DIOCESE OF LINCOLN Resources Consultancy
The Parish Treasurers’ Guide
Revised September 2011
This document is intended to be used electronically as it contains links to other relevant information, websites and email contacts. Please be aware that if you choose to print a copy it will soon become out of date; you should always refer back to the on-line version. Extracts from The Charities Act 2006 and the PCC are copyright Archbishops’ Council, 2006 and are reproduced here by permission
FOREWORD This guide brings together the practical wisdom and experience of many people in the ways of handling the financial affairs of our parishes.
Following the guidance of this booklet will help parishes stay within both statutory and ecclesiastical law; it will also ensure that members of the PCC are able to exercise their responsibilities as trustees in a competent manner. The good practices in this guide encourage us to be transparent to all who enquire about our stewardship of the money which God has, through his grace, given us to use for his purposes.
In recent years, the roles of both Treasurer and Planned Giving Secretary have become even more demanding on time and application than ever before. I want to pay tribute to the good work done by so many in carrying out the onerous tasks of daily life in our parishes. For them in particular, and their successors, I hope that this guide will prove to be a meaningful and helpful guide.
Andy Wright Director, Resources Consultancy September 2011
Click here for contents page
CONTENTS Foreword Contents Introduction Overview of PCC responsibilities A The Work of the Treasurer A1 Major tasks A2 Definitions A3 Parish finance In general A4 Handling receipts A5 Handling payments A6 Bank/Building Society accounts A7 Guide to parish budgeting A8 Keeping the accounts A9 Tax Self Assessment A10 Tips on handling other church funds A11 Trusts & parish property A12 Insurance B The Annual Financial Statements B1 B2 B3 B4 B5 B6
The annual accounts Preparing the annual accounts Publication of accounts Format of accounts The accounts in context Notes for teams, groups and united benefices
C Related Issues C1 C2 C3 C4
Giving principles Practical comments on giving External scrutiny of Accounts The parish and the Diocese
Appendices 1. Fees – this will be available online as soon as possible
Click here for contents page
Introduction This is intended to be a practical guide to the work of a PCC Treasurer. Someone coming new to the job should find it a sufficient guide to be able to tackle the job 'from scratch'.
Specialised knowledge of accountancy is not required - care and attention to detail is. The methods suggested here provide a clear and efficient system which could be adopted by any parish, using either manual or computer based systems. Don’t worry if something doesn’t make sense the first time you come across it in the guide. We hope that by the time you have reached the end of the guide, it will be clear enough. If it isn’t, please contact the Resources Consultancy on 01522 504060 or email resources@lincoln.anglican.org You will find an enormous wealth of helpful information to support your work by visiting the Church of England’s Parish Resources Website http://www.parishresources.co.uk/ The phrase 'PCC Treasurer' is usually abbreviated to Treasurer in these pages. The term 'PCC' is used in this guide in its legal context, but the good practices recommended in this booklet are appropriate in all parish or district circumstances.
A new Treasurer should send their name, address, telephone number and email address to the Diocesan Offices as soon as possible after appointment to ensure that future mailings are correctly addressed. Please send these details to resources@lincoln.anglican.org or telephone 01522 504050
Click here for contents page
Overview of the basic financial responsibilities of a PCC under the Charities Act (2006)
** Record all incoming resources and expenditure in three main categories unrestricted funds restricted funds endowment funds
Aggregate the accounts of other parts of the organisation or make reference to connected charities in your accounts
Account for the stewardship of those resources either o in cash based accounts recording receipts and payments (with a Statement of Assets and Liabilities as illustrated in this guide ) o or in accruals accounts which use a Statement of Financial Activities and a Balance Sheet (for which you will need a copy of the CBF guidance notes available through The Diocesan Office)
Identify your assets and liabilities, so that it is easy to understand the parish's position
Report on your finances and activities in such a way that the general public can understand what has been going on
Have the accounts scrutinised by an independent examiner or audited by a registered auditor as appropriate. Use this tool to check what level of inspection your accounts require.
Click here for contents page
A1 Major tasks The Treasurer and the PCC The Treasurer is an officer of the Parochial Church Council (PCC). They are appointed by the PCC (not at the Annual Parochial Church Meeting) from among its members. It is better not to combine the jobs of Churchwarden and Treasurer. Strictly speaking the Treasurer's job is to manage, on behalf of the PCC, all those financial affairs for which the PCC is ultimately responsible. When they present accounts at the annual meeting they present them on behalf of the PCC. In practice a PCC will delegate a good deal of their authority in financial matters to the Treasurer but it is important to remember that the final authority and responsibility rests with the PCC. The tasks of the Treasurer In relation to the parish funds the Treasurer has a number of specific tasks, which are set out below. In some cases (eg in the counting and recording of Sunday collections) other people must be involved. The PCC should recognise that overall management in all the following areas is exercised by the Treasurer on their behalf. The Treasurer must: Receive and record income, control banking, and pay and record all items of expenditure. Keep clear, accurate and adequate records with supporting documentation. Prepare the reports and accounts for each year, pass them to the independent examiner, and then present the verified Annual Statement of Accounts etc first to the PCC and then on behalf of the PCC to the Annual Parochial Church Meeting (APCM) Use this tool to see what form of accounting and the level of inspection your accounts require. Provide such information as is required by the PCC for setting and monitoring a budget. Advise the PCC and the parish as necessary on the present and anticipated state of all parish finances, and support the PCC in its efforts to provide appropriate and clear information on parish finances to church members. Provide statements to clergy and other recipients of benefits or wages as necessary under the tax self assessment requirements. The Treasurer's basic records will therefore consist of
The cash-book(s), manual or computerised A file of invoices etc relating to payments for the current year and any receipt documentation Bank statements and investment records A file of the budgets and annual statement of accounts for previous years A file for correspondence
Cash-book(s), invoices, cheque-books stubs, paying in slips, receipt documentation, bank statements etc must be kept for 6 years in addition to the current year. It is best to label them clearly for storage. Click here for contents page
A2 Definitions A Fund consists of an accumulated sum of money from which a defined range of payments may be made. The General Fund is the most obvious example - the basic fund which every parish has and into which most basic income is paid and from which most running expenses are met. Each fund will have its own account in the PCC's records, although not necessarily its own bank account. Funds fall into one of these categories. Unrestricted - Expendable at the discretion of the PCC. Restricted - Expendable only in accordance with the donor's stated intention or the declared purpose for which the money was raised. Monies which the PCC has allocated from its general fund into a specific fund are not restricted funds are known as designated funds and are unrestricted. The PCC can choose to move such monies back into the general fund at a later date Endowment Restricted funds where there is only power to spend the income, not the capital, in the accounting period An Account in this guide refers to the record of the receipts and payments relating to one fund, such as the Fabric Fund Account. The Cash Book is the book used for recording in detail every sum which is received or paid. One cash book can be used for all funds, provided that the details of each are kept separate. The Parish Accounts refers strictly speaking to the accounts of all the funds which the parish has. Here it also refers to the complete record of the parish's financial transactions. Keeping these records is 'keeping the accounts'. The PCC should be aware that the setting up of separate funds does not create separate legal entities and therefore the PCC, through the Treasurer, is as responsible for these funds as for the PCC's General Fund. This does not preclude the day to day accounting being delegated to another official as authorised by the PCC. A typical example might be the finances of a church hall but, as ever, the PCC retains ultimate responsibility.
