CHAPTER 5 GOVERNANCE AND AUDIT REQUIREMENTS FOR SERVICE FUNDS

Transcription

1 CHAPTER 5 GOVERNANCE AND AUDIT REQUIREMENTS FOR SERVICE FUNDS Leaflet The Audit or Independent Examination of Charitable Service Funds Introduction Comparison of audit and IE Management checks Audit period Responsibilities of auditors and independent examiners HQ AIR Service Funds and CIMA staff Service Funds Internal Audit Board Funds to be externally audited or independently examined Annex A - Employment and Responsibilities of a Civilian Auditor Appendix 1 - Example of Letter of Appointment to Auditors Annex B - Independent Examination Appendix 1 - Guidance on the Selection of an Independent Examiner Appendix 2 - Example Letter of Appointment of Independent Examiner Appendix 3 - The Independent Examination Annex C Charitable Service Funds: Registration, Accounts, IE and Internal Audit Requirements Leaflet Presentation of Charity Annual Accounts Presentation of charity annual accounts Enclosure 1 - Guidance on Completion of CC17a Enclosure 2 - CC17a Accruals Accounts Activity Categories Enclosure 3 - Guidance on Completion of CC39a Enclosure 4 - CC39a Accruals Accounts Natural Categories Enclosure 5 - Guidance on Completion of CC16a Enclosure 6 - CC16a Receipts and Payments Accounting Leaflet Preparation of Annual Submissions to the Charity Commission Introduction Annual accounts Completion of Charity Commission documentation Submission of annual accounts to the CC Annex A - Notes on Completion of the Trustee s Annual Report Leaflet The Service Funds Internal Audit Board Introduction Control of the internal audit Submission of proceedings Annex A - Example Terms of Reference for the President of SFIAB Annex B - Check List of Points for Inclusion in TOR s for Members of SFIAB Appendix 1 - TORs for Members of the SFIAB Appendix 2 - Guidelines for Internal Auditors Appendix 3 - Example of Letter of Appointment from Station Commander to SFIAB Members Annex C - Example TOR for Internal Audit Clerk Annex D - Return of Service Funds called by QR 75(4) Annex E - SFIAB: Diary of Actions Annex F - Example of Audit Progress Chart Leaflet Conduct of the Internal Audit Introduction Preliminary checks AL3

2 Internal control and management Audit of cash and bank transactions Trading activities Subsidiary activities and banked funds The nominal ledger Verification of assets and liabilities Audit schedules Retention of accounting records Annex A - Service Funds Management Audit Schedule - SOY Annex B - Service Funds Management Audit Schedule Quarterly Annex C - Service Funds Management Audit Schedule SFAS Annex D - Service Funds Management Audit Schedule - EOY Annex E - SFIAB Annual Health Check Schedule Leaflet Presentation of the Proceedings of the Service Funds Internal Audit Board Introduction Preparation of Service Funds Form Preparation for scrutiny by the stn cdr Signature by the stn cdr Independent examination/external audit Submission to HQ AIR Service Funds Annex A - Specimen of Form 2: RAF Proceedings of Board of Officers, Board of Inquiry Leaflet Governing Documents Constitutions Governing documents Constitutions Annex A - Recommended Constitution for Registered Charity Service Funds Leaflet Charity Commission Registration Charity Commission registration Annex A - Instructions for RAF Service Funds Online Charity Registration Back to top Main Contents Page Back to AL3

3 AP3223 Leaflet 501 EXTERNAL AUDIT OR INDEPENDENT EXAMINATION OF CHARITABLE SERVICE FUNDS Introduction Regulations for the internal audit of Service Funds are contained in QR 75 and QR 1298; however, all Service Funds that have charitable status are also subject to an external audit or Independent Examination (IE) dependant upon their level of income. The external audit or IE must conform to the requirements of the Charities Act and the Charity Commission Statement of Recommended Practice (SORP). Comparison of audit and IE External audit. The object of an audit is to ensure that the balance sheet of a fund represents its true financial state as at the date of the balance sheet. In addition, auditors must satisfy themselves as to the accuracy of the transactions since the previous audited balance sheet and correctness of the fund s administration, bearing in mind the objects of the fund and the policy regarding its accounts. An external audit by a qualified auditor is to be carried out for all charitable funds with a gross annual income in excess of 500, IE. An IE is a less onerous form of scrutiny than an audit and provides less assurance both in terms of depth of work carried out and the qualifications necessary to undertake such work. An IE involves a review of the accounting records kept by the fund and a comparison with the summary accounts generated from those records. It also involves consideration of any unusual items or disclosures identified. Verification and vouchering procedures only become necessary where material concerns or doubts arise from procedures, and where satisfactory explanations cannot be obtained from the trustee body. Therefore it is reasonable to describe an IE as a negative assurance check, because the independent examiner 1 is not required to build up a body of evidence to support a positive opinion of the accounts, as would be required of an audit. Nor is the examiner required to form an opinion as to whether the accounts show a true and fair view An IE is required for all charitable funds with an income between 25,000 and 500,000. Charitable funds with an income between 250,000 and 500,000 will be subject to an Independent Examination by a qualified 3 person The legal requirement for IE or external audit is additional to RAF QR s requirement for a SFIAB (see para below), and the SFIAB cannot legally also carry out the external audit or IE of unit charitable funds. Trustees are urged not to request subordinate staff to perform IEs as their true independence would be questionable, and likewise, trustees are urged not to enter into mutual IE provision with staff from other units, as this could be seen to establish a mutual relationship and therefore a dependence. Independent examiners can be identified through the Association of Charitable Independent Examiners (ACIE) or HQ AIR Service Funds staff. HQ AIR Service Funds staff may exceptionally be called upon, if available, dependant on this size of the fund (normally for funds below 250,000 only). 1 An Independent Examiner is an independent person who is reasonably believed by the charity trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts. 2 Taken from Charity Commission Leaflet CC32 Independent Examination of Charity Accounts Examiners Guide April 2009 pg A person who holds recognised auditing qualificationsas denoted by Charity Commission Leaflet CC32 Independent Examination of Charity Accounts Examiners Guide April 2009 pg AL11

4 Management checks As previously stated, the appointment of a fund auditor or independent examiner does not obviate the need for the SFIAB, as required by QR 1298, to ensure that all funds subject to scrutiny are correctly administered and controlled. The work carried out by the auditor or independent examiner is completely independent of the SFIAB, but they may view the SFIAB s findings. Additionally, the SFIAB is required to ensure that the management checks and controls recommended by this publication are carried out in a correct and timely fashion in respect of all funds on a unit; this will include numerous funds that do not require IE or external audit. Audit period The audit period is normally to be 12 months; it may end on any date specified in the governing document or with the agreement of HQ AIR Service Funds. Responsibilities of auditors and independent examiners Where the total income to a charitable fund exceeds 500,000, qualified civilian auditors must be appointed to carry out the audit of the fund; detailed instructions for their employment and responsibilities under the Charities Act 2011 are given at Annex A. Detailed responsibilities of independent examiners are given in Charity Commission Leaflet CC 32 Independent Examination of Charity Accounts Examiners Guide These responsibilities are summarised at Annex B. HQ AIR Service Funds and CIMA staff HQ AIR Service Funds staff and those Service personnel who have undertaken, or are in the process of undertaking, CIMA training are accepted by the Charity Commission as independent from the command chain of unit trustees. Furthermore, they receive no benefits in return from unit personnel/funds. HQ AIR Service Funds staff and Service CIMA students may therefore carry out the IE of unit charitable funds with an income between 25,000 and 250,000, subject to their availability. Individuals appointed to carry out an Independent Examination on a fund with an income in excess of 250,000 must meet the criteria detailed in the Charity Commission pamphlet CC32. Under no circumstances is an Independent Examination to be undertaken on a fund where the examiner is a member or has been involved with the running or management of the accounts of the Fund in the previous two financial years. Where a Unit engages the services of CIMA personnel, all T&S costs are to be covered by the Fund(s) but no further benefit or remuneration is to be provided. The responsibility lies with the Trustee to ensure that he/she is satisfied that an appointed Independent Examiner is suitably competent to perform the task. Details of those CIMA personnel that indicate their willingness to undertake the Independent Examinations can be obtained from HQ Air Service Funds. Detailed instructions for the IE of unit Service Funds by HQ AIR Service Funds staff are given at Appendix 3 to Annex B. Trustees are required to appoint a qualified person to carry out IE of charitable funds with a gross annual income between 250,000 and 500,000. Service Funds Internal Audit Board At each self-accounting unit a Board of Officers, to be known as the Service Funds Internal Audit Board (SFIAB), is to assemble on the first working day of the audit period to carry out the arithmetical and management audit of each charitable fund (an arithmetical audit is not required where a qualified external auditor has been appointed) and should remain in being until the completion of its report at the end of the audit period as specified in QR The work of the SFIAB is in addition to and not in place of the formal audit or IE of the funds; however, the auditor or independent examiner is to be allowed full access to the work of the SFIAB. Detailed AL11

