Charity or Church Treasurers Manual

This manual provides some pointers over the topics shown below. Additionally there are also links to relevant facilities or tools on the Liberty Accounts system if the user wishes to follow them.

Basics

When it boils down to it, the charity treasurer is not just the bookkeeper but the ultimate financial controller and is accountable for all the funds of the charity to both the board of trustees and the relevant charity regulator.

Before agreeing to take on the role it is advisable to talk to as many people as possible about the charity, inspect the existing books of account (where the transactions are recorded) and the published accounts. Ensure nothing is "hidden" either bank accounts or relevant facts (it does happen).

In any charitable organisation that is expected to prepare financial statements the record keeping should be based upon principles of :-

Accuracy
The records for ALL funds should clearly show each and every income (receipt) and expense (payment) transaction made. The cashbook balance should be reconciled to bank statements regularly. Investment and Fixed Asset transactions should be properly accounted for, perhaps using an asset register if necessary. In essence the records should add up correctly.
Integrity
All bookkeeping entries should be evidenced by some form of originating document, Invoices, receipts, letter, service records for a church, gift aid records and expense claims etc.
Consistency
Record keeping is done in a consistent manner; same type of expenses recorded to the same account each time etc.
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Charity Regulation

In the UK there are three Charity Regulators, one for each of the main regions. When a charity or church is set up on the system the relevant regulator and charity number are entered on the organisation profile for the entity. For a little more on the topic click Charity Regulation

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Fund Accounting

Fund Accounting is an essential and required feature of charity accounting. Fund accounting distinguishes between two primary classes of fund: those that are unrestricted in their use and can be spent on any charitable purposes of the charity, and those that are restricted in use and can only be used for a specific charitable purpose. Proper accounting for funds is therefore essential to ensure that the Trustees do not act in breach of trust.

Full fund accounting is an integral part of the system. The organisation selects between reporting on the Receipts and Payments basis or Income and Expenditure (accruals) when setting up the organisation profile. The basis can be amended in the future as necessary.

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Deciding on the reporting basis

If it has not already been decided by the trustees the basis of reporting must be agreed; Income and Expenditure (accruals) or Receipts and Payments (cash). One of the prime reports is called the Statement of Financial Activity (SoFA) and the format of this is determined by the reporting basis chosen. Follow the link for some comments on selecting which basis (when there is an option) SoFA Reporting

Selecting the reporting basis on the system is done on the Accounting Options Tab of Organisation Profile. Navigate to the tab and click the basis required.

Control - Organisation Profile - Accounting Options - click the selection
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What Financial Information do the Trustees need?

Before starting it is important to think through the outputs from the system that will be necessary. In addition to having available the basic statements for reporting to the regulator, SoFA, Balance Sheet or Statement of Assets and Liabilities (Receipts and Payments basis) other analysis may be necessary such as:-

  1. How detailed does the recording of income/expenditure (chart of accounts) need to be?
  2. Do grant makers/major donors need statements of income and expenditure?
  3. Is the charity of a size that an analysis of support costs is required?
  4. Is it necessary to analyse charitable activities into projects?
  5. Does a grant/donation include an allocation for some support costs and these need to be disclosed?
  6. Do the trustees require a specific analysis of income and/or costs?

Answering these questions provides a guide as to how to set up the system and the complexity required. The following notes on Apportionment - Using Funds, Departments and Activities may be of assistance. It may also be helpful to discuss with a professional advisor.

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Setting up a Charity or Church on the system

Having decided upon using Liberty Accounts as the organisation's bookkeeping and accounting tool (If we may say, a wise decision) the process is described in the link. It may be followed when ready Setting up a Charity or Church on the system

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Basic Bookkeeping and Documentation

Keeping up to date with recording the charity's transactions and completing bank reconciliations is the acknowledged best practice to achieving accuracy. The expectation, of course, is that any transaction recorded is supported by some form of documentation. That documentation should be stored and indexed in some way to enable easy inspection by Independent Examiner and in some cases by HMRC.

Where gift aid is being claimed then relevant documents should be carefully stored and easily accessible. Scanned copies of any gift aid declarations can be stored for easy access and maintenance either directly on the system via an external document storage facility. As well as gift aid declarations, any other type of document may be stored, see Document Storage for more information.

Below some of the usual documents and transactions a charity or church can expect to process are shown together with some commentary on using Liberty Accounts to do so.