Click here for contents page
A3 Parish finance in general The finances of a parish operate within a legal framework and the principles are set out in section B5. There are occasions when it is important for the Treasurer to know the precise legal situation, in which case professional advice should be obtained in the first instance through The Diocesan Office, Lincoln. The main areas of financial need for a parish church are as follows:
Working Expenses PCCs are responsible for the working expenses of clergy. (A free handbook entitled "The Parochial Expenses of Clergy - A Guide to Their Reimbursement" can be downloaded here
Deanery Share Each parish contributes to the total costs of the Diocese of Lincoln through the Deanery Share system. The Diocese informs each deanery of their costs for the coming year. Each parish’s individual share request is then agreed with the deanery. Your share request will illustrate how the money you are contributing is being deployed in the deanery. The biggest elements of deanery costs are clergy stipends and housing. Full details of the Diocesan budget can be obtained here
The Church Building Repairs and maintenance to the church and its furnishings, insurance, heating, lighting, etc. Large-scale projects for restoration, extension or development are best dealt with in a separate fabric fund.
Church Services Choir, music group and organ costs, books and music, bread, wine, candles, etc. Parish Running Costs All the incidental costs which do not come under the above headings, including such things as administration, postage, contributions to deanery expenses and IT running costs.
Specific Activities There may be specific activities incurring a cost, eg running a parish hall or the production of a magazine. Some parishes might wish to show separately expenditure on such things as training and evangelistic activity.
Donations To Missions, Charities Etc. Expenditure under this heading is the result of a voluntary decision by the PCC to give money away. In some cases money will be collected in the parish for missions or other charities or appeals and will be paid through the parish accounts. Such amounts should be distinguished from the parish's own giving in the annual statement of accounts.
Click here for contents page
A4 Handling Receipts It is important: To have collections and envelopes checked by two unconnected people as soon as possible after receipt and to have the signatures of the checkers. That all receipts are promptly and regularly banked. To make payments only by cheque or through a petty cash imprest (float top-up) system - not straight out of income. To record the nature of income involved for each amount banked and to check that your record agrees with the bank statement when it arrives. To enter into the cash-book items paid directly into the bank account, and to treat them as separate bankings. This would include interest received on current and deposit accounts and donations paid by bankers order. To make sure that an accurate record of GiftAid income is kept - see the Diocesan Planned Giving Guide
Important note It is important that income, which goes directly into a bank or building society account, or is given direct to a third party on behalf of the church, or is credited to a parish account by a third party (eg a direct transfer of tax refund), must be shown in the accounts in the same way as other income. In other words, the accounts must show all income for the benefit of the church. For interest on monies deposited, the general rule is that interest follows the capital on which it has accrued. This is important where a treasurer is trying to allocate monies properly between restricted, unrestricted and endowment funds.
Click here for contents page
A5 Handling payments All expenditure should strictly speaking be authorised by the PCC. In practice most payments made by the Treasurer are of a routine nature. The PCC should approve a budget. The Treasurer then has authority to pay amounts included in that budget. Anything else should be authorised by the PCC or its standing committee. All invoices should be filed. If there is no invoice for an item then a piece of paper giving the essential details would be written out as a substitute. They should be kept in the order in which they are paid, with a note of the cheque number used to pay them so that easy cross referencing is possible. If it is necessary to make certain small payments in cash (eg postage stamps, matches) a petty cash imprest (float top up) system should be used. It works as follows: The PCC decides on the float amount - say £25. The Treasurer draws a cheque payable to cash for £25 and opens a petty cash book in which all petty cash receipts and payments are entered. Receipts or their substitutes are kept to support every payment entry. At any one time the actual cash in hand and the receipts should total the float of £25. When the £25 is nearly exhausted the Treasurer draws another cheque to cash for the amount needed to bring the imprest back to £25. This is then a good time at which to transfer the petty cash expenditure record into the main cash book. In some parishes, expenses are paid out of the loose offertory cash and only the net amount banked. A sheet is produced showing the gross offertory cash, the expenses paid out of it (supported by vouchers and receipts) and the net banking. The sheet is then retained as part of the Treasurer's accounting records who uses it to enter the full offerings as receipts and all the expenses as payments. This way of dealing with cash, however, whilst not illegal, is strongly discouraged. The procedure of paying by cheque, with its double signature requirement, provides the proper level of control. Similar controls are also available with appropriate on-line bank accounts. In addition, HM Revenue and Customs will expect to see bank credits for the full amount of envelope cash connected with the GiftAid scheme and therefore it is best not to use the cash in such envelopes to pay expenses. It is also worth commenting that following the introduction of GiftAid in April 2000, loose cash at the offertory from donors who are tax payers should be avoided in favour of envelopes or bank standing orders to provide a robust audit trail.
