Financial Policy for Haringey Stars Financial Procedure - Guidelines
These guidelines describe how the financial procedures are implemented for Haringey Stars. These guidelines are aimed at producing good practice within Haringey Stars, enabling it to safeguard its assets, secure accuracy and reliability of its records, promote operational efficiency and encourage its staff to adhere to written policies. These guidelines will be reviewed on a regular basis to ensure that it continually meets the requirements of Haringey Stars. The Cash Analysis Book The cash analysis book or cash book is for bank transactions only. It provides an analysis of all transactions made using the cheque book. It should be updated on a weekly basis. Information should be entered in the cash book from the cheque book stubs or the invoice for which the cheque was written. Entries should be made in strict cheque number order, making it easier for checking and auditing. At the start of each financial year write the headings under which the various transactions will fall, e.g. Rent, Rates, Salaries, PAYE, NI etc. If possible have categories that match those of the audited accounts or the categories on a grant application form, for funded project expenditures. For transactions that occur very rarely also have a Miscellaneous/Sundries column heading. This category should be used with extreme caution in order to avoid it becoming a category for things that the cashbook controller cannot be bothered to look up. If in doubt about what the transaction was used for, ask the originator of the transaction. When up-dating the cashbook, it should be remembered to include all the transactions that have gone through the bank directly, for example standing orders and direct debits. These transactions can be updated into the cashbook from the bank statement. Writing up the Cash Book
1. Using the Cheque Book stubs, enter the cheque details into the cashbook. 2. If one cheque is made out to pay more than one transaction type (for example stationery and
printing), the transactions should be entered in the cashbook under the appropriate headings and the additions cross cast so that the full total is entered.
3. Cheques should be written in the cashbook in numerical order. This will make doing the
bank reconciliation a great deal easier.
4. Maintain a monthly and cumulative year total to date for the transactions.
Petty Cash Petty cash is for small day-to-day transactions, for example local travel, postage and subsistence. The amount for a single petty cash purchase shall normally be restricted to £10. This amount may be increased for a single purchase at the discretion of the Project Manager. The maximum amount held in the petty cash box will be at the discretion of the Project Manager but must not exceed the maximum amount agreed by the management committee.. At the end of each week, add up the petty cash vouchers, calculate the balance from the maximum amount allowed to be held in the petty cash box and then complete a petty cash requisition form for the difference. The Project Manager who should then raise a cheque for this difference must check this. The Finance Officer who should record the transaction in the petty cash book will then obtain this amount. Petty cash Operation 1. Petty cash forms must be filled every time money is spent from petty cash. Forms not filled immediately might be forgotten causing problems when the petty cash book is being updated. 2. All requests for petty cash must be made according to the procedures set out in the Finance Policy. It is essential that all such requests be approved by the appropriate person (e.g. a line manager in the case of claims from staff and volunteers). 3. Petty cash forms must be completed for all cash payments and relevant receipts filed. The form must clearly show the reference number for the claim, and the amount, purpose and date of the expense. The claimant‟s line manager and the Finance officer must sign this form. The claimant must also sign the form on receipt of the payment. 4. The Finance Officer must enter each transaction in the petty cash book in reference number order making it easier for checking. Each entry should record the date, amount and description of the transaction. 5. Transactions should be kept in a monthly format. At the end of each calendar month, the Finance Officer should begin recording transactions in the next calendar month. 6. Petty cash receipt forms must be filed together in order of reference number.
Cash Receipts Book The Cash Receipts book provides a record of all the income, cash, cheques, postal orders etc. received by Haringey Stars. Cash receipt book operation On the receipt of a payment enter it into the incoming mail book. Prepare and send an acknowledgement letter and receipt. Check the receipt against the accompanying document. Date the accompanying document and allocate it a folio number- for easy reference. Enter the receipt i.e. date, payer and reason for receipt into the cash receipts book. File the accompanying document into the “money received” file. The documents should appear in this file in folio number order. Fill in the paying in book for Haringey Stars‟s bank account. Take the money received to the bank, keeping the money in a locked box until it is banked. All monies received must be handled according to the procedure in the Finance Policy. All receipts should be reconciled with bank statements according to the procedure in the Finance Policy.
Bank Reconciliation Bank statements Bank statements are copies of the bank account as it appears in the bank‟s books; it provides a record of the transactions that have gone through the bank up to the date of the statement. Bank statements rarely agree with the Cash Analysis Book. This might be due to: - Items in the cash book not appearing on the bank statement because they have not yet been presented to the bank or are awaiting clearance by the bank and are therefore not yet on the bank statement. These are known as un-presented cheques. - Items on the receipts side of the cash book not appearing on the bank statement. These are items received by Haringey Stars that have not yet been banked or money banked on the same day that the copy of the bank statement was sent. - Payments on the bank statement not being in the cash book, for example bank charges, standing orders, direct debits, dishonoured cheques. The bank does not need to notify Haringey Stars about such transactions because the request action was pre-arranged. - Deposits appearing on the bank statement but not in the cash book since such receipts are paid into the bank directly, for example direct payments, dividends or interest on investments.
