Unofficial Funds
Manual of Guidance
MARCH 2016
Unofficial Funds
Manual of Guidance
CONTENTS
Page No.1. Introduction / 1
2. Basic Requirements / 2
3. Accounting Records and Statements / 3
4. General Management of Unofficial Funds
- Reconciliation / 4
- Income/Receipting / 5
- Expenditure / 6
5. Unofficial Fund Financial Inspection
- Financial inspection requirements / 7
- Appointment of a Financial Inspector / 7
- Powers / 8
- Duties / 8
- Notes for Guidance / 9 - 14
6. Taxation
- Income Tax and National Insurance / 14
- VAT / 14
7. Insurance / 15
8. Internet Banking / 16
9. Charitable Status / 16
Appendix 1 – Example of Unofficial Fund Cash Book
Appendix 2 – Financial Statement of Activities
Appendix 3 – Bank Reconciliation
Appendix 4 – Income Control Record
Appendix 5 – Tuck Shop Register
Appendix 6 – Specimen Financial Statement
Appendix 7 – Suitable Financial Inspectors for large Unofficial Funds
1. INTRODUCTION
1.1 This manual of guidance covers the administration of unofficial funds in schools, including the main school fund account.
1.2 All school unofficial funds must be maintained entirely separately from official funds. Unofficial funds must be administered in accordance with certain basic minimum standards in order to safeguard the interests of those who have provided resources for unofficial funds, and to safeguard the interests of staff administering the funds. School employees who are involved in unofficial fund administration must comply with these standards.
1.3 The role of Audit and Financial Standards is to monitor that properly inspected unofficial fund statements are received by the Education Directorate on an annual basis. Audit and Financial Standards does not normally carry out financial inspections of unofficial fund records, and can only access the records of such funds at the written request of the Governing Body.
1.4 The Governing Body should be informed of any unofficial funds maintained in the school for the furtherance of school activities which are not part of the provision made through official funds. The Governing Body should receive annual statements of accounts inspected by a person appointed by them (see section 5(1)), and should be satisfied that the accounts are managed in accordance with these Notes of Guidance.
1.5 The ultimate responsibility for the control of all non-official monies in any school lies with the Governing Body and Headteacher. Governors will normally exercise an overview of the Fund. The Head will be responsible for day to day administration and operation, in line with the objectives of the Fund as approved by the Governing Body. The Head should report to the Governing Body on a periodic basis.
1.6 The administration of the fund may well be delegated by the Head to other members of staff at the school, e.g. the school’s bursar or a member of staff overseeing an activity at the school (e.g. a school journey), but the Head will retain responsibility.
1.7 Where the Head is not the Treasurer, he should examine the accounts, bank statements and other records at fairly frequent intervals to ensure the accuracy of balances and entries. Such inspections offers protection to the Headteacher and the responsible staff.
1.8 The Head should determine who is authorised to approve expenditure and to pass bills for payment.
1.9 The Headteacher should submit to the Governors not less frequently than once each year a statement certified by the financial inspector of all unofficial funds.
1.10 Objectives should be set for the Fund. These should be authorised by the Governing Body. All activities financed by the Fund should be in line with these Objectives. Each school will wish to set its own Objectives, but suitable “model” Objectives might be: “The xyz School Fund is to be used to further the education of pupils at the school, by financing activities not normally funded by official capitation monies, or by subsidising activities which normally fall within the remit of Capitation Funds”.
1.11 GCC Early Years establishment should follow exactly the same principles as described in this Manual, with one exception. With regard to these establishments, Early Years Officers in Shire Hall will act instead of Governors. These Officers should receive and consider all accounts and forms which Governors in a school would normally expect.
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2. BASIC REQUIREMENTS
2.1 Separation of Funds
It is important that unofficial funds are not allowed to become mixed with other monies. Monies held on school premises must be clearly labelled and held securely, and separately, otherwise cash balances cannot be independently verified with petty cash or unofficial fund cash records.
2.2 Bank Account
A separate bank account with cheque facilities should be opened for the Fund by the Treasurer appointed by the Governing Body. It should incorporate the name of the school and of the Fund but not that of the County Council. All monies received by the Fund must be paid into the account. In addition to the bank account, a deposit account or Building Society account for the purpose of holding monies surplus to the current requirements, and/or funds earmarked for a specific future use may be opened. The same guidelines on the name to be used apply to such accounts.
2.3 Signatories to the Account
All cheques should require the signature of two persons of suitable seniority at the school. For practical purposes, the bank mandate should incorporate at least three signatories to ensure that two people are available whenever a cheque for the unofficial fund needs to be drawn. This normally includes the Headteacher and may include a School Governor plus one other.
The cheques should be crossed ‘Account Payee Only’ for security reasons.
On no account should cheques ever be pre-signed or post dated.
2.4 Separation of Duties
Wherever possible, duties should be divided between members of staff so that, as far as practicable, each transaction involves more than one person. The Governing Body should appoint one person to act as Treasurer to each Fund maintained at the school. Generally, the Headteacher should not act as Treasurer, nor should any close relative of the Headteacher so act. No one person should act as Treasurer who is responsible for receiving and banking money (either directly or collected by others), paying into bank, making payments and maintaining the Fund’s principal accounting records and responsible for the organisation of particular activities (trips, visits, refreshment facilities, etc.), the collection of income generated in connection with those activities and the certification of associated invoices as correct before payment.