Click here for contents page
A6 Bank/Building Society accounts You do not need to have separate bank accounts for each of the funds held by the PCC. In fact it is much easier and clearer not to but just account for each fund within the one bank account. Proper records will then show how much of your bank balance relates to each of the funds involved. The obvious exception is where money is invested elsewhere (such as with the Central Board of Finance Investment Office Deposit Fund) to earn higher interest. Many churches split their money between the amount needed for everyday use and that which is being set aside for larger irregular bills. It is best to have a current account for normal receipts and payments, and a higher interest account for short to medium term surplus cash. Where money is placed on deposit, you should ensure that interest is paid gross. You will need a Tax Certificate from HM Revenue and Customs Charity Division to be able to have interest paid gross. If there is only one account there will only need to be one chequebook and one paying-in book in use at a time. If the parish has more than one fund then the cheque stubs, paying-in book and bank statements will have to be marked to show which fund each item relates to. It is important that you regularly reconcile your accounts with the statements received from your bank or building society. Bank or building society accounts are opened only on the authority of a PCC resolution. The name of the bank account should be as far as possible the legal name of the church (eg The Parish of St Cashalot, Smalltown PCC). If you are not sure how to ‘name’ your bank account, please ring The Diocesan Office, Lincoln for advice. Obviously, banking charges should be avoided if at all possible and most banks and building societies now operate treasurers’ accounts which give free banking to charities with modest income and outgoings. For the protection of all concerned, the signatures of at least two people are required on each cheque. It is useful to have (say) four people who are authorised to sign cheques and to specify that any two of them may sign a cheque - with the understanding that they would not be two people from the same household. Provision needs to be made for holidays and illness. Signatories must never sign blank cheques. This may well be inconvenient, but if they do, it negates the benefit of the double signature procedure. Again, dual signatory controls are now also available with on-line bank accounts. A list should be kept of those who are authorised to sign cheques and this should be kept up to date. This is easily dealt with annually when the PCC appoint their Treasurer. As the future of cheque clearance is uncertain beyond 2018, it is recommended that PCCs look to minimise both receipt and payment by cheque wherever possible in favour of direct payment through the bank. Many banks now offer online accounts for churches and charities which include a secure two-signatory facility.
Click here for contents page
A7 Guide to church budgeting What is a budget? It is an estimate of income and expenditure for a given period. Having estimated the expenses, the amount of income required to meet them can be calculated and the sources of income can be identified. Why does your parish need a budget? You need to estimate the total expenditure for a calendar year in advance so as to:a) establish authority for expenditure b) stimulate and support parish planning c) generate a deeper understanding of how money is generated and where it goes d) identify the total income needed e) identify the amount to be raised from giving f) provide an early warning system to both parish and Diocese Should a budget be monitored? Yes. Rarely will a budget be 100% accurate. During the budgetary period expenditure will vary because unknown factors, such as an unusually mild or severe winter, can radically change expenditure on fuel or emergency repairs to buildings, causing significant unplanned expenditure. When is the time to plan a budget? All parishes must have their accounts finished and certified by the Annual Parochial Church Meeting (APCM) which must be held before 30 April following the year end. Once the accounts are approved by the PCC, the Treasurer can then begin the process of planning the budget for the accounts year starting the following January. On what do you base a budget? Start with the previous year's income and expenditure. Much church expenditure tends to be of a regular nature. From these figures and the most up to date information and indicators for the current year in progress, calculate the increases in parish share, fuel, wages etc for the budgetary year. Some increases (eg, contribution to Deanery Share, electricity) will be published in advance but others (eg, wages) will be controlled by the PCC. What process should you go throughto produce the budget? From April onwards, in preparation for all the next year's budget, the Treasurer should consult the PCC about:i. Major expenditure during the budgetary year (eg, replacement books/equipment) ii. Specific appeals to cover major capital expenditure iii. Accumulation of reserves for future expenses iv. Consideration of expenditure and possible savings to be made Click here for contents page
v. The church's giving to mission agencies/charities vi. Any other expenditure which needs to be provided for (eg work recommended in the Quinquennial inspection report) vii. Recommendations for change in investment policy. Where does it all end? By November the Treasurer should be close to having a final budget for the following year, although the precise Deanery Share request will not be confirmed until at least after approval of the Diocesan budget at the November Diocesan Synod. The PCC should approve the budget and also recommend how sufficient income should be raised (eg giving, events, investment income, changes in hire charges, etc). Having approved the following year's budget, the PCC must communicate it to all parishioners because they will need to know, for their review of their personal giving. Use your imagination to think of the different ways in which this important information can be shared.
Click here for contents page
A8 Keeping the accounts The PCC accounts must run from 1st January to 31st December each year. Local Ecumenical Partnerships (LEPs) have sometimes been set up with a different accounting period. This section covers the normal week-to-week work of the Treasurer. In general it assumes that the methods outlined here are being used. The detail given is intended to help the inexperienced Treasurer to organise their cash-book and their routine bookkeeping efficiently. The cash-book This contains a record of every item received or paid, analysed into as much detail as is required. Each fund has its own account but all accounts are kept in basically the same way. Three points need to be considered before the precise form of the cash-book is settled:
The separate funds which will be presented in the annual statement of accounts Funds will need to be grouped together according to their status: unrestricted, restricted or endowment. What headings are going to be used to analyse receipts and payments on the annual statement, especially in the General Fund account? The headings chosen should be meaningful and if possible maintained from year to year to allow comparisons to be made.