5 instructions for the SFIAB are given in Leaflet 506. For ease of reference a detailed table of registration, accounts, IE and internal audit requirements is shown at Annex C. Funds to be externally audited or independently examined Only those charitable Service Funds on the unit for which the stn cdr is trustee, and which receive 25,000 or more gross annual income, need be subjected to external audit or IE. It is the responsibility of the trustees of any other charitable funds on the unit, which are registered as charities in their own right, to arrange for the audit or IE of their own charities (eg nursery schools), regardless of whether or not they bank with SFAS and are therefore regarded as a Service Fund. Annexes: A. Employment and responsibilities of a civilian auditor. B. Independent examination. C. Charitable Service Funds: Registration, Accounts, IE and Internal Audit Requirements AL11

6 Back to Chapter Contents Page Back to Main Contents AL11

7 AP3223 Leaflet 501 Annex A EMPLOYMENT AND RESPONSIBILITIES OF A CIVILIAN AUDITOR Background 1. Service Funds hold unincorporated charitable status under the 2011 Charities Act. Where any charity receives annual gross income in excess of 1m the Act requires an independent audit of the charity s annual accounts and underlying financial records to be performed in accordance with professional auditing standards. The auditor will then form an opinion as to whether the annual accounts comply with relevant UK accounting standards and issue an audit report for inclusion within the accounts. The Charity Commission will refuse to file any accounts for charities with gross annual income in excess of 1m unless an appropriate auditors report is included. The audit will involve not only an examination of the underlying accounting information, but also an examination of the system of controls on which charity s trustees rely. The audit will be focused on the statutory requirement for the accounts to show a true and fair view. The auditor s opinion is provided in the form of an audit report, which will be addressed to the trustees of the charity as the commissioners of the audit. Eligible auditors 2. Section 144 (a) (b) of the 2011 Charities Act require the independent auditor to be a member of, or subject to supervision by one of the eligible supervisory professional bodies which are regulated under the Companies Act The supervisory bodies currently recognised in the UK are: a. Institute of Chartered Accountants in England and Wales (ICAEW) b. Institute of Chartered Accountants of Scotland (ICAS) c. Institute of Chartered Accountants in Ireland (ICAI) d. Association of Chartered Certified Accountants (ACCA) e. Association of Authorised Public Accountants (AAPA) 3. The auditor must be independent of the charity within the meaning of chapter 46 (42)(2) s1214 of the 2006 Companies Act. In practice the auditor can not be an officer or employee of the charity, or any subsidiary undertaking of the charity, nor directly associated with any person or company who is an office or employee of the charity or its subsidiary undertakings. If there are any doubts as to the independence of an auditor, units should contact HQ AIR Service Funds staff for further advice. Auditor s reports 4. The contents of charity audit reports are set out in the Charities (Accounts and Reports) Regulations Professional auditing standards requires additional explanation to be included in the report with regards to the nature of the examination process and to quantify the level and nature of work completed. 501A-1 AL12

8 5. The auditor s reports must contain a clear expression of opinion, based on their review and assessment of the conclusions drawn from evidence obtained in the course of the audit. The statutory requirements revolve around the auditor providing an option as to whether the accounts provide a true and fair review of the charities financial activities for the year (the Statement of Financial Activities/Income and Expenditure Account), of its year-end financial position (the Balance Sheet) and as to whether the accounts have been properly prepared in accordance with relevant accounting requirements. Should the auditor is unable to provide this assurance than an adverse option will be issued. If there is potential for the auditor to issue an adverse option on the annual accounts you should contact HQ AIR Service Funds for further guidance. Access to information 6. Part 8(3) section 154 (d)(e) of the 2011 Charities Act provides the statutory auditor with the right to access to any books, documents and other records (however kept) which relate to the charity concerned which they considers it necessary to inspect for the purpose of the audit. Information and explanations can also be trustees, officers and employees of the charity, both past and present as deemed necessary. Duties of an auditor 7. The statutory reporting duties of the external auditor are noted in Part 8(3) section 154 of the Charities Act Additional regulatory duties of the auditor are set out within the Auditing Practices Board s Practice Note No 11 on charity audits and their regulatory bodies. The Practice Note provides detailed guidance on the duties of auditors and has been prepared in consultation with the Charity Commission. Whistle blowing 8. Under Part 8 (3) Section of the 2011 charities Act, the statutory auditor is under a duty to notify the Charity Commission in writing of certain matters which give cause for concern regarding the charity s financial position or applications. These will primarily be matters whereby the auditor has reasonable cause to believe that: a. The accounts are not true and fair. b. Funds have been used in a manner that does not benefit the beneficiary class. c. The identification of a significant loss or misapplication of a charity s property or funds. d. There is a significant risk to the property or funds resulting from maladministration or misuse of assets. Appointment of an auditor 9. A draft letter of appointment can be found at Appendix 1. Notes: 501A-2 AL12

9 All details contained within this Annex were correct as at July It is the Trustee s duty to ascertain that the facts contained within the leaflet are still current. This guidance relates to unincorporated charities only. If your charity is considering or is already incorporated as a charitable company then units should contact HQ AIR Service Funds for further guidance on audit requirements. Appendix: 1. Example letter of appointment for civilian auditor. Back to Chapter Contents Page 501A-3 Back to Main Contents AL12

10 501A-4 AL12

11 AP3223 Leaflet 501 Annex A Appendix 1 EXAMPLE LETTER OF APPOINTMENT FOR CIVILIAN AUDITOR Royal Air Force Briton, Gwynedd Wales Telephone: Briton (01782) Ext 5721 Fax: (01782) Number Crunchers Ltd Reference: BRI/791860/2/Accts Penny Lane Bangor Date: 11 Jan 12 APPOINTMENT TO AUDIT ROYAL AIR FORCE BRITON OFFICERS MESS References: A Charities Act. B. Charities (Accounts and Reports) Regulations C. CC17 Accruals Accounts Pack You have been appointed to carry out the audit of the Royal Air Force Briton Officers Mess, a registered charity in accordance with References A and B. Additionally; you are required to produce the accounts in compliance with the Charity Commission Statement of Recommended Practice on the accruals accounts basis using Reference C as a template. Instructions for the administration and accounting of Service Funds are contained in Air Publication (AP) A copy of the AP will be made available for audit purposes by the Officer Commanding Accounts Flight who will be required to confirm periodically that the manual is amended and up to date, your attention is specifically drawn to AP3223 Chapter 5. Moreover, you are required to: a. Ensure that the audit is carried out on a continuous basis and the examination of the books and records should, whenever possible, be made on the station. b. Ensure that particular attention is paid to the audit of bar and cellar records (including stock books), inter-fund transactions, gaming machine records, stock records maintained on locally produced forms and to any other areas defined by the trustee commander or the president of the Service Funds Internal Audit Board. c. You are required to report any irregularities, undue surpluses or deficiencies that come to your attention during the audit and draw to the attention of the trustee any transaction which although legitimate, you may consider to be excessive or extravagant. 501A1-1 AL6

12 d. The final report is to be addressed to the Trustee. To assist you in your task the Royal Air Force Briton Officers Mess will produce end-of-year accounts, produce monthly statements of accounts and provide all source documentation to support of them. Moreover, a Service Funds Internal Audit Board has been convened to ensure that all internal management checks are being conducted in accordance the charity s regulations, laid down in AP3223, and these reports will also be made available to you. If you are in doubt about any matter connected with the audit or require information on any matter arising then you should seek advice and guidance from the President of the Officers Mess, Squadron Leader B Sparks on (01782) Extension 5555, who will be able to assist you in any matters. I M T Riffic Group Captain Trustee Back to Chapter Contents Page 501A1-2 Back to Main Contents AL6

13 501A1-3 AL6

14 AP3223 Leaflet 501 Annex B INDEPENDENT EXAMINATION Introduction 1. The Independent Examination (IE) was introduced by the Charities Act It is a less onerous form of scrutiny than an audit and provides less assurance both in terms of the depth of work which is carried out and the qualification necessary to undertake such work. An IE involves a review of those accounting records kept by the charity and a comparison of the accounts presented with those records. It also involves a review of the accounts and consideration of any unusual items or disclosures identified. Verification and vouching procedures only become necessary where material concerns or doubts arise from procedures, and where satisfactory explanations cannot be obtained from the trustee body. Selection of examiners 2. Appendix 1 sets out the Charity Commission s guidance on the selection of an independent examiner. Whilst examiners do not have to hold a professional accountancy qualification, the trustees must, in accordance with Charity Legislation, appoint a person suitable for the circumstances of the charity. The examiner s report 3. Following the examination, the independent examiner is required to produce a report. The specific reporting duties of the independent examiner are detailed in SORP In the report the examiner must state whether or not any matter has come to attention in connection with the examination which gives reasonable cause to believe that: a. Proper accounting records have not been kept. b. The accounts do not accord with such records. c. The accounts fail to comply with relevant Regulations. 4. A statement is also required as to whether or not any matter has been identified, in connection with the examination, to which attention should be drawn to enable a proper understanding of the accounts to be reached. The report should also include details of the following matters where they have become apparent: a. Material expenditure or action contrary to the trusts of the charity. b. Failure to provide information and explanations to which the examiner is entitled. c. Evidence that accounts prepared on an accruals basis are materially inconsistent with the trustees annual report. 501B-1 AL3

