacon, and authorised by a Deacon or the Pastor; examples of such payments include already-paid invoices, travel claims, preacher donations and musician donations.

The Trustees take the view that this is acceptable and practical.

4.6.2 Are all payments by cash made from a cash float and not from incoming cash?

As described immediately above, cash payments are regularly made from incoming cash.

The Trustees take the view that this is acceptable and practical.

4.6.3 Is supporting documentation authorised by someone other than the person maintaining the petty cash or the person making the claim?

The current situation (which is accepted by the Trustees) is that most of the cash payments are for small amounts but they are not authorised by a person other than the person maintaining the petty cash or the person making the claim. The majority of them are paid to Deacons or as the Pastor’s expenses. There are very few requests from other people and all those who do request reimbursement do have supporting documentation. We also have the current limit (£250) set by the Church Members Meeting.

4.6.4 Are details of all payments entered in a petty cash book?

Yes.

4.6.5 Are regular independent checks made of the petty cash float and records?

The current view of the Trustees is that we should be flexible about this issue with regard to the ability to have a petty cash float; each group should discuss with the Treasurer their desire (or not) to have a petty cash float, the alternative being to obtain reimbursement for expenses via the Treasurer.

At the time of writing the policy the following groups are examples of those affected by this condition:

DCF
Market Stall
Craft Group
Sunday Lunches
Toast and Prayer

4.7 Wages and salaries

Two introductory notes, relating to the requirements below:

The Charity does not currently have any employees. The Pastor is currently self-employed.
At the time of the current Pastor’s commencement of the role, the Church Meeting agreed the payment of a monthly amount. The Treasurer has produced a recent document where this amount has been confirmed and has been accepted by the Pastor. This agreement will be reviewed periodically or at the Pastor’s request.

4.7.1 Are statutory deductions (tax and NIC) made from employees’ wages and salaries and regularly forwarded to HMRC? (legal requirement).