It will be seen that all of these relate to the annual statement of accounts, and that a Treasurer should decide in some detail what form that annual statement is going to take before they starts their cashbook (See Section B1 of this Guide). Choosing a cash-book A PCC needs an adequate cash-book system. Paper versions are available commercially, as are electronic equivalents. Electronic accounting Several software packages are available at reasonable prices and details of suppliers of suitable software can be found here. Information stored must comply with the requirements of the Data Protection Act. Advisory booklets are available from the Data Protection Registrar (01625 545700).
Click here for contents page
A9 Tax Self Assessment implications Payments To The Laity With the advent of self assessment, there is an additional duty to provide details of all expense payments made to individuals so that they have the information needed to complete their tax returns. The treatment for employees is more complicated and you can obtain further information from your local tax office, or you can contact the Head of Finance at The Diocesan Office, Lincoln for up to date information on this issue.
Payments To The Clergy PCC treasurers are exempt from the requirement to submit returns to HM Revenue and Customs for any clergy on the Church Commissioners payroll. The clergy will need this information for their tax returns. The HM Customs & Revenue deal directly with clergy and will not correspond with PCC treasurers.
Summary Of Treasurer’s Responsibilities When you pay expenses, you may give the recipient written confirmation of the amount you have paid. Expenses include both payments of cash directly to them as well as bills paid on their behalf. Typical items will be postage, stationery, telephone, and travelling expenses. When you provide benefits (most likely to your clergy), you must give written confirmation of the ‘cash equivalent’ of those benefits. Benefits could include payments towards heating, lighting, cleaning, gardening etc at their residence, as well as any loans for work purposes at concessionary rates of interest.
Click here for contents page
A10 Tips on handling other church funds It is clear that the PCC must account for all incoming resources and for the way in which those resources are expended, but it is sometimes difficult to identify whether or not the PCC is responsible in law. The principle of transparency is crucial. The PCC should cast its net wide enough to ensure that it cannot be criticised for failing to disclose a financial responsibility which would be recognised in law. The key tests are these.
If the funds or assets involved are a special trust of the PCC, include them If a group or an organisation accepts the authority of the PCC and the PCC agrees that it is in control of the group or organisation, include their activities within the PCC accounts
If the PCC, or the incumbent acting on behalf of the church, represent the majority influence on a group, then it must be assumed that the group's activities are under the control of the PCC, and accounted for accordingly within its accounts Individual situations, however, are often more complex than these key tests might suggest. If you are in any doubt, please contact the Head of Finance at the Diocesan Office with the full facts and, after due consultation, you will be provided you with the best advice available. The following points should also be noted.
If a group or organisation is deemed to be outside the control of the PCC, they will have of course to deal with their own legal standing under the Charities Act 2006 and fulfil their responsibilities accordingly.
Where groups or organisations are deemed to be independent, but nevertheless, have a very close relationship with the PCC, eg “Friends of”, that relationship should be noted in the annual financial statements.
Click here for contents page
A11 Financial, land & buildings Land & personal property In the Diocese of Lincoln around 1300 ecclesiastical and charitable trusts and parish properties are vested in the Diocesan Trust and Board of Finance (LDTBF) as Custodian Trustee. For the great majority of these trusts the Parochial Church Council (PCC) or the incumbent and churchwardens of the parish concerned are the Managing Trustees and they are responsible for the day to day management of the trust affairs and property. However, by virtue of statutory provisions a PCC or incumbent and churchwardens may not hold or acquire an interest in land (other than a short lease) or any interest in personal property to be held as permanent trusts, such interest shall be vested in the Diocesan Trust and Board of Finance. If a PCC intends to acquire a piece of land or property (albeit donated to them or purchased by them), by virtue of the Parochial Church Councils (Powers) Measure 1956, the legal title to the land is required to be vested in the Lincoln Diocesan Trust & Board of Finance Limited, so you should contact the Diocesan Assets and Trusts Manager at the outset who will make sure the correct legal procedures are followed. Similarly, if the PCC proposes to sell or lease church property, the Assets and Trusts Manager should be notified at an early stage. Selling church property is governed by regulations and requires the prior consent of the Diocesan Trust under the 1956 Measure. In particular, any sale is subject to the provisions of section 36 of the Charities Act 1993, which amongst other things requires the PCC to obtain a written report from a qualified surveyor before committing itself to a sale. The report needed is not a survey, but it should include a description of the property, details of any tenancy that affects the property or any rights or covenants that benefit or affect it. It should also cover the state of repair of any buildings and give advice on how best to dispose of the property – eg: Should it be sold on the open market? Should it be sold by auction? The Charities (Qualified Surveyors’ Reports) Regulations 1992 sets out exactly what should be covered. Qualified surveyors will be familiar with these regulations, but again further information can be obtained from the Assets and Trusts Manager.
In brief, a suggested procedure for either a lease or sale is as follows; 1. PCC resolves to sell (or let) property. 2. PCC approaches Diocesan Trust for consent. 3. PCC seeks advice from a surveyor on method of sale (on terms of letting) and obtains a Charities Act report. 4. PCC considers report (or advice) and agrees method of sale. 5. Terms of a sale (or lease) are agreed by the PCC and Diocesan Trust. 6. Sale or lease is completed. 7. Sale proceeds invested or spent (depending on whether the terms of the trust on which the property is held are immediate or permanent).