15 The examiner s report must be signed by the examiner in his/her own name. Whilst the name of a partnership or company may be added, the appointment of an examiner relates to the individual rather than the partnership or company. Appointment of an examiner 5. A draft letter of appointment can be found at Appendix 2. Trustees are required to appoint an examiner for each charitable Service Fund with gross annual income in excess of 25,000 on the unit. RAF Standardisation 6. Regardless of whether an IE is required, HQ AIR Service Funds expect accruals accounts to be prepared annually in the format of the Charity Commission s Form CC17a by each of the Officers Mess, SNCOs Mess and JRWF. The Form CC17a is a purpose-made template: following it ensures compliance with the Charity Commission s mandatory Statement of Recommended Practice (SORP). Since most messes and JRWFs will already have gross annual income over 25,000, and others will qualify over time, it is logical to promote standardisation across the RAF. For similar reasons, all officers messes, SNCOs messes and JRWFs are also expected to produce Trustee s Annual Reports regardless of whether they yet qualify for IE. NOTE: All details contained within this Annex were obtained from the Charity Commission s website and trustees should always consult the website for amendments before taking any of the actions detailed above. Appendices: 1. Guidance on the selection of an independent examiner. 2. Example letter of appointment of an independent examiner. 3. Undertaking the independent examination. Back to Chapter Contents Page 501B-2 Back to Main Contents AL3

16 AP3223 Leaflet 501 Annex B Appendix 1 GUIDANCE ON THE SELECTION OF AN INDEPENDENT EXAMINER Introduction 1. The following guidance has been obtained from the Charity Commission for trustees of charities on the selection of an independent examiner. References to sections are references to the Charities Act. The independent examiner 2. The Charity Commission s definition of an independent examiner is described in section 145 of the Charities Act 2011 as, an independent person who is reasonably believed by the charity trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts. An independent person 3. For an examiner to be independent they should have no connection with the trustees of the charity, which could inhibit the impartial conduct of the examination. Whether this connection exists will depend upon the circumstances of a particular charity but the following persons at least will normally be considered to have such a connection: a. A trustee of the charity or anyone else closely involved in the administration of the charity. b. A major donor or major beneficiary of the charity, (in the case of a service mess, this would include an individual mess member of the mess concerned). c. A close relative, spouse, partner, business partner or employee of any person who falls within sub para (a) or (b) above. Requisite ability 4. The Charity Commission states that; An independent examiner must obviously be competent for the task that he is to do and must be familiar with accounting methods, but he need not be a practicing accountant. We have in mind people such as bank or building society managers, local authority treasurers or retired accountants. They would all be suitable as independent examiners. Although not specific in the above extract the examiner can of course be male or female. 5. The quality of evidence of ability which is required will depend upon the size and nature of the charity's transactions. Charity trustees should consider taking independent references on the capability of the prospective independent examiner to carry out this function. Practical experience 501B1-1 AL3

17 6. Charity trustees should satisfy themselves that prospective examiners have practical experience relevant to the charity in question which might be by virtue of that person having: a. Had an involvement in the financial administration of a charity of a similar nature. b. Acted successfully as an independent examiner on previous occasions for such charities. c. Relevant practical experience in accountancy or commerce. Selection procedures 7. Charity trustees should discuss fully with the prospective examiner the work of the charity and their expectations. They should ensure that the prospective independent examiner is conversant with the Charity Commission s Directions to independent examiners and the nature of the independent examiners' report prescribed by relevant Regulations made under section 44(1)(c). 8. Charity trustees should take all necessary steps to satisfy themselves as to the matters referred to above. Charity trustees who follow these guidelines and gain suitable assurances from prospective examiners and from any references can be satisfied that they have taken all reasonable steps to obtain a competent independent examination of their accounts for the period in question. 501B1-2 AL3

18 Back to Chapter Contents Page Back to Main Contents 501B1-3 AL3

19 AP3223 Leaflet 501 Annex B Appendix 2 EXAMPLE LETTER OF APPOINTMENT OF AN INDEPENDENT EXAMINER Royal Air Force Briton, Gwynedd Wales Telephone: Briton (01782) Ext 5721 Fax: (01782) Mr N I T Picker Reference: BRI/791860/2/Accts Penny Lane Bangor Date: 11 Jan 14 INDEPENDENT EXAMINATION OF ROYAL AIR FORCE BRITON OFFICERS MESS FUND References: A. Charities Act, Sections 145 and 152. B Charity Commission Reporting Regulations (SORP 2015). In accordance with Reference A, you have been appointed to carry out the independent examination of the Royal Air Force Briton Officers Mess Fund in accordance with References A and B. You are required to carry out the independent examination in accordance with the directions and guidance notes issued by the Charity Commission; CC32 Independent Examination of Charity Accounts Examiners guide. Your final report, which must be submitted no later than 3 months after the end of the financial year, is to be addressed personally to me as trustee of the charity. Instructions for the administration and accounting of Service Funds are contained in Air Publication 3223 (AP3223). A copy of this AP will be made available for examination purposes by the Officer Commanding Accounts Flight, who is responsible for ensuring periodically that the publication is amended and up to date. Your attention is specifically drawn to governance requirements detailed in AP 3223 Chapter 5. To assist you in your task, the Royal Air Force Briton Officers Mess Fund will produce end-of-year accounts, monthly statements of accounts, and all source accounting documentation. Moreover, a Service Funds Internal Audit Board has been convened to monitor the accounts internally and ensure that all internal management checks are being conducted in accordance with the Charity s regulations, as laid down in AP3223. The Board s reports will also be made available to you. If you are in doubt about any matter connected with the independent examination or require information on any matter arising then you should seek advice and guidance from the President of the Service Funds Internal Audit Board, Squadron Leader B Sparks on (01782) Ext 5555, who will be able to assist you in any matters. 501B2-1 AL11

20 I M T Riffic Group Captain Trustee for the RAF Briton Officers Mess Fund Back to Chapter Contents Page 501B2-2 Back to Main Contents AL11

21 AP3223 Leaflet 501 Annex B Appendix 3 UNDERTAKING THE INDEPENDENT EXAMINATION Introduction 1. The work of independent examiners is completely independent of the Service Funds Internal Audit Board (SFIAB) and will be carried out as specified in the CC guidelines 1 ; however, the examiner will also rely upon the work of the SFIAB to assist with this task and it is essential, therefore, that the work of the SFIAB is kept up to date. 2. This Leaflet has been compiled to comply with the CC requirements and extracts from their publications are used where applicable in the guidance issued in this leaflet. The Independent Examiner is to ensure that an up to date and current version of the CC guidance is obtained prior to each IE. 3. The examiner will decide on the programme for each IE and the extent of the check on accounting records, advising the unit accordingly. Nevertheless, an IE is valueless unless it is conducted intelligently and by a systematic programme of checking such as will enable the examiner to produce a report under the CC Statement of Recommended Practice (SORP). The examiner will, therefore, ensure that details of income as well as expenditure are properly and comprehensively checked. The percentage check of specific items may be varied as circumstances dictate, but when a percentage check reveals a number of errors, a deeper check will be carried out. Only when no errors are found after a substantial percentage check can the rest of the entries be assumed to be correct. To assist the examiner in formulating an examination programme and for the guidance of civilian auditors and examiners generally, the paragraphs which follow set out very broadly the checks which should normally be made. Examine the accounting threshold 4. The examiner is to acquire the previous year s annual income (using SFAS records) to ensure that the annual income falls within the thresholds for IE. Understanding the charity 5. The examiner has a duty to gain an understanding of the charity s constitution, organisation, accounting systems, activities and nature of its assets, liabilities, incoming resources and application of resources in order to plan the specific examination procedures appropriate to the circumstances of the charity. Accounting records 6. The examiner will examine all accounting records during the course of the examination to ensure that they are accurate, up to date and provide the basic information from which the financial position can be ascertained. The records must contain readily retrievable source details of all 1 CC32 Independent Examination of Charity Accounts Examiners Guide April CC32 provides almost all of the source information for this leaflet. 501B3-1 AL3

