SORP 2005 Training for PCC Treasurers

1. SORP 2005Training for PCC Treasurers VENUE

2. SORP 2005 – IThe Law Charities Bill Church Representation Rules Church Accounting Regulations 2006 Trustees Act 2000 SORP 2005

3. Charities Bill • 12 Statutory Charitable Purposes • Religion stays in top three along with Education and Poverty • Public Benefit Test • Two main implications for PCC’s Lichfield DBF

4. Charities Bill Implications • Audit threshold to increase from £250k to £500k • Over £250k, the Independent Examiner must be professionally qualified in accordance with the Companies Act 1985 • Charity registration threshold - £5k gross income - £100k for religious charities Lichfield DBF

5. Changes after Registration • PCC's registered with the Charity Commission will need to complete an Annual Return for the Charity Commission • Copy of Annual Accounts to the Charity Commission and a copy sent to the Diocese. • We hope to make this process easier, by seeking to standardise these accounts Lichfield DBF

6. SORP 2005 – IIOverview No significant changes from SORP 2000 Major changes are in Annual Report All PCC accounts must have an audit or Independent Examination Consider the options that apply to your PCC Think ahead ! 2005 Comparatives may need restating

7. Which Option applies to your PCC ? Lichfield DBF

8. Teams, United Benefice, Pluralities • Each PCC as the legal entity is responsible for preparing the Annual Accounts. • United Benefice – each PCC responsible • Teams with PCC’s, each produce accounts • Teams/Pluralities with DCCs,the responsibility of accounts lies at the PCC level. • Aggregate Accounts for Threshold limits Lichfield DBF

9. Thresholds – What to include ? Income Includes (Unrestricted & Restricted)- • Gross Income, no netting off • Voluntary receipts • Gross Income from events • Investment Income • Any endowment transferred – normally a wound up smaller trust Lichfield DBF

10. Income Threshold Do not include:- • Loans received • Proceeds of investment sales or sale of any fixed assets • Endowments Lichfield DBF

11. Expenditure Gross expenditure from all funds include:- • Endowments Exclude:- • Making of a loan • Repayment of a loan • Purchase of Investments or Assets Lichfield DBF

12. Unrestricted and Restricted Funds • Unrestricted – money given for the general purpose of furthering the mission of the church • Designated Funds – origin Unrestricted • Restricted – Donation, legacy, gift etc that can only be used for specific purposes or has specific clauses attached Lichfield DBF

13. Surplus on Restricted Appeals • Surplus on appeals should either be retained in the restricted fund or returned to the donor(s). • Solution to problem ? Lichfield DBF

14. Endowments • Expendable – where the capital and income can be spent for a specific purpose • Permanent – where the capital can not be spent, only the income for the purposes directed by the donor • Costs incurred managing the Endowment can be charged against the fund. If insufficient then paid from Unrestricted Funds Lichfield DBF

15. Accounting for funds • System must be in place to allow each fund to be accounted for • Receipts and Payments – a separate R&P must be prepared for each fund • Accruals – column format allows funds to be aggregated, although reserves in each fund and movement should be shown in the notes Lichfield DBF

16. Incumbent & Warden trusts • Trusts for ecclesiastical purposes • Trusts for educational purposes • Trusts for relief of poverty • Any trust administered by the PCC must be accounted for by the PCC; may be Restricted • If administered separately, or where PCC is Custodian, then put in the notes Lichfield DBF

17. Assets and Valuations • Predominantly for those doing accruals • Church Building: do not include in accounts, but Insurance Valuation is recommended in notes as way of reference to Trustees Annual Report (TAR) • Inalienable Property – do not account for. Any purchases write-off in year of expenditure Lichfield DBF

18. Valuations Receipts and Payments – • No Valuations required, but note details in Statement of Assets and Liabilities For Accruals – • Church Halls – Cost or valuation less Depreciation • Investments – Market Value • Assets – Lower of cost or realisable value Lichfield DBF

19. SORP 2005 - III Income & Expenditure Receipts & Payments

20. Income • Voluntary Income – planned giving, Gift Aid, Grants, Donations, Appeals, Legacies • Activities for Generating Funds - Gross • Income from Investments – dividends and interest • Income from Church Activities – Lettings • Other Income Lichfield DBF

21. Expenditure • Costs of Generating Funds • Charitable Activities – may wish to link these with the objectives in the annual report • Governance Costs • Other Lichfield DBF

22. Receipts and Payments • If under the £100k threshold to less burden you may opt for the Receipts and Payments • Communicate a clear picture • Do not use words such as Income & Expenditure or Balance Sheet • Only use and clearly marked Receipts & Payments and Statement of Assets & Liabilities Lichfield DBF