Click here for contents page
Monetary trusts The value of the monetary trusts administered by the Diocesan Trust on behalf of parishes in the Diocese amounts to over £15 million. These have been set up by bequests, sale of church property and new trusts being formed by the execution of Letters of Request. The majority of the parish investments held by the Diocese are with CCLA, an ethical investment company who provide a range of funds specifically designed for Church of England organizations. A legacy is a valuable source of funds for a church. A pecuniary legacy is the name for a simple gift of money left to the church. A residuary legacy is where part or the rest of an estate is left to the church after family and friends have been provided for. Similarly, lifetime gifts or donations can be turned into a trust fund by the establishment of what is known as “letters of request”. In this way the benefactor requests the Diocesan Trust to become trustee of the fund. The Diocesan Trust invests the capital sum and pays the income over to the Parochial Church Council of the benefactor’s choice. The income generated can be put towards the upkeep of the church fabric, the general purposes of the PCC or indeed any other charitable purposes at the benefactor’s discretion. A statement giving details of all the parochial trust funds for a particular parish is sent to the PCC Treasurer in January each year. The majority of the trust funds are likely to be restricted funds for Charities Act accounting purposes, (restricted by the donor for a particular purpose such as the upkeep of the churchyard or the repair of the fabric). However, recent legislation has, under certain circumstances, given trustees of small charities the power to expend permanent endowment and alter the purposes of their charity. A charity must meet specific requirements for these powers to be applied. If you are unsure on the terms of a particular trust fund, please contact the Assets and Trusts Manager who will be pleased to advise. For further information or guidance on these matters, whether land or money, please contact the Assets and Trusts Manager at The Old Palace, Minster Yard, Lincoln, LN2 1PU.
Click here for contents page
A12 Insurance Minimum legal requirements The PCC needs to have public liability insurance for all premises under its control and employer’s liability cover for staff and volunteers who receive money from the PCC In the event of a major disaster, the PCC will have demolition or site clearance expenses and these should be insured against Good practice and obligations Ensure that you have a current insurance valuation for the property to be insured Maintain a full inventory of all valuables with proof of identity Talk through carefully the level and nature of cover required; the ideal is the full cost of re-building or replacement, but if that is not possible, agree a realistic level with your insurer and make sure that there is no penalty for under insurance. Don’t fall behind with premiums – you never know when disaster might strike! Review the situation on a regular basis, say every 2/3 years Other noteworthy points The PCC is a board of trustees and as such has a duty to insure against all reasonable risks subject to the monies available. There is generally no personal liability for individual members of the PCC which acts reasonably as a body corporate. Ecclesiastical Insurance is the only mutual firm in this market. The ‘profits’ are fed back in to the Church of England through grants to dioceses (which reduce future parish share requests). They also operate a voucher scheme whereby individuals who take out private cover with them can pass on a discount voucher for the local church to use. Insurance of the priest’s residence is usually the responsibility of the Diocesan Parsonages Board Parishes must consult the Archdeacon(s) on all major insurance decisions. The Secretary to the Diocesan Advisory Committee (DAC) also has experience in these matters.
Click here for contents page
B1 The Annual Accounts The drawing up and presentation of the nnual financial statement of the PCC is the most important single job that the Treasurer does. Unless a parish has clear annual statements set out in sufficient detail and properly arranged, it cannot know what its financial position is or where it is going; and adequate budgeting is made much more difficult. Use this tool each year to decide on the format of your annual statement.
It is taken for granted here that Treasurers will draw up their own financial statements. However, it is the custom in some parishes for the Treasurer to hand over his cash-book etc to a suitable person who then produces the actual financial statement ready for an independent examination. Very basically, for parishes using the receipts and payments style of accounts, the financial statements should include:
Details of the money received and paid out in each fund during the year to 31 December set out under meaningful headings and clearly showing the deficit or surplus for that year.
A statement of assets and liabilities in accordance with the guidelines in Appendix VII and the example contained within Appendix VI.
A report on the activities of the PCC during the period covered by the accounts based on the example provided here. The areas to be included in the annual report which accompanies the financial statement are o a review of progress and achievements o a review of financial activities and affairs o something about the aims and organisation of the PCC (your mission statement and annual plans will come in handy) o legal and administrative information
A report from an independent examiner which confirms that an appropriate examination has taken place and which, where necessary, identifies any matter of concern which arose. For more information follow this link.
The requirements for parishes using the accruals style of accounts are more extensive and you should refer to the CBF guidance notes obtainable from Church House Bookshop in London. Again, check the form of accounts that you must prepare using this tool. If your PCC has an unusual year, e.g. a grant, a large legacy, an insurance claim, or a building project, and your income or expenditure takes you into a different category (as shown on the previous page), you should consult the Diocesan Head of Finance immediately. This is because there are implications for the way in which the accounts are prepared and examined in the current and future years, and this may involve revisiting previous accounts. You may also be required to register with the Charity Commission If in doubt, please ask for advice.
Click here for contents page
B2 Preparing the annual accounts Make sure that all receipts and payments to be included in the year's accounts are dealt with. Ask the bank to supply end-of-year statements for all accounts. Get end-of-year value of investments held.
Do the final adding up of cash book column and check that the sum of the columns totals equals the total receipts or payments.
Bring together cheque books and paying-in books, statements, invoices and record of income items. Doing a reconciliation helps. It can be done like this: BANK/CASH RECONCILIATION STATEMENT 31.12.10
(1) Net balance on 1.1.20XX (2) Total receipts (year)
£670 £14,100 £14,770
(3) Total payments (year) (4) Net balance carried forward 31.12.20XX
£14,330 £440
represented by: cash held current account as on bank statement 31.12.20XX deposit account as on bank statement 31.12.20XX
£20 £490 £270 £780
Less unpresented cheques 476 477 479
£72 £10 £258
£340 £440
This done, filling in the details of receipts and payments will be easy. Any discrepancies at this stage are likely to stem from errors in copying or addition.