22 assets, liabilities and money received and expended (eg invoices, receipts, claims, credit notes, bank statements etc). Analytical procedures 7. The examiner carry out analytical procedures to identify unusual items or disclosures in the accounts. Where concerns arise from these procedures, the examiner will seek explanation from the charity. If, after following such procedures, the examiner has reason to believe that in any respect the accounts may be materially misstated then additional procedures, including the verification of the asset, liability or incoming resource will be carried out. Comparison with accounting records 8. The examiner shall compare the summary accounts of the charity with the charity s source accounting records in sufficient detail to provide a reasonable basis on which to decide whether the summary accounts are in accordance with such source accounting records. The use of a comprehensive system of internal control by management will normally uncover errors and fraud at an early stage and may certainly do much to prevent their occurrence in the first place. The examiner will check the system of internal control in operation and will draw the attention of the trustees to any apparent weaknesses in the system. In carrying out this task the examiner will rely upon the work of the SFIAB and it is essential that the internal audit task is kept up to date. Trading activities 9. The trading activities of charitable funds normally provide one of the most important sources of income. Unfortunately, these activities tend to be susceptible to loss through either fraud or theft. It is therefore essential that the procedures for handling and accounting for cash and stock are strictly complied with. The examiner will ensure that the trading activity exists as primary or ancillary trading activity of the charity and examine the accounts of trading activities to be satisfied as to their accuracy. Designated and restricted funds 10. Designated and restricted funds at stations vary considerably in size and function according to the objects of the charity, and it is, therefore, impossible to develop a standard programme of examination checks. Nevertheless, it is very important that the records of designated and restricted accounts are thoroughly checked during the course of an audit and, to this end, the examiner will verify that all regulatory checks have been carried out at unit level. Form and content of accounts 11. The examiner must inspect the accounts to ensure they comply with current CC Regulations. For example, charities with a gross annual income in excess of 250,000 must prepare their accounts on an accrual basis to comply with the CC SORP, (although HQ AIR Service Funds require all mess and JRWF accounts to be prepared on an accruals basis regardless of annual income). 12. Computerised accounts (on Sage software) should be maintained in accordance with the requirements of AP3223A and should conform to the standard layout for RAF accounts. Where manual records are maintained any erasures or obliteration s will be investigated. 501B3-2 AL3

23 Accounting policies, estimates and judgements 13. The examiner will check the accounting policies adopted, and consider their conformity with fundamental accounting concepts, consistency of application and their appropriateness to the activity of the charity. The examiner will also consider and review any significant estimate or judgement that has been made in preparing the accounts. 14. Where accounts are, exceptionally, prepared on the receipts and payments basis, the only fundamental accounting concept which applies is that of consistency. Documentation 15. The examiner is required to raise and retain paperwork to support any conclusions reached and record any judgmental matters which may arise. The examiner will retain working papers for six years from the end of the financial year to which they relate. Events subsequent to the year end 16. Accruals accounts. When accounts are prepared under the accruals basis an event occurring after the balance sheet date may have a material effect on both the financial activities and state of affairs disclosed by the accounts. The events that have occurred subsequent to the yearend will be discussed with the charity trustee and, where appropriate, with the charity staff. Any effects on the accounts under review will be considered. The matters that will be discussed include: a. Whether any income anticipated and accrued into the accounts at the year-end has proved irrecoverable. b. Discovery of an error or fraud. c. Crystallisation of a taxation liability. d. A valuation of a property indicating a permanent diminution in value. 17. Where an event occurring subsequent to the year-end effects the amount of disclosure of an item in the accounts this will be brought to the attention of the trustee with a view to the accounts being amended. 18. Receipts and payment accounts. If accounts are prepared on a receipts and payments basis then there is no requirement to consider events subsequent to the year end, unless on examination, procedures have given rise to concerns which need to be addressed in this way. Trustee s Annual Report 19. The Trustee s Annual Report provides a report of the charity s activities during the financial year. The CC Regulations specify the information that is to be contained in such reports and the examiner will check the report with a view to identifying inconsistencies with the accounts which are misleading or which contradict the financial information contained in the accounts. Where inconsistencies are identified which may have a significant effect on the proper understanding of the accounts, this will be drawn to the attention of the charity trustee. If no appropriate amendment is made to the annual report then details of the matter will be provided in the examiner s report. 501B3-3 AL3

24 20. If accounts are prepared on the receipts and payments basis there is no requirement placed on the examiner to consider the trustee s annual report. The examiner may, nevertheless, find the annual report a useful guide to the activities of the charity. Examiner s report 21. The examiner will review and assess all conclusions drawn from the evidence obtained from the examination and consider the implications on the report to be made under Regulation 31 of the 2008 Regulations. Upon conclusion of the examination the examiner will complete a report in the prescribed format. 22. In providing the examination report the examiner will state whether or not any matter has come to attention, in connection with the examination, which gives reasonable cause to believe that in any material respect: a. Where source accounting records have not been kept in accordance with the Charities Act. b. The accounts do not accord with the source accounting records. c. Whether accounts which are prepared on the accruals basis fail to comply with regulations in respect of their form and content. d. Any material expenditure or action which appears not to be in accordance with the aim of the charity. e. Any failure to be provided with information and explanation by any past or present trustee, officer or employee that is considered for examination. f. In the case of accruals accounts any material inconsistency between the accounts and the Trustee s Annual Report. 23. Where any of the above concerns have been identified the examiner will provide a clear explanation of the nature of the failure and of its financial effects on the accounts. If the financial effect cannot be ascertained due to uncertainty, the nature of the uncertainty will be explained. If the concern relates to non-compliance with the relevant Regulations as to the form and content of accounts, this will be raised with the charity trustee to seek the necessary amendment to the accounts. 24. Any failure to be provided with information and explanations may seriously hamper an examination. If information and explanations requested are not provided this matter will be included in the examiner s report. In the case of accounts prepared on an accruals basis any major inconsistency between the accounts and the Trustee s Annual Report may give rise to misunderstanding. This will be brought to the attention of the charity trustee with a view to the amendment of the discrepancy. Where concerns still exist, this will be stated in the examiner s report. Reports to the Charity Commission 25. If the examiner believes that the charity trustee (stn cdr) has been responsible for deliberate or reckless misconduct in the administration of a charity then a separate written report of the will be 501B3-4 AL3

25 forwarded directly to the CC. A reporting requirement would not arise through mere inadvertence or error of judgement on the part of the trustee whilst endeavouring honestly to carry out trustee duties. It is also unlikely that a reporting duty will arise unless a material loss or misapplication of funds has resulted or could result. 26. The duty to report relates to information or evidence obtained from the examiner s work undertaken in fulfilling the Commissioners Directions or whilst acting in the capacity of the examiner of a charity. It is not intended that the examiner should report on small and insignificant matters, particularly where such matters have been satisfactorily resolved internally. Back to Chapter Contents Page Back to Main Contents 501B3-5 AL3

26 AP3223 Leaflet 501 Annex C CHARITABLE SERVICE FUNDS: REGISTRATION, ACCOUNTS, IE AND INTERNAL AUDIT REQUIREMENTS Category SMALL CHARITABLE FUND Gross Ann Income 0 to 5k 5 to 10k Type of Fund Banked Fund Banked Fund 10 to 25k Banked Fund Status Excepted Charity Excepted Charity Excepted Charity Registration Requirement None (as per civilian charity threshold) None yet (to be reviewed in 2011) None yet (to be reviewed in 2011) Accounts Requirement Transaction History via SFAS Transaction History via SFAS IE Requirement None None Internal Audit Requirement Ad hoc checks as required (Quarterly Audit by SFIAB if running an alcoholic bar) Annual Health Check (Quarterly Audit by SFIAB if running an alcoholic bar) Transaction History via SFAS None Quarterly Audit by SFIAB MEDIUM CHARITABLE FUND LARGE CHARITABLE FUND 0 to 25k 25 to 100k 25 to 100k 100k to 250k 100k to 250k 250k to 999, ,000,000+ Mess or JRWF Banked Fund Mess or JRWF Banked Fund Mess or JRWF Mess,JRWFor Banked Fund Mess,JRWFor Banked Fund Excepted Charity Excepted Charity Excepted Charity Registered Charity Registered Charity Registered Charity Registered Charity None yet (to be reviewed in 2011) None yet (to be reviewed in 2011) None yet (to be reviewed in 2011) Must Register with Charity Commission Must Register with Charity Commission Must Register with Charity Commission Must Register with Charity Commission Accruals accounts (CC17a) and Trustees Annual Report Receipts and Payments (CC16a) and Trustees Annual Report Accruals accounts (CC17a) and Trustees Annual Report Accruals accounts if possible 1 (CC17a) and Trustees Annual Report Accruals accounts (CC17a) and Trustees Annual Report Accruals accounts (CC17a) and Trustees Annual Report Accruals accounts (CC17a) and Trustees Annual Report None Independent Examination Independent Examination Independent Examination Independent Examination Independent Examination by Qualified Body Full Commercial Audit Quarterly Audit by SFIAB Quarterly Audit by SFIAB Quarterly Audit by SFIAB Quarterly Audit by SFIAB Quarterly Audit by SFIAB Quarterly Audit by SFIAB Quarterly Audit by SFIAB 1 Receipts and payments accounts (CC16) may be used if accruals accounts are not maintained OR If the banked fund is a separate company under the Sage accounts software in SFAS, it should produce accruals accounts (CC17a). This was in the original T Letter but replaced by the option here which way do we go? SEE New bits in 508 under medium. 501C-1 AL12

27 Note: Although funds that are not deemed charitable do not have to comply with CC requirements, they may, however,have to close, or review their operations such that they qualify as charitable, or merge with the JRWF. Non-charitable funds will not be supported by units or HQ AIR Service Funds. 501C-2 AL12

