Accounting Instruction No. 12
FINANCIAL MANAGEMENT
TRUST FUNDS
Practice Note for Accountants
The responsibility of the Accountants:
1.To understand, and carry out the terms of the Trust, its purpose, who the Trustees are, which Service Manager is responsible for and which Solicitor advises the Trust. The Charity Commission may also be involved.
2.To ensure that the Trust is managed in conjunction with the above. Where Trustees are no longer active, to consider how the Trust might be revived: the larger the Fund the greater the importance of considering possibilities for revival, but all should be reviewed.
3.The powers of investment are governed by the "Trustee Investment Act 1961", as well as by any instructions or restrictions that may be contained within the trust instrument.
Trustees must have regard to the suitability of investments to the Trust and to appropriate diversification of investments, and must obtain and consider proper advice on these matters. Investment in "wider range" securities (e.g. equities) requires the Trust Fund to be divided; first into two parts, wider and narrower range, and thereafter the parts have to be accounted for separately.
4.So, the investment of the Trust must be held in accordance with the terms of the Trust, and in a suitable form; for example, if the capital is required to be realised at some stage, investment in securities which have a fluctuating capital value may be inappropriate because of the risk of capital loss at point of realisation: Investment for income yield with the capital fixed may then be more suitable, but each case must be considered separately in the context of the Trust concerned and TAKING APPROPRIATE ADVICE. Accountants should consult the Head of Finance: Financial Accounting & Audit, and the Strategic Finance Director for such advice, unless they are sure about the suitability.
5.Tax will normally be reclaimable from HM Revenue & Customs, and accountants must ensure that this is done. A prerequisite for tax exemption is approval of the Trust by the Charity Commission. Tax refunds should be secured at least annually. In practice, tax deductions from dividends and interest received should be separately coded, which will then be the subject of a consolidated claim for a refund from HM Revenue & Customs by the Accountant, Tax, Control & Pensions Finance, extension 5885.
6.Surpluses should be invested promptly, unless they are required for disbursement from the Trust.
7.Accountants should seek advice from the Head of Finance: Financial Accounting & Audit or Finance Manager: Financial Accounting on any problems arising from the administration of Trust Funds.
F/ACCTINST/TRSTFUND
Feb 2013
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