Click here for contents page
B3 Publication of annual accounts 1. The annual accounts should be prepared by the Treasurer and then independently scrutinised. Once the final accounts are approved by the PCC, they should be signed by the Treasurer and Chair of the PCC meeting at which the accounts were approved and the certificate of the independent examiner should be attached. 2. A copy of the annual accounts and a statement of funds and property must be displayed near the main entrance of every church and building in the parish licensed for public worship for a continuous period of at least 7 days before the annual parochial church meeting including at least one Sunday when the church is used for worship. 3. Copies of the annual accounts should be available to everyone attending the Annual Parochial Church Meeting (APCM) 4. After the annual accounts have been approved by the PCC and signed by the and Chair of the PCC meeting at which the accounts were approved, they should be received at the APCM. 5. A copy of the signed annual accounts should be kept with the permanent records of the PCC. 6. The annual financial statements are required by law to include a report on the activities of the PCC. An example can be found here. 7. Church Representation Rules require the PCC "to cause a copy of the signed approved annual accounts to be sent to the Secretary of the Diocesan Board of Finance". This is normally done by submitting a copy of your accounts with the annual Archdeacon’s Visitation return. This is quite distinct from the annual finance return for use by the Church of England in compiling the statistics for the whole church. 8. Section 8(4) of the PCC (Powers) Measure states that accounts of trusts administered by the PCC must be laid before the Diocese annually.
Click here for contents page
B4 The format of accounts The following points need bearing in mind:
The title of the accounts should show the PCC name, including the name of the church, the village or town, and the year.
The term accruals account should not be used for a receipts and payments account and vice versa.
The accounts should show comparative figures for the previous year.
Accounts should be stated to the nearest pound.
The accounts will show a result for the year that is described either as a surplus or a deficit.
The opening and closing balances need to be shown at the end of the account. The advantage of this arrangement is that a comparison can easily be made between total receipts and total payments as well as between the opening and closing balances.
The annual financial statement needs to show funds separately according to their status (restricted, unrestricted, endowment)
Details of the accounting policies used in the preparation of the accounts should be provided with the accounts. Ask the Head of Finance for advice if you are not sure.
GiftAid income and related tax refunds should be shown separately to enable correlation with the tax claim submitted to HM Revenue and Customs. It is good practice to show other planned giving separately from general collections.
Minor miscellaneous expenses should be shown in total and not listed on the face of the accounts; a schedule of individual items can be appended as a note to the accounts.
The figure for charitable and mission donations should be shown in total with the detail appearing in a separate note to the accounts.
The annual accounts should include full financial details of all the various funds controlled by the PCC. Comment should also be made of any funds directly associated with the church which are not controlled by the PCC.
The report of the independent examiner needs to be addressed to the members of the PCC.
Click here for contents page
B5 The accounts in context The Charities Act establishes the legal framework within which all charitable organisations must operate. All Parochial Church Councils are charitable organisations, but not all are yet required to be registered charities. This is because they enjoy the status of 'excepted charity'. (Currently, only PCCs with an annual income of over £100,000 are required to register with the Charity Commission.) It still means that the requirements of the Act must be met. Use this tool to check what level of inspection your accounts require Within the Church of England, the Church Representation Rules determine how PCCs must conduct themselves. These rules are wide ranging, but in this context, they determine the management and organisation of our financial activities. The Church Representation Rules cannot be less stringent than those of the Charities Act but may apply further requirements on PCCs as approved by the General Synod of the Church of England. Associated with the Charities Act regulations are a set of recommendations, The Charities Act and the PCC, which gives guidance on how accounts should actually be prepared and how reports on the charity's activities should be presented. In addition, the Church of England has its own simple guidance booklets to help local churches meet the requirements of the law. This treasurers’ guide is part of that overall guidance and advice. If you follow these rules and codes of practice, you should stay within the laws of both the land and the Church of England.
Click here for contents page
B6 Notes for teams, groups and united benefices The general principle is that the PCC is a charity and therefore the recognised legal entity, and must prepare appropriate annual accounts for the parish in accordance with the Act. So how does this work if the situation is not straightforward? United benefices and pluralities - each parish must produce accounts in the statutory format. The thresholds are tested for each PCC, which must appoint an independent examiner. Providing the independence and ability criteria are met, the same person can examine more than one parish. Groups - groups (which are simply parishes grouped together informally) must produce accounts at the PCC level. A group account can be prepared in addition, but if it is done, although it is not subject to the requirements of the Charities Act, it must in no way be misleading when compared with the PCC accounts. Teams - teams which are legally a 'collection of churches' but with a single PCC must produce accounts at the PCC level. The individual churches could produce their own statements, but again, these are in addition to the PCC’s annual financial statements and are not subject to the requirements of the Act. Parishes with District Church Councils (or Village Church Councils) - accounts must again be produced at the PCC level. Where, however, DCC/VCCs have previously been preparing their own accounts, they can continue to do so, and the PCC accounts must be a consolidation of the PCC’s funds and the funds held by the constituent districts and communities . This will mean that a common format should be in use across all churches in the parish, for the production of consistent annual financial statements -
-
-
It must be noted, however, that the threshold tests for accruals accounts and auditing must be applied to the aggregated or PCC totals. Use this tool to check what kind of accounts and audit level you will require. The task of the independent examiner appointed by the PCC may at first seem onerous, but aspects of the work can be delegated. In this way, each DCC/VCC may, if it wishes, have its part of the aggregated account examined by a suitable person, with that person working on behalf of the PCC's Independent Examiner. Depending on the basis on which money have been given, the fund that a DCC/VCC handles as its general fund is likely to be shown as a restricted fund for the use of that particular district within the overall PCC accounts.