28 AP3223 Leaflet 502 PRESENTATION OF CHARITY ANNUAL ACCOUNTS Annual accounts format. The Charity Commission (CC) has prepared three templates for the legally-compliant presentation of charity annual accounts. Although not obligatory, it is sensible to use one of these templates as they provide comprehensive aide-memoires and are each accompanied by guidance notes. It is advised that the CC website is consulted prior to each end of FY in order to obtain the latest templates in electronic format. a. CC17a accruals accounts activity categories. This format was first recommended by HQ AIR Service Funds in 2006, because at the time it was the only accruals accounts template produced by the CC. Messes and JRWFs (and a few major banked funds) are advised to report using accruals accounts 1 because that is the fundamental basis upon which their Service Funds accounting is conducted on Sage. The CC17a s activity-based accounts format is generic and it groups, for example, various types of income into categories such as voluntary income, activities for generating income, investment income and incoming resources from charitable activities. These activity groups can seem a little unnatural, especially to the uninitiated who might simply expect to see a number of specific headings such as bar income, subscription income or gaming machine income. However, a bespoke format (chart of accounts) on Sage is available to assist SFAS staff in compiling accounts to fit the CC17a layout. Notes to facilitate the completion of the CC17a are available from the CC website, in a form entitled CC17b. Blank forms CC17a and CC17b can be obtained from the Charity Commision website at: xt.pdf b. CC39a accruals accounts natural categories. The template for this format of accruals accounts was released in Mar 10 and is available from the Charity Commission website: It is similar to the traditional Service Funds Sage accounts format (chart of accounts) used prior to 2006, and still in use by many units as a more readily understood alternative format. It is likely that the CC39a format is easier for a layperson to understand as, for example, it requires charities to simply list items of income and expenditure under natural headings (eg bar income, subscription income etc) at the trustee s discretion. However, standardisation and consistency offer great benefits, and it is therefore recommended that CC17as continue to be used. Trustees/units must ensure that they consult the CC39b guidance notes available from the Charity Commission website at: before considering changing to the CC39a format. c. CC16a receipts and payments accounts. Although legally charities with gross annual income below 250,000 may use this format of accounts (see template at Charity Commisson website at: it is felt inappropriate for major Service Funds such as messes and JRWFs to do so, because they are operated as accruals accounts for standard best practice. However, if/when banked funds are required to produce annual accounts for Independent Examination, this format of accounts is normally recommended. Banked funds may only be able to use Sage to provide transaction histories, and although the fund OIC/treasurer should 1 Any fund with gross annual income over 250,000 must report using an accruals accounts format AL9

29 be able to provide additional detail from their own accounting records (eg cash book), it is unlikely they will be able to provide enough information to complete full accruals accounts. The receipts and payments format is simpler and easier to complete than either of the accruals accounts formats. Guidance notes are provided in CC form CC16b available on the Charity Commission website at: Each of the templates provided as enclosures to this Leaflet are presented as pdf documents. Once printed, the document may be completed by hand, although Microsoft Excel spreadsheet templates are available from the CC website at Likewise, whilst all the information in this leaflet and its annexes was correct at the time of publication, the CC website will always have the more up-to-date information and templates when changes occur AL9

30 Back to Chapter Contents Page Back to Main Contents AL9

31 PREPARATION OF ANNUAL SUBMISSIONS TO THE CHARITY COMMISSION Introduction AP3223 Leaflet It is a statutory requirement under the Charities Acts that all charities with a gross annual income of over 25,000 prepare annual accounts and undergo Independent Examination (IE). Individual Service Funds that are registered with the Charity Commission (CC) must also submit their annual accounts to the CC. A complete set of accounts is to be drawn up annually, at the end of each financial year (FY), on the date set by HQ AIR Service Funds. The accounting date may be changed with the HQ AIR Service Funds approval, subject to the requirement of the Charities Acts, that no accounting period shall exceed 18 months. CC formal guidance on the form and content of annual accounts is detailed in the CC Statement of Recommended Practice 2015 (SORP). (Note as at Aug 2010: all Service Funds with gross annual income of over 100,000 are required to register with the CC, whilst all other charitable Service Funds remain excepted charities under Statutory Instrument 1056/65. The threshold of 100,000 is likely to be reduced in future years towards the civilian charity registration threshold of 5,000. Check with the CC or HQ AIR Service Funds for latest information.) The purpose of this leaflet is to describe the procedure to be followed when preparing the annual accounts so as to ensure that they are submitted to the CC in the correct format. Annual accounts To assist in complying with SORP in the production of the annual accounts, units are advised to ensure that they have up-to-date copies of the following CC publications prior to the end of each FY: a. Charities SORP The SORP outlines the precise legal accounting requirements for charities. b. The Essential Trustee: What you need to know (CC3). This leaflet will provide the stn cdr with a guide as to his responsibilities as a charity trustee. c. Independent Examination of Charity Accounts Examiners Guide (CC32). This publication details the requirements and financial thresholds relevant to independent examination, and must be taken as authoritative over the advice in this publication. d. Accruals Accounts Pack (CC17 or CC39). These include templates for forms CC17a/CC39a (accruals accounts formats) and the Trustee s Annual Report. It also includes instruction notes for each form. e. Receipts and Payments Accounts Pack (CC16).. This includes a template for form CC16a (receipts and payments accounts format) and the Trustee s Annual Report. It also includes instruction notes for the form. Copies of the Charity Commission publications should be obtained directly from the CC (tel: ) or via their website ( Accounts packs and most other CC forms can be downloaded electronically. AL12

32 The annual accounts for the major Service Funds on a unit should be prepared on an accruals basis (using the format shown in pack CC17 or CC39) wherever possible. Banked funds, which on Sage are only recorded as simple cash accounts, may present their accounts on the receipts and payments basis (using pack CC16), unless their income is over 250,000, beyond which point all charities are obliged to prepare accruals accounts. Annual accounts must conform to the requirements of the CC SORP. Completion of Charity Commission documentation Accounts. Following completion of all Sage year end actions as specified in AP3223A Leaflets 121 and 122, the CC forms contained in CC17, CC39 or CC16 packs (as applicable) are to be completed in respect of each Service Fund charity registered with the CC. To complete the forms, it is necessary to enter the information and figures from the end of FY Sage accounts on to the forms. The completed forms will constitute the charity s annual accounts. If there are particular circumstances or important matters applying to the charity which are significant but not covered by the forms, details are to be provided in the notes at the end of the accounts Trustee s annual report (TAR). To fulfil their duty of public accountability and to demonstrate effective stewardship of their charity, all trustees must prepare a TAR for their charity which must be attached to the accounts. All Service Funds are to use the proforma Trustees Annual Report which is available from the Charity Commission website ( and can be downloaded in MS Word or PDF formats for easier completion by units. The TAR is to be a concise but comprehensive review of the activities of the charity for each accounting year. Units are to ensure that a report is submitted for each charity s accounts. Notes on completion of the TAR are at Annex A to this Leaflet Independent examiner s report. The SORP requires charities to have their end of year accounts either independently examined or audited, dependent upon their level of income. Larger charities (eg those with a gross annual income in excess of 500,000) are required to have their accounts professionally audited while those with a lower gross annual income (between 25,000 and 500,000) are required to have their accounts subject to a less stringent form of scrutiny by way of an Independent Examination (IE) (by an appropriately qualified person if income falls between 250,000 and 500,000). Detailed guidance on the requirements for an IE and the contents of an independent examiner s report is given in Leaflet 501 and CC publication CC32. Units are to ensure that an independent examiner's report that conforms to the format and reporting requirements of CC32 is obtained, where applicable, for each charity s accounts. Submission of annual accounts to the CC It is a statutory requirement that charities submit their annual accounts to the CC within 10 months of the end of their FY. Units are to ensure that they meet this timescale for the submission of their accounts, by following the instructions contained in reminder s supplied by the CC. Annex: A. Notes on completion of the trustee s annual report. Back to Chapter Contents Page Back to Main Contents AL12

33 AP3223 Leaflet 503 Annex A NOTES ON COMPLETION OF THE TRUSTEE S ANNUAL REPORT 1. The following notes are extracted from the Charity Commission s (CC) own publication entitled Completing the pro forma Trustees Annual Report. They are annotated where relevant in bold text to relate directly to Service Funds charities. The CC notes however remain the authoritative document, and can be consulted via the CC website at 2. Excepted charity status. The CC notes contain a cover page of general points, including reference to excepted charities. It must be noted that most excepted charities are civilian charities with gross annual income of under 5,000 this being the standard threshold beyond which charities must register formally with the CC. Under the provisions of Statutory Instrument 1056/65, Service Funds are excepted unless/until registered, which is only obligatory once gross annual income exceeds 100,000. The CC s cover sheet states that the trustees of charities that are excepted are not required to prepare a Trustees Annual Report unless they are specifically requested to prepare an annual report by us. The second clause applies to Service Funds. Any charity with gross annual income over 25,000 requires independent examination, which in turn requires a TAR, so all Service Funds with gross annual income over 25,000 must prepare a TAR, and it is strongly recommended that all messes and JRWFs do so regardless of income. All the above thresholds are subject to amendment at any time by the CC HQ Air will notify any changes as they occur. Section Charity name Other names by which the charity is known Registered charity number Principal address Comment For registered charities this is the name on the Charity Commission's register. Non-registered charities should give the name on their governing document. For Service Funds activities this should be the name of the station plus the charitable activity name, eg Royal Air Force Briton Officers Mess. From time to time charities can use another name to that registered with the Charity Commission or on their governing document. If an alternative name is used, then it is included here. This is the charity's number on the Charity Commission's register. This should be left blank for an excepted charity. This should be left blank for an unregistered Service Funds excepted charity. Registered Funds should insert their CC registration number. If including the charity's address might put any of the charity's trustees, senior staff or those who appoint trustees in personal danger, please contact the Charity Commission once registered with them, (through HQ AIR Service Funds), to obtain permission for the address not to be disclosed in the report. This exemption may be needed for charities such as women's refuges. 503A-1 AL12