2.5 Supervision
The Headteacher should examine the accounting records maintained by the Treasurer at intervals throughout the year, to ensure compliance with the standards set out in this guidance. The Headteacher may delegate this supervisory responsibility to senior staff in the school, but this should be formally approved and minuted by the Governing Body. Where the Head has been appointed Treasurer, the Fund records should be inspected periodically by an independent person (eg Governor).
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3. ACCOUNTING RECORDS AND STATEMENTS
3.1 A cash book should be maintained by the Treasurer to record all financial transactions of the Fund. An example of a cash book layout is shown in Appendix1. It is a record of money received and paid to the bank, and of payments made by cheque. The cash book should consist of columns to enable both receipts and payments to be analysed over a number of main divisions so that financial statements can be produced more easily.
3.2 The cash book should be written up no less frequently than weekly and each entry should be supported by documentary evidence. At the end of each month or when bank statements are received, the cash book balance should be reconciled with the bank balance.
3.3 Financial Statement
At the end of the financial year, which must have an accounting cycle of twelve months, a summary of the Fund’s transactions should be prepared and inspected. An inspected copy of this Financial Statement (see Appendix6 for example) must be presented to the Governing Body. IT IS NOT SUFFICIENT FOR THE CASH BOOK OR LEDGER ONLY TO BE PRESENTED TO GOVERNORS. A short report should accompany this.
The Financial Statement must show balances on each bank/building society account held for each Unofficial Fund.
For simplicity a “Receipts and Payments” form of account is shown at Appendix 6. This should suffice for most School Funds. An alternative form of account, “Income and Expenditure”, accounts for monies owing to, and owed by the school at the end of the financial year. (“the accruals concept”). This form of account should only be necessary for larger Unofficial Funds.
3.4 Financial Statements for Trips and other Activities
In those instances where trips, visits, holidays, etc., are organised through an unofficial fund a statement along the lines shown in Appendix2 should be prepared by the member of staff responsible for the particular activity. Initially, in order to obtain approval for the activity from the Headteacher, a statement of the estimated receipts and payments should be prepared. After the activity has taken place, the actual receipts and payments should be entered on the statement which is then certified as a correct record by the member of staff responsible.
3.5 Retention of Records
The accounting records of the Fund should be kept in a safe place, e.g.locked steel filing cabinet or cupboard, and, in addition to the current year’s records, those for the previous six years should be retained in line with the requirements of the tax authorities.
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4. GENERAL MANAGEMENT OF UNOFFICIAL FUNDS
4.1 Reconciliation
4.1.1 Bank statements should be obtained monthly, transactions checked and the bank balance reconciled with the unofficial fund records.
4.1.2 When reconciling the bank balance allow for unpresented cheques and cash banked but not yet shown on a bank statement (Appendix3). If a cheque is not presented within six months it becomes out of date and should be cancelled, the amount being deducted from the payment side of the cash book.
4.1.3 Cash balances must also be reconciled to any cash held on the premises.
4.1.4 Care should be taken to ensure that unduly large balances are not built up, especially on current accounts. Transfers can then be made into a deposit account or high interest account in order to achieve a better rate of interest.
4.1.5 In general, unofficial funds should be considered to be for the benefit of pupils during the period that funds are raised, and only where significant purchases or projects are to be financed should balances be allowed to build up.
4.1.6 Unofficial funds should never be allowed to become overdrawn or incur bank charges.
4.2 Income
4.2.1 It is an important principle that whenever cash passes from one person to another acknowledgement should be given by the person receiving the cash, therefore all income received should be receipted. The receipt should show the sum collected and the purpose, date and mode of payment (cash, cheque, postal order) using a carbon duplicate numbered receipt book. Any subsequent transfers of cash between staff should also be recorded.
4.2.2 Receipts should be issued at the time money is received by way of donation or from any person responsible for a school trip or function.
4.2.3 Used receipt books must be retained. Both the original and copy of cancelled receipts should be kept in the book.
4.2.4 Where cash is collected by members of staff from pupils by instalments (e.g. School Trips etc.), a record in a book or Income Control Record (Appendix4), showing the amount, and date collected, from each pupil should be kept. All cash received should be paid frequently to the Treasurer who should agree the cash entries on the record, then sign and date the record maintained by the member of staff, issuing a receipt for the amount submitted for banking. Individual receipts need not be issued to pupils, but each pupil should have a collection card, which should be signed when monies are received, or if using an Income Control Record (Appendix4), this should be available for pupils’ parents to inspect, if requested.
4.2.5 Members of staff organising holidays abroad or trips, where large cash payments will need to be made during the holiday or trip, may sometimes express a preference to retain some of the cash collected to have it readily available. Such arrangements should never be permitted as they are readily open to abuse and do not allow an adequate audit trail to be maintained. All collections should be banked by the Fund’s Treasurer, or a person nominated by the Treasurer in his absence, who will arrange to draw suitable amounts in foreign currency and travellers’ cheques, etc., and to have cash available as required.
4.2.6 Income generated by refreshment facilities provided through the unofficial fund, e.g.school tuck shop, should be accounted for using the form of register shown in Appendix5, any hard-covered notebook being suitable for this purpose. At the end of each session that the facility has been provided the persons collecting the income should complete and sign the register, thereby verifying the accuracy of the record. Where these persons are pupils of the school, the register should be countersigned by the member of staff responsible for the activity.
4.2.7 The form of register described above is suitable for any other activity in which cash sales are made.