Bank Statements
Whilst clearly not an original source document bank statements provide bookkeeping data. Organisations can use them to provide bookkeeping entries or reconcile to existing entries. Click the link for more on Bank Account Reconciliation (Manual) or Bank Statement Upload and Reconciliation
Paying-in Slips
Cash and cheque receipts have to be physically taken to the bank and paid in, the usual document will be a pay-in slip, and this can have a number of differing income sources including irregular cash donations. The Bank Batch Deposit process is a helpful tool for dealing with this.
Regular Donations
Regular donations, and the associated gift aid are often an important income source to charities and churches. The system has a full donor ledger and online gift aid claiming suite Receipts from external Donation aggregators can be managed and uploaded through a Donation upload process. Note being able to upload files must be firstly activated from the Optional Features tab of the Organisation Profile
Sales Invoices
Many charities and churches have a sales ledger where invoices are raised for services or goods and a certain amount of credit is offered to the customer. This is usually managed with a Customer Ledger. Note for those organisations reporting on the Receipts and Payments basis having a customer ledger is a complication as the sales amount does not flow through the SoFa until the cash has been received and recorded. The system easily manages this but users are advised to be careful.
Purchase ledger Bills
Sometimes a charity or church has a purchase ledger where bills are received for services or goods and a certain amount of credit is taken by the organisation. This is usually managed with a Purchase Ledger. Note for those organisations reporting on the Receipts and Payments basis having a purchase ledger is a complication as the expenditure amount does not flow through the SoFa until the cash has been paid and recorded. The system easily manages this but users are advised to be careful.
Payments
In many cases payments (expenditure) is recorded when bank statements are uploaded, however payments can be recorded as they are made (and subsequently bank reconciled). The system provides a Payments process for that purpose.
Payroll
Where a charity or church has employees there will be a payroll and therefore payment transactions to be recorded. Some organisations find it preferable to use an external payroll agency to manage the process and simply make payments as required, although this can be sometimes be relatively expensive. Others may elect to run a payroll themselves using a suitable payroll software. Payroll is often perceived as daunting, in practice for smaller charities or churches with the correct software and a structured approach to the process it is very manageable. The system offers both approaches and in both cases employees must be set up using the Personnel Facility. For guidance on using the system payroll follow this link Payroll
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Internal Controls

Good internal controls reduce the risk to the charity or church of financial loss and therefore are part of the duty of stewardship carried by trustees to demonstrate to donors, regulatory authorities and the public generally that the charity or church funds and assets are properly managed. Controls are usually a blend of:-

Agreed procedures
Having procedures and consistent approach (perhaps written and approved) to the regular financial management activities regardless of who performs them enhances both accuracy and reliability. Procedures, for example, such as:-
  • Making payments
  • Paying-in
  • Gift-aid management
  • Payroll management
  • Bank reconciliations
  • Making Investment decisions
  • Agreeing and approving signatories
  • Changing Treasurers and handovers
Independent Examination or Audit
Virtually all charities or churches will have a requirement for some form of external examination, the depth of which will be dependent on financial size. The levels are set in law and vary slightly across each regulatory area. See the Charity Regulation section above for more information. Although potentially viewed as a burden a good examination process can be a support to the organisation, identifying areas that the trustees perhaps need to strengthen and offering some comfort that things are OK. In this context the selection of the Independent Examiner who has the appropriate skills and knowledge is an important decision. One of the key things an examiner will wish to do is look samples of how items that have been recorded in the books of account from the originating document through to how is it reported in the financial statements. This is known as an audit trail and for users of the system a full audit trail process is available both as a Transaction Audit Report as well as Audit button attached to each individual transaction.
Allocation of activities between different individuals
Also known as the Segregation of Duties, meaning that where possible, not all financial duties should be carried out by the same person continuously and others should be involved. Small charities or churches may find this difficult but effort should be made to expand involvement. If using the system, although it is multi-user, each user can have an individual role that reflects their involvement and the amount of information they have access to. It is comprehensive and more information from Role Based Access
Budgets
It is well accepted that setting budgets and monitoring performance against them is a great way to manage an organisation financially and a regular review aids understanding of what is happening and areas that perhaps need the trustees attention. There is much written about budgeting that the reader can access elsewhere, but in this case they may anticipate that in the system they have access to powerful budget creation and reporting tools; more fully described in the link Budgets
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What next?

Congratulations you are now the Treasurer, we offer you our very best wishes. If you and the trustees decide that Liberty accounts is the system you would like to try as the organisation's bookkeeping and accounting system we suggest you have a play with one of our instant trial organisations that have been populated with some data, provide access to all the tools and features the system has to offer and have organisation structures appropriate to a number of types of charities or faith based entities. Log on to the system and Click ADD, under Instant Trials with Demo Data select one that represents your charity or church, try everything out to ensure the system will meet your needs. Good Luck

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