34 Section Trustees Comment However, the exemption is not anticipated to be required for Service Funds Charities. This should be the unit address and not the individual home address of anyone connected with the charity. There are two distinct types of trustee in charity law. Details of those carrying out these distinct roles are presented separately in the report: All charities have charity trustees who are responsible for the general control and management of the charity, taking decisions about what is to be done, how money is to be raised and spent. Governing documents may call charity trustees a variety of names including trustees, management committee members, board members, governors etc. Occasionally, a charity has a corporate body such as a local authority as its charity trustee (see below). For Royal Air Force Service Funds the stn cdr is the ex-officio Trustee for all Service Funds on the unit. Names of the charity trustees Some charities may also have 'trustees' who play no part in the control and management of the charity but in whose name the property of the charity is registered. Such trustees are known as trustees for a charity and include custodian trustees and nominees. They reduce the need to change ownership documents every time the charity trustees change. If the charity is a corporate body (such as a company) then such trustees are generally not necessary as property may be vested in a corporate body. In the trustee table, include the names of the charity trustees managing the charity on the date the report is signed and of anyone who acted as a charity trustee during the period covered by this report, giving the dates during which they acted. You may also add details of any office held (eg Chair, treasurer, secretary etc) after the name. For Service Funds charities this section will include the name of the stn cdr(s) covering the financial year being reported upon and their title in the office held column (eg Station Commander written in full). If a charity trustee is appointed by a person or body include the name of the appointing person or body (eg the trustees themselves, the members of the charity, the settler or founder etc). For Service Funds Charities place the following comment: Appointment of station commanders is controlled by the Royal Air Force Manning organisation at HQ AIR Command (See Trustee Selection Methods below). Names of the trustees for the charity (if any) If including a particular name might put any of the charity's trustees in personal danger, please contact the Charity Commission once registered with them (through HQ AIR Service Funds), to obtain permission for the name(s) not to be disclosed (this does not apply to company directors). A trustee for the charity holds the title to the charity's property (see above). Include the names of any such trustees at the date this report was signed or who served during the year of the report. 503A-2 AL12

35 Section Names and addresses of advisers (optional) Name of chief executive or names of other senior staff Type of governing document How the charity is constituted Charity trustee selection methods Comment This should be left blank for a Service Funds charity. Charity trustees may choose to show here the names and addresses of any advisers regularly used, for example, the independent examiner, auditor, accountant, architect, lawyer, surveyor, investment advisers and bankers. Service Funds charities may choose to include details of any financial advisor consulted, their bank and/or the independent examiner appointed. (Note that OC Accts Flt is not a qualified financial advisor and should not be listed here). Charity trustees may choose to show here the name of the chief executive officer or if there are a number of senior staff who are responsible for managing the charity, their names. Service Funds charities may choose to include details of the PMC, CMC, PSI and committee members. State the type of governing document the charity has and if possible give its date and date of any amendments. The type of governing document will typically be a constitution or trust deed, though it could also be a will, Royal Charter, Charity Commission Scheme or memorandum and articles of association (company). The Charity Commission's register (on their website) shows the type of governing document for each registered charity. Service Funds are governed by a constitution. (See Leaflet 507 for recommended Service Fund constitution). This is the legal form adopted by the charity. This may be a trust, association, limited company etc. Service Funds are unincorporated associations. This section is used to briefly explain how charity trustees are selected. For example trustees may be appointed by another body, elected from membership, appointed by the existing trustees, etc. For Service Funds charities, as the stn cdr automatically assumes trustee responsibility upon taking over command, then the following phrase should be used (where the Managing Trustee holds an appointment other than Station Commander, the text should be edited accordingly): Additional governance information (optional) The Station Commander at Royal Air Force (insert name of unit) is appointed as ex-officio Trustee of all Service Funds at Royal Air Force (insert name of unit). Appointment of Station Commanders is controlled by the Royal Air Force Personnel Manning organisation, currently based at Headquarters Air Command, Royal Air Force High Wycombe. Charity trustees may choose to provide in this section further information about the charity's governance arrangements, structure and relationship. The pro forma provides headings for the additional information that may be provided in this section. For Service Funds charities, the following areas should be covered: 503A-3 AL12

36 Section Comment to Detail of delegation of management function to a committee Detail of the committee composition The committee meeting process (including periodicity) The process of circulation of minutes for Trustee approval Detail responsibility for other Registered/Excepted charities Indicate methods employed to mitigate risk, including reference the SFIAB and the maintenance and regular review of a risk register Summary of the objects of the charity set out in its governing document Include in this section a summary of the legal objects of the charity. Trustees of registered charities may view a summary of their registered objects on the Charity Commission's register on their website. Service Funds objects are concerned with, The promotion of military efficiency of the Armed Forces of the Crown. This object presents the Trustee with wide powers, enabling her to provide charitable assistance to all elements of the Royal Air Force Community; internal subsidy of mess activities and grant-making are the Royal Air Force Briton Officers Mess s principal means of delivering this charitable assistance. The specific aims stated in the constitution should be inserted into this area and should be taken from one or more of the following: The Royal Air Force Briton Officers Mess has one/two/three aims set by the Trustee: i. Encourage esprit de corps by enabling serving Mess members to mix together in both formal dining situations and informal social activities so as to help keep service traditions alive and encourage the well-being of the Mess community. ii. Encouraging, supporting and facilitating the development of sport to raise standards and to promote the link to fitness, teamwork and personal development through sporting activity and opportunities. iii. Supporting facilities and capital projects to enable the best possible provision for the Royal Air Force Briton community. Details of the Fund s objectives and activities are grouped together within the appropriate aims and details of the scope of each activity are given in the Achievements & Performance section. In addition, charity trustees may choose to include details of the charity's 503A-4 AL12

37 Section Summary of the main activities undertaken for the public benefit in relation to these objects Comment aims and objectives set for the year and the strategies adopted to achieve them. This may include explaining the changes or differences the charity seeks to make through its activities. This is a very important part of the annual report and in this section include a brief summary of the charity's main activities undertaken for the public benefit, explaining how these further its charitable objects. You might explain, for example, the major programmes, projects and other activities in which the charity engages. The summary should be sufficient to give the reader a reasonable understanding of the type of work undertaken for the public benefit. For example under a heading, 'Runs a community centre' describe the main activities at the centre and the groups using the centre or under a heading, 'Provides free advice to beneficiaries' follow this with a brief description of the main areas of advice given and the nature of the beneficiaries helped. The Charities Act and the Charities (Accounts and Reports) Regulations require the trustees of a charity to have regard to the guidance on public benefit issued by the Charity Commission when exercising any powers or duties to which the guidance would be relevant and make a statement to this effect in the annual report. If the trustees have read the guidance, we recommend that they say how the guidance has been considered when undertaking the charity s work, for example, in planning the activities of the the year the trustees reviewed the guidance at their trustees meetings. If all the trustees have not read the guidance then a statement should be made that discloses this fact and we recommend the trustees advise the action the trustees are taking to fulfil their legal duty. Although more detail may be added if desired, HQ AIR Service Funds recommends the following two paragraphs are used in this section of a TAR regarding Service Funds charities: This Fund derives public benefit as it assists in providing Royal Air Force personnel with the necessary skills to carry out the Royal Air Force contribution to the defence of the United Kingdom and its interests. Service Funds are established for the benefit of Service personnel to promote military efficiency which underpins esprit de corps and team working, and they help to encourage personnel to develop the character, spirit and attitude to face challenges and danger associated with military service. As a result the Fund derives a benefit to the general public in helping to provide personnel who are motivated, have high morale and are willing to serve the needs of their country and that of its public, at all times. Additional matters on activities The above statement has been agreed by RAF Air Command HQ Service Funds staff and the Charity Commission. With assistance issued from Air Command staff, the trustee has paid due regard to the guidance issued by the Charity Commission on public benefit. Charity trustees may wish to provide further information about their activities including any policies on grant making or programme related investments or 503A-5 AL12