If you have any queries about your local situation, which are not clear to you from reading this page, or if you simply want confirmation that you have understood the rules correctly, please contact the Head of Finance at the Diocesan Office or your archdeacon.
Click here for contents page
C1 Principles of giving A PCC Treasurer may find him or herself in the difficult role of telling other church members that more money needs to be found if parish share payments, building repairs and other vital expenses are to be met. The implication of this message will often be that direct giving to the church needs to increase. 'Don't shoot the messenger' is the plea of many Treasurers who have found themselves in this sometimes uncomfortable position. This section of the handbook is an effort to bolster the confidence of Treasurers in such circumstances. Further help and support is always available from the Resources Consultancy THE PRINCIPLES OF GIVING Christian people in their response to the love of God, express themselves in the giving of their available resources to further His work on Earth. There are six basic principles which hold good:-
The first is that everything belongs to God. When we say "of your own do we give you", it means just that.
The principle of generosity is strong and clear in the Gospel. The value to God is a cost to us. Giving something which you do not want or need is hardly the act of a sacrificial giver.
As Christians, we are asked to accept that within the Body of Christ, the needs of others are a claim on us.
Giving should be systematic, not hand to mouth, and God's work should come first, not last, in the use of our resources.
The level of personal giving must be a personal decision worked out between the individual concerned and God.
Click here for contents page
C2 Practical comments on giving Income Parish income comes from the following main sources:
Planned giving Tax refunds including GiftAid Fees and lettings Legacies/bequests One-off gifts Fund raising activities/appeals Other giving Grants Interest on investments
Planned Giving This must be at the heart of every parish’s financial picture, and should be the largest source of income. Each church should aim for the planned giving of its church members to be:-
Regular-every week or month Planned-committed first Proportional-in proportion to what has been received Each individual must decide his or her own response to God's love expressed in their giving. The two most common used yardsticks are:-
the tithe (1/10th) from the Old Testament 5% of take home pay or pension for the Church and 5% for other Mission purposes (set by the General Synod in 2009: “Giving for Life”)
Personal giving is a matter for Christians more to do with spiritual growth, than it is to do with earthly need. For members in the local community who are not directly involved with the church, but nevertheless value its community role, the reverse may be true. In both cases, there is overwhelming evidence that giving to the church, by both its members and its community, can be increased by the application of the appropriate type of intervention, of which a wide variety exist. Contact the Resources Consultancy at The Old Palace, Lincoln to find out more about the options which exist. Tax Refunds Where the giver is paying income tax or tax on investment and savings, it is possible to recover tax from HM Revenue and Customs for the benefit of your church, as long as the money is given in an approved manner (such as a special envelope, cheque or banker’s order) and the donor concerned has signed a
Click here for contents page
GiftAid declaration. This applies to one off gifts of money as well as to regular giving with no minimum amount required. Please see The Planned Giving Guide
C2 (Ctd) Fees And Dues (Follow this link) Legacies There is a wealth of resources and supporting literature on how PCCs can develop a legacy strategy. Please contact the Resources Consultancy or visit the following webpages:  www.churchlegacy.co.uk  Diocesan Advice
Fund Raising Activities/Appeals Most parishes already have a good idea of which local fund raising activities are right for them, but fresh ideas are available through many well written books and guides which you will find in church bookshops. Appeals are used mainly for the larger, unpredicted bills which parishes have to face. You can of course simply do your own thing, but there are also professional fundraisers who specialise in this type of work. Contact the Resources Consultancy at The Diocesan Office, Lincoln for suggestions. Other Giving Mainly by open plate collections or small offertory boxes, this should consist chiefly of the giving of those who attend church services rarely or irregularly, and have therefore made no regular financial commitment.
Interest On Investments Where your church has been well blessed, it is important that you seek to gain the best from your capital. Much will depend on whether you are taking a shorter or longer term view of your investment. There are too many options to cover here and of course markets can change rapidly. For more information please contact the Assets and Trusts Manager, who is based at The Diocesan Office, Lincoln.
Click here for contents page
C3 External scrutiny of accounts Legal Requirement The Church Accounting Regulations require that the annual statement of finances of individual parochial church councils must be subjected to external scrutiny, and this tool identifies the point at which an independent examiner must be replaced by a registered auditor. This section deals with the scrutiny of receipts and payments accounts carried out by an independent examiner. Those parishes with annual income or expenditure in excess of £500,000 should talk to the Diocesan Head of Finance. For all other parishes, the information here is appropriate. Who Can Be An Independent Examiner? The law defines an independent examiner as someone who has the requisite ability, and who is independent from the body whose accounts are being examined. We will explore those two issues a little further. Requisite ability will depend to a large extent on the size and complexity of the PCC accounts involved, as well as on the individuals experience or qualifications. It will probably be appropriate for the person who has "audited" your books in the past to continue to do so, provided that they pass the independence test. They will, however, need to ensure that they understand their responsibilities under the new legislation. Independence requires that the person involved must have no connection with the PCC which might appear to be prejudicial to an impartial examination of the accounts. This means for example that the following persons could not be an independent examiner.
a member of the PCC or its sub-committees an employee of the PCC or a recipient of benefit from the PCC (other than a fee received as examiner) a close relative, business partner or employee of any member of the PCC or its sub-committees
An independent examiner can, however, be a member of the church with their name on the Church Electoral Roll. If you are having difficulties because your person is competent but not independent, one possibility would be to swap examiners with a neighbouring parish. As with all of these guidelines, if you want advice contact the Head of Finance at the Diocesan Offices
Click here for contents page
C3 (ctd) OUTLINE DUTIES OF AN INDEPENDENT EXAMINER 1. Check that the PCC has produced the right sort of accounts for the amounts involved and confirm that a full audit is not necessary. 2. Take steps to understand the way the PCC works so that it is possible to plan procedures which are appropriate. 3. Compare the accounts with the accounting records. 4. Check that the accounting records are adequate. 5. Carry out procedures designed to identify unusual items, including comparison with the previous year’s accounts. 6. Compare the accounts with the annual report. 7. Keep a record of the procedures used in the examination. 8. Prepare a report on the independent examination. 9. Bring any unresolved matter to the attention of an appropriate person or body. Immediately after this page, you will find the following papers which could be needed by the PCC to support its appointment of an independent examiner
a draft letter of engagement for use by the examiner an example report to a PCC by the examiner a sample work programme for the examiner to follow
For those who wish to study the detailed guidance notes produced by the Church of England, please follow this link. More work is required when accruals accounts are involved, and reference should again be made to the Church of England guidance notes.