23. Receipts & Payments • Recommend two signatures – one clergy one laity where possible. • The accounts must show consistency • The accounts must be material • Must show a separate Receipts and Payments account for each Restricted Fund • Column segregation is acceptable but the notes must distinguish each fund Lichfield DBF

24. SORP 2005 - IV Statement of Assets and Liabilities & Balance Sheet

25. Statement of Assets & Liabilities • Cash and Bank – includes CBF Deposit. Do not include fixed term cash deposits ! • Other Monetary Assets – Funds due • Investment Assets – no need for valuation, however an approximation should be included in the notes. Land and Buildings held require a brief description • Other Fixed Assets Lichfield DBF

26. Liabilities • Obligation to pay after the year end – Parish Share Arrears, Loans, Collections due to third parties • Do not include commitments to make a payment for future benefit – i.e. leases • Just make a note • Liabilities should be shown against the respective fund Lichfield DBF

27. Grants • Grants received – only account what has been received for Receipts & Payments, under accruals what should is due in the year • Grants Paid – R & P account for the payment in the year, the balance as a liability. Accruals – account for the total commitment, and payments in later years go to liabilities Lichfield DBF

28. Balance Sheet • Fixed Assets Freehold Property – cost or revaluation Leasehold Property Fixtures, Fittings, Equipments – net book value Work in progress – at cost Investments – at market value Heritage assets Lichfield DBF

29. Heritage Assets • These refer to assets that are of historical or artistic importance that are held to advance preservation, conservation and educational objectives of charities. Your church may have some paintings or artefacts that are held historically by the church. Lichfield DBF

30. Balance Sheet • Current Assets Stock, Debtors, prepayments, accrued income, investments, cash • Current Liabilities Analysed between short term (in year year) and long term (over one year) Should be analysed between loans, creditors for goods and services, accruals, owed to a party related to the PCC Lichfield DBF

31. Balance Sheet • Of course the Balance Sheet should make it clear and distinguish the assets and liabilities of the funds that are Unrestricted, Restricted or Endowments. Lichfield DBF

32. Payments to Trustees • The new Charities Act and the SORP allow payments for services to the trustees, provided they are in the minority and the cost justified • Any remuneration or expenses paid to any trustee must be disclosed in the notes to the accounts Lichfield DBF

33. SORP 2005 - V Trustees Report

34. Trustees Report • Identification of the Parish Church • PCC Members and Officers • How the PCC operates, sub committees • Activities, new developments • However try not to make it too long or complicated • Use photographs, graphics etc. Lichfield DBF

35. Trustees Report • Look at it as a form of communication • Not just another job for the Treasurer • Puts the financial statements into perspective and relates them to the wider life of the church • PCC must adopt the report prior to the AGM • Beware and do not try to write the report by Committee • Independent examiner will need to see a draft Lichfield DBF

36. Risk Management • Only applicable to those over the Audit Threshold, however all PCC’s should consider how their church is at risk • Financial Risk • Reputation Risk • Statutory and Legal Risk • Operational Risk Lichfield DBF

37. Reference and Administration • Name and location of church • PCC members (all who served in the year) • Officers of the PCC • Name and address of bankers/legal or other advisers / Independent examiner / Auditor * • Name of Incumbent * Lichfield DBF

38. Structure, Governance & Management • How was the PCC constituted • Any related trusts or charities • How members are appointed • Policies and procedures for inducting and training new members * • Structures – sub committees * • Risk Management * Lichfield DBF

39. Constitution “The Parochial Church Council is a corporate body established by the Church of England. The PCC operates under the Parochial Church Council Powers Measure. The PCC is excepted by order from registering with the Charity Commission.” Lichfield DBF

40. Objectives and Activities • In addition to promoting the Gospel and doctrines of the Church of England • Mission or Vision Statement • Other objectives, could include building work * • Any strategies * • Contribution of volunteers * • Grant making policies or commitments * Lichfield DBF

41. Achievements and Performance • Number of different services • Attendances, baptisms, confirmations • Any activities, missions, fundraising, pilgrimages, community events • Performance against previous years objectives * • Investment performance, fund raising initiatives etc * Lichfield DBF

42. Financial Review • The current financial performance, against budget • What is needed to continue the work within the church • Reserve Policy – Unrestricted, Restricted etc. • Principal funding sources * • Investment Policy * Lichfield DBF

43. Independent Examiner • Must be selected each year at the AGM • Can receive a modest fee • An independent person who is reasonably believed by the trustees to have the requisite ability and practical experience to carry out a competent examination of the financial statements Lichfield DBF

44. Independent ? Must not be:- • A member of the PCC or any of its sub committees • An employee of the PCC, or a person receiving benefit or support of PCC funds by way of gift (other than a fee as examiner) • A close relative, business partner or employee of any person who falls within the above two points. • They can be a member of the Church with their name on the Electoral roll Lichfield DBF

45. Many thanks For all your work and commitment