38 Section Summary of the main achievements of the charity during the year Comment about the contribution made by volunteers. Include in this section a brief summary of the charity's main achievements for the year that resulted from the charitable activities undertaken. This may be a brief narrative describing the results of the charity's work or give details of the outputs achieved, for example, 'ran 150 playgroup sessions of 3 hours each reaching 89 children and 60 families'. Charity trustees may choose to provide more detailed information in this section about their main achievement. Such information may include: Qualitative and quantitative information that helps explain performance provide details of subsidies provided to functions/events throughout the year. A comparison of performance achieved with objectives set for: Charitable activities. Fundraising. Investments. A commentary on any factors within and outside the charity's control relevant to the achievement of its objectives. Details of any future plans and any other matters which the trustees believe should be brought to readers' notice. Policy on reserves The Regulations require that charity trustees either disclose their reserves policy or disclose the fact that they do not have a reserves policy. If the trustees have a reserves policy then include in this section an explanation of the charity s reserves policy. In particular, explain: what charity trustees have decided is an appropriate level of reserves; how much the charity has in reserve at the end of the year; and why the trustees need to hold reserves. This may, for example, include meeting fluctuations in receipts or payments, meeting specific future needs, or money set aside to cover events or situations that may happen (contingencies and risks). Service Funds should provide detail of the level of reserves held and cover the three areas specified above. If the charity has designated material funds for a future purpose as part of reserves, the purpose of the designation needs to be explained. It may also be helpful to explain when the designated amounts will be spent. Also, If the charity holds expendable endowment or programme related investment, charity trustees may choose to also explain how such funds or amounts affect their reserves policy. Service Funds should detail any designated material funds for a future purpose in addition to any endowment funds (eg CL) and the effect that this has on the fund s reserves. Reserves policies, as well as being important for a charity's own financial 503A-6 AL12

39 Section Details of any funds in deficit Comment planning, also help explain to readers of charity accounts the reasons why reserves are held. Normally this statement can be quite brief for smaller charities. Further information can be found in the Charity Commission publication Charities' Reserves (CC19). Service Funds charities regularly designate monies at the end of the year towards future projects such as Mess Improvements or towards a specific project to which assistance from RAF Central Funds will be sought. Details of any designations should be explained. This section need only be completed if the charity prepares accounts on an accruals basis and has any individual funds which are materially in deficit. Service Funds accounts on SAGE are operated on an accruals basis for the messes and JRWF, but not for most banked funds. Further financial review details Other information If any funds are in deficit an explanation must be given of why this has occurred and what will be done to correct the situation. Charity trustees may choose to expand their financial review to provide additional information about their principle funding sources and how they support key objectives. Similarly, where material investments are held they may choose to explain their investment policies. Such additional information may assist readers to better understand the accounts and financial policies adopted. Major donors or funders may find such information helpful in understanding the link between funding provided and key objectives of the charity. This section can be used for any other details which the charity trustees may choose to include in their report. This information may include, for instance, details of key aims and objectives set for the future and planned activities. If the charity is, or its trustees are, acting as custodian trustees then they should provide here information on: Signatures The assets held in this capacity; The name and objects of the charity (or charities) on whose behalf the assets are held and how this activity falls within the charity's objects; and Details of the arrangements made for safe custody and segregation of such assets from the charity's own assets. The Regulations require that this report is approved by the trustees and after approval that the report is signed and dated to show that it has been approved. At least one trustee's signature is required but it is good practice to have it signed by two trustees. A signed copy of the report should be retained by the charity. Where a copy of the report is filed with the Charity Commission that copy need not be manually signed by the trustees. Service Funds charities must only send reports and accounts to the Charities Commission if they are formally registered as a charity with the commission. Until registered, the Trustees Annual Report should be held together with the Form 2 on an appropriate file and kept for 6 503A-7 AL12

40 Section Comment years. Back to Chapter Contents Page Back to Main Contents 503A-8 AL12

41 THE SERVICE FUNDS INTERNAL AUDIT BOARD AP3223 Leaflet 504 Introduction The Service Funds Internal Audit Board (SFIAB) called for by QR 1298(1) and detailed in this Leaflet is to be convened by the stn cdr and is required to assemble on the first working day of the 12 month audit period. A continuous internal management and arithmetical audit of all Service Funds, including any that are registered with the Charity Commission, is to be carried out throughout the period, at the end of which the Board is to present its report and findings for review at station level within three months of the end of the FY. An electronic copy of the Form 2, along with a scanned copy of the stn cdr s signed certificate, is to be forwarded to HQ Air Service Funds within 16 weeks of the end of the audit period. A full copy of the report is to be retained on the unit for at least six years and is also to be made available to any external auditor or independent examiner that examines unit funds. Responsibility Although the SFIAB cannot carry out the IE of charitable accounts on the unit, it is required to satisfy itself that all Service Funds have been administered and accounted for in accordance with the regulations contained in this publication and that all expenditure, other than routine, has been approved by both the fund membership and the trustee/stn cdr. The SFIAB is to be satisfied as to the accuracy of the transactions which have taken place since the last balance sheet was audited. The SFIAB is to include in its report the circumstances of any discrepancies and irregularities which may come to light including comment on payments or charges incurred which, though legitimate, are regarded as excessive. Composition The size of the SFIAB will vary between stations depending upon the volume of work to be undertaken, but it is to comprise a minimum of a president (commissioned officer) and at least two members of SNCO rank or above. The prior authority of HQ AIR Service Funds is to be obtained where it is deemed necessary to reduce the membership below the minimum criteria. The president is not to hold any responsibility for Service Funds; Board members are not to perform any internal audit function in connection with a fund or activity for which they have any responsibility. Appointments The following may be appointed as members of the SFIAB: a. President. A senior officer of any branch is to be appointed as President. Where no senior officer is available a flt lt may be appointed. Sample terms of reference for the President of the SFIAB (PSFIAB) are at Annex A. b. Board members. Board members are to be of SNCO rank or above. A checklist of points for inclusion in the terms of reference for members of the SFIAB is at Annex B. 1 The IAB composition is derived from JSP 832 Service Inquiries AL10

42 c. Audit Clerk. The PSFIAB may employ an audit clerk to perform arithmetical checks on accounting documents; undertake annual health checks on funds exempt full audit and other routine auditing tasks. Sample terms of reference for an internal audit clerk are at Annex C. All personnel appointed to undertake SFIAB duties are to attend the appropriate training course in order to achieve the competence Q-A1 Accts (SF Audit). See QR 2356 regarding the appointment of accountant officers to SFIAB duties. Authority for any appointments other than those specified above may only be given by HQ AIR Service Funds, although this does not extend to or preclude the employment of Internal Audit Clerks to assist the SFIAB. An officer/snco with responsibility for the Service Funds bank account is not to be employed in any capacity by the board. However, they are permitted to supervise the work, on a day-to-day basis, of an audit clerk where one is appointed by the SFIAB. Promulgation The names of the president and members of the Internal Audit Board, along with any other person appointed to the SFIAB, are to be published in stn routine orders prior to the first day of the audit period. Any subsequent changes to the composition of the Board are to be published as and when they occur. Funds to be subject to management checks by the SFIAB All Service Funds on the unit are to be subject to scrutiny by the SFIAB regardless of whether they are charitable or not. However, the SFIAB is not required to scrutinise those other charitable funds which are registered as charities in their own right and for whom the stn cdr is not trustee (eg RAFA Branches, SSAFA, Crèches etc) but who may be permitted by the stn cdr to bank their funds with the unit SFAS In accordance with QR 1298, all Service Funds are to be scrutinised by the SFIAB every 12 months. With a view to ensuring that no account escapes the notice of the audit board, the stn cdr is to call annually for a complete return of all service funds of whatever nature, including Memorial Award Funds/Prize Funds, kept in the units under his/her command to be rendered by the officers responsible for the accounts of such funds. In respect of Memorial Award/Prize Funds, it is important that details of the legally appointed Managing Trustee is identified and recorded within the Form 2 (record of proceedings). Arrangements are to be made by stn cdrs for annual returns to be rendered in the format of Annex D which will enable him/her to: a. Ensure that all appropriate trading activities are accounted for within the books of a Service Fund. b. Ensure that any charitable fund with a turnover in excess of 500,000 is subject to a full commercial audit by a professionally qualified audit company, any charitable fund with a turnover between 250,000 and 499,999 is subject to an Independent Examination by a Qualified Body, and that any charitable fund with a turnover between 25,000 and 249,999 is subject to an Independent Examination (IE) by a competent person. c. Dispense with the full scrutiny of the accounts of funds with an annual income of less than 10, AL10

43 d. Dispense with the annual scrutiny of the accounts of funds with an annual income of less than 5,000, except in the case of alcoholic bars The stn cdr is to provide the PSFIAB with a list of the funds to be scrutinised by the SFIAB, those funds which only require an annual health check, and those funds which are exempted from any scrutiny. Funds which are scrutinised by the SFIAB should also include those which are subject to an IE The SFIAB is to audit the funds notified by the stn cdr (see para 50408). Officers responsible for the listed funds are to make themselves, their books of account and all other relevant documents available to the SFIAB as and when required. The SFIAB is to verify that those funds exempted from audit do not exceed the threshold for exemption. Should circumstances require the scrutiny of funds not listed, the PSFIAB is to inform the stn cdr and arrange for the list to be amended Although funds that are exempt from audit do not require formal scrutiny by the Board, all 'minor' funds with an annual turnover between 5,000 and 9,999 that are exempt from full scrutiny are to receive an annual health check (AHC) by the audit clerk or a member of the SFIAB. The AHC is to cover such items as the timeliness of the OICs checks and the reconciliation of the fund balance with the SFAS monthly transaction history and is to be in the format shown at Leaflet 505 Annex B Any fund, except alcoholic bars, with a turnover below 5,000 may be exempted from audit, including AHC, and require no scrutiny by the SFIAB other than to verify that such funds do not exceed the threshold for exemption. Control of the internal audit Monitoring of progress. Whether or not the Service members of the SFIAB receive assistance from civilian auditors or an audit clerk, the PSFIAB is to devise a method of controlling the audit of funds, the raising of reports, completion of follow-up action and the final clearance of the report. A diary of actions for the SFIAB is at Annex E and an example of a unit audit progress chart is at Annex F. Progress meetings of the SFIAB are to be called at the start of each audit period, and are to be Chaired by the PSFIAB. Submission of proceedings The report and findings of the SFIAB are to be prepared on Service Funds Form 2 in accordance with the instructions contained in Leaflet 506. The proceedings are to be submitted to the stn cdr no later than 12 weeks after the end of the audit period. Once satisfied that the report is correct, the stn cdr is to append the certificate called for by QR 75(4) together with his/her comments on to the Form 2. When the stn cdr is satisfied that all is in order he/she is to approve the proceedings which are then to be retained by the unit for a period of six years. Annexes: A. Example terms of reference for the President of the Service Funds Internal Audit Board. B. Check list of points for inclusion in terms of reference for members of Service Funds Internal Audit Boards. C. Example terms of reference for internal audit clerk. D. Return of Service Funds called for by QR 75(4) financial year 20xx/xy. E. Service Funds Internal Audit Board diary of actions AL10