Reconciling bank balance with cash book (Bank Reconciliation) On receipt of bank statements; ensure that the cashbook has been up-dated then: Check the bank statement entries against the cashbook, entries on both the payments and receipts sides. Correct any clerical errors on the bank statement / cash book, for example differences in the amount written in the cashbook to that on the statement. Up-date any transactions appearing on the bank statement but not in the cashbook. List all the outstanding cheques (cheques in the cash book which have not appeared on the bank statement yet). List all the receipts that are not on the bank statement (outstanding receipts) Do the bank reconciliation by subtracting the outstanding cheques from the outstanding balance as it appears on the bank statement. Add the outstanding receipts to this total. This will give the balance as it appears in the cashbook.
A copy of this reconciliation must be given to the Project Manager for presentation to the Management Committee. Handling dishonoured cheques. Dishonoured cheques are cheques that have not been „honoured‟ by the bank (bounced) due to insufficient money in the account to cover the cheques. A dishonoured cheque should be entered in the cash book as a reverse transaction. It will then cease to be an outstanding cheque. Payments Apart from petty cash payments, the normal method of payment of money due from Haringey Stars is by cheque or other instrument, for example banker‟s draft. Payments must be made according to the procedures in the Finance Policy. All payments should take into account a supplier‟s settlement terms. Payment of bills and Invoices. On receipt of an invoice check that its details (source, purpose and amount) are correct, then obtain authorisation for payment from the Project Manager. Date-stamp the invoice and note the payment terms if any (e.g. part-payment, pay-bydate, etc.) Note the cheque number and date of payment on the invoice as a precautionary measure. Prepare a cheque to be signed by the authorised people according to the procedures in the Finance Policy). When writing out cheques, always write the name of the payee and the
reason for the payment (e.g. invoice number) on the cheque stub. This will make it easier to up-date the cash book. Make the recording of the payment in the cashbook under the appropriate expenditure heading in cheque number order. File the invoices in cheque number order to enable easy cross-referencing.
Expense Claims Staff and Volunteers claiming expenses must do so not later than three months after the expenses has been incurred. Where possible claims should be submitted on a monthly basis on an approved claims form. Claims should be itemised and include the business purpose for which the expenditure was required, the date of the expenditure, its amount and a receipt for it. Staff/Volunteers‟ expenses should be authorised by the Project Manager. The expenses claim forms of the Project Manager must be authorised by the treasurer or the Chair of Haringey Stars. Financial Reporting The following standard reports should be provided: quarterly and annual budgets; analysis of these budgets to compare the actual income and expenditure; cash book and invoices files; petty cash book and forms files; confirmation of cash in hand; bank statements and paying in books for all bank accounts; records of fixed assets; and all details showing salary calculations, and tax and National Insurance Contributions payments to the Inland Revenue. Auditing Auditing is the process of examining and then reporting on the financial statements of an organisation. All incorporated companies are required by the Companies Act 1985 to have their books audited by a qualified practising auditor (or an Independent Examiner). Organisations that are not incorporated may use an independent competent bookkeeper (except where the organisation is a registered charity, in which case they will need to abide by the rules/regulations of the Charity Commission for financial reporting). However, a good audit is essential to ascertain an organisation‟s viability and internal control systems. Funding agencies and Trusts usually insist that organisations produce audited or independently examined accounts. Audit Process Financial information documentation required by the auditor/independent examiner include: Cash Paid Analysis Book. Cash Received Analysis Book. Invoices. Documentation of money received.
Petty Cash Book. Petty Cash Forms. Bank statements. Paying in book. Cheque book stubs. Bank Reconciliation accounts for the year. Confirmation of cash in the petty cash box as at the year-end.
Other information required might be: - Salaries/wages analysis, including PAYE and NI for the year. - A break down for the transactions in the Miscellaneous / Sundries column. - A list of creditors and debtors at the year-end. - Prepayments on items such as rent and telephone rentals. - Loans to employees if any. - Budgets and cash flow forecasts for the following year. - A note of fixed assets bought or disposed of during the year. - Minutes of Management meetings at which financial decisions were made. It is always advisable for the Finance Officer/Project Manager to liaise with the auditors before, during and after the audit so as to know what they require to understand what is happening. Budgets Budgets should be drawn up for the beginning of the financial year. They should be drawn up at the same time as the Annual Plan is being put together. This is essential since it is only then that the Management Committee can discuss the objectives for the coming year and how to resource them (Strategic Planning). Essential activities must be planned and the funds secured for implementing them. Cash Flow Forecasts The cash flow forecast is another important exercise in the planning period. It shows the likely movement of funds into the organisation, where they are coming from, for what purpose and how regular. This allows for proper management of monies available at any one time to prevent the organisation running out of funds to meet it immediate commitments. In drawing up an activities programme for the following year, sources of funds and ways of securing them must be identified. Marketing and fund-raising strategies should form a large part of the cash flow forecast. Balance Sheets The balance sheet is a statement about an organisation‟s assets and liabilities. It shows the organisation‟s financial viability or non-viability at an agreed date, for example at the end of the financial year.