Click here for contents page
C4 The Parish and the Diocese The Diocesan Council, in its role as the Diocesan Trust and Board of Finance, is responsible for the stewardship of Diocesan finance, including the provision of clergy houses, stipends and historical assets. It recommends to Diocesan Synod the level of Deanery contributions to the total costs of the diocese, and oversees the wise management of financial resources. The Diocesan budget The outgoings of the Diocese consist chiefly of:-
Clergy stipends, housing and pensions Mission, work with schools, training, resources and ecumenical costs Diocesan administration & National Church costs Income is received from:-
Investments Rents Fees and miscellaneous sources Church Commissioners
The difference between the two is the sum of money provided from parishes. Parish Portion Of Deanery Share The Deanery should notify each PCC of its portion of Deanery Share before the start of each financial year. Regular statements of the amount due are sent to each parish every quarter. With the Diocese’s need for a regular flow of funds (stipends and so on have to be paid for every month), the parish contribution to Deanery Share should ideally be paid by monthly instalments or at least regularly throughout the year. However, whatever method is chosen it is important that every effort is made to pay Share in full. Should it become evident that a parish will be unable to fulfil its obligation, the PCC should, in the first instance, contact the Deanery Treasurer, Rural Dean or Lay Chair.
Click here for contents page
C4 (ctd) Each Deanery decides how to apportion Share contributions. There are a number of methods currently in use:
By formula, using factors such as population, church attendance, number of clergy or socioeconomic information By some form of “bidding” system By identifying a portion of unrestricted income
Other matters The Trust does not issue receipts for payments made to it by parishes. If a receipt is needed, you should provide a stamped addressed envelope with your payment and ask for one. The quarterly parish share statements do, however, contain details of all share payments made by the PCC and, therefore, act as receipts for your records. Arrangements for the disposal of collections at certain special services should be noted by the Treasurer as follows:Confirmations - sent to the Bishop of Lincoln's Discretionary Fund Institutions and licensing services - the amount should be sent to the Diocesan Trust and Board of Finance where it will be allocated to the support of ordination candidates in training. Archdeacons’ Visitations – these are usually allocated to the Bishop’s Discretionary Fund and processed by the Resources Consultancy During a vacancy for an incumbent or priest in charge in a parish, the parish is usually said to be 'in sequestration' and the responsibility for running its affairs is shared between the Rural Dean and the churchwardens, working with the PCC (whose operation continues during the vacancy). Diocesan staff will always be available to support the life of the local church and will help if they can; all you need to do is ask. The Rural Dean and the Archdeacon will be deeply involved in guiding the parish through the vacancy and advice should be sought as required. The PCC Treasurer will need to liaise with the churchwardens because some matters relate to finance. For example, the share of marriage and funeral fees that would have normally gone to the incumbent are instead to be remitted to the Diocesan Trust and Board of Finance once a month.
Click here for contents page
APPENDIX IV Fees Parochial fees for marriages, funerals and the erection of monuments in churchyards are charged at fixed rates authorised by the General Synod. Tables of fees are published electronically and can be downloaded from the Church of England website: www.churchofengland.org. The table shows the total amount due and how it is split between the incumbent and the PCC. In this Diocese there is a Fees Policy and Practice Paper which provides full details for the various situations which arise. This paper is particularly helpful during a vacancy. The paper is due to be updated following a General Synod debate on fees in July 2011 and will be available to download from the website following the update. The notes on this page do, however, summarise the key points which will affect your work as a PCC Treasurer. The share of the fee due to the incumbent forms part of his or her stipend. Such fees may be assigned to the Diocese under a Deed of Assignment. The incumbent shows on his or her annual return of income all assigned or unassigned fees. Where fees are unassigned, the Diocesan Trust calculates the amount by which to reduce the stipend. If the fees are assigned, the incumbent receives a full stipend because all the fees that were due to him come to the Diocese. In the case of vacant parishes, the Rural Dean can advise on the nature and destination of all fees which arise during the vacancy. The following is suggested as a suitable way of recording fees received: A record should be kept by the incumbent (or the parish office, where one exists) for all occasions on which a fee is to be paid, with weddings, funerals and monuments listed separately. This should show the dates, the names of those involved, and the amount due to the PCC, the incumbent, and to anyone else. When the fee is actually received, the record should be marked and dated. The incumbent and/or the Treasurer should be responsible for the payment of fees under the agreed Diocesan policy. Any fees payable to NSMs and OLMs are subject to agreement between them and the incumbent. Fees payable to retired clergy are the same as for the incumbent. In parishes where there are daughter or district churches it is necessary to establish some clear policy about the destination of fees. In the smallest of parishes, where fees are paid only on rare occasions, it is noted that in practice, fees may be handled by the incumbent (or the person taking the service), who will disburse them as appropriate and pass the PCC's fee to the Treasurer. Other charges are commonly made, such as for the organist or the choir at a wedding. The PCC's policy on making these charges should be in a written form and available to members of the public who wish to use the services of the Church.
Click here for contents page