44 F. Audit progress chart template. Back to Chapter Contents Back to Main Contents Page AL10

45 504A-1 AP3223 Leaflet 504 Annex A EXAMPLE TERMS OF REFERENCE FOR THE PRESIDENT OF THE SERVICE FUNDS INTERNAL AUDIT BOARD Date: To:... (to be addressed personally to the recipient) TERMS OF REFERENCE FOR THE PRESIDENT OF THE SERVICE FUNDS INTERNAL AUDIT BOARD References: A. QR 75. B. QR C. AP 3223 Chapter The Service Funds Internal Audit Board (SFIAB) forms an essential element in safeguarding my responsibility as trustee of the charitable funds on this unit. You are appointed as the President of the Board (PSFIAB) as required by References A to C. You are to ensure that the board carries out all its duties in a timely and conscientious manner. In particular, you are required to carry out a continuous internal audit of all Service Funds throughout the audit period, at the end of which the Board is to present its report, findings and recommendations for review by me. 2. The object of the internal audit is to ensure that all funds with an annual income in excess of 1,000 are being managed and accounted for in accordance with the requirements of AP3223. The function of the SFIAB is separate to the audit/independent examination of the unit charitable funds that is carried out in accordance with the Charities Act and the Charity Commission Statement of Recommended Practice (SORP). In achieving the SFIAB s aim you are to bear in mind the objects of each fund and its financial policy. You are to satisfy yourself as to the accuracy of all transactions since the end of the last audit period as well as the correctness of the fund's administration and management. Although the work of the SFIAB members will be of assistance to fund managers in combating fraud, this is not the primary aim of the internal audit as it is not possible to prevent premeditated and opportunist crimes or fraud. However, efficient and alert management allied to thorough checks and audit should ensure that, if not detected immediately, criminal activities are deterred or detected with minimal delay. When carrying out your tasks you are to concentrate your efforts on the following areas. 3. Responsibility. As PSFIAB you are to satisfy yourself that the those funds subject to scrutiny, either by audit or annual health check, by the SFIAB have been managed and controlled as specified in this publication. You should be satisfied as to the accuracy of all transactions which have taken place since the last audited balance sheet was produced. You are to report directly to me the circumstances of any discrepancies and irregularities which may come to light including comment on payments or charges incurred which, though legitimate, are regarded as excessive. 4. Appointment. You are to appoint members of the SFIAB, as required by Reference B. The composition of the Board is to conform to the requirements of Reference C, Leaflet 504 paras AL6

46 and You are to discuss, at the appropriate time, the performance of the SFIAB members with their first reporting officer so that their performance in this important duty is reported upon formally in their annual appraisal report. 5. Promulgation. The SFIAB is to be convened on the first working day of the audit period. Details of the composition of the SFIAB are to be promulgated in SROs prior to the first day of each 12 month audit period. Any subsequent changes to the composition of the Board are to be published in SROs as and when they occur. The board is only to be dissolved once I have approved the proceedings. 6. QR 75(4) return. As trustee of all Service Funds on the station, I am required to ensure that: a. No Service Funds are overlooked by the SFIAB. b. All notifiable trading activities are accounted for within the books of the Service Fund accounts. c. All funds, with the exception of any fund that I have exempted from internal audit, are subject to scrutiny. You are, therefore, to promulgate in SROs an order calling for an annual return to compile the estimated gross annual income of all Service Funds on the unit as required by QR 75(4). Unless specifically notified separately, I have no trustee responsibility for funds belonging to non-service organisations (eg RAFA Branches, RAOB lodges etc) or station activities registered as charitable organisations in their own right (eg Crèches, certain Flying Clubs etc). Such activities should not be included in the QR 75(4) return. You are to present the consolidated list to me no later than three weeks prior to the end of the current 12 month audit period, in order that I can determine the need for scrutiny of funds in the next audit period. 7. Funds subject to internal audit. All funds, including those registered with the Charity Commission or Office of the Scottish Charity Regulator (eg Officers Mess, SNCOs Mess and/or JRWF) are to be subject of an internal management check. Attached at Annex A is a list of all funds which require both a management and arithmetical check (ie those funds with an annual income over 10,000). You are to monitor the annual income of all funds at Annex A and, should any individual fund s annual income exceed 25,000, you are to advise me accordingly so that an independent examiner can be appointed for that fund. 8. Annual Health Check (AHC). All funds detailed at Annex B have a gross annual income between 5,000 and 9,999 and you are to ensure that these funds are subject to an AHC as required by Reference C, Leaflet 505. You are to monitor the annual income of all funds at Annex B and should any individual fund s annual income exceed 10,000 you are to ensure that they become subject to an internal audit as specified at para 7 above. 9. Funds exempted from scrutiny. At Annex C, I have included a list of funds whose gross annual income is below 5,000 (except alcoholic bars), or which I deem do not require scrutiny by the SFIAB. Where those funds have monies banked with SFAS, you are to monitor their income and should any individual fund s annual income exceed 5,000 you are to advise me accordingly so that I can review my requirements for the level of scrutiny required of the particular fund. 504A-2 AL6

47 10. Future audit periods. Prior to the first day of each 12 month audit period I will provide you with updated Annexes outlining my requirements for the scrutiny of funds by the SFIAB in the coming audit period. 11. Conduct of audit. You are to decide on the programme for the internal audit and the extent of the checks to be made on accounting records. The programme is to be sufficiently systematic and thorough so as to enable the SFIAB to certify that the funds are being managed and accounted for as required by AP Start of audit period. You are to ensure that the checks specified at Reference C, Leaflet 505 (as applicable to the fund in question) are carried out at the start of the audit period in respect of each fund that I require to be audited. 13. End of audit period action. The Board is to perform the end of audit period checks as specified at Reference C, Leaflet 505 (as applicable to the fund in question). 14. Civilian auditors/independent examiners. The employment of civilian auditors or an independent examiner does not relieve the Board of any of its responsibilities. A copy of each audit report produced by the members of the Board must be made available to the civilian auditors/independent examiners where so requested. 15. Submission of proceedings. The report and findings of the Board are to be prepared on Service Funds Form 2 in accordance with References B and C. The proceedings, together with the QR 75(4) certificate, are to be submitted to me, through OC Base Support Wing, no later than 10 weeks after the end of the audit period (such that my signed certificate may be submitted to HQ AIR Service Funds no later than 16 weeks after the end of the audit period). Having satisfied myself that the proceedings and balance sheets are reasonable, I will append any additional comments that I wish to make and clear the proceedings. B O Bunty B O Bunty Gp Capt Stn Cdr Trustee of RAF Briton Service Funds I certify that I have read and understood my Terms of Reference. I M Crawler I M Crawler Sqn Ldr PSFIAB 504A-3 AL6

48 Annexes: A. List of Unit Service Funds to be subject to management checks and arithmetical audit. (Not included in example) B. List of all Unit Service Funds to be subject to an Annual Health Check. (Not included in example) C. List of Unit Service Funds exempted from scrutiny by the SFIAB. (Not included in example) 504A-4 AL6

49 Back to Chapter Contents Page Back to Main Contents 504A-5 AL6

50 504B-1 AP3223 Leaflet 504 Annex B CHECK LIST OF POINTS FOR INCLUSION IN TERMS OF REFERENCE FOR MEMBERS OF SERVICE FUNDS INTERNAL AUDIT BOARDS 1. Terms of Reference (TOR) for Service Funds Internal Audit Board (SFIAB) members will vary according to local circumstances. Appendix 1 gives an example set of TOR, with guidelines for internal auditors shown at Appendix 2. Units are to ensure that the TOR in issue covers the following points: a. Ideally the period for which the individual is to undertake the duty should be a complete audit year. b. If the individual is expected to undertake the duty for a period covering more than one audit year, then no period of duty need be specified. This will negate the need to reissue TOR to every SFIAB member prior to the start of each audit year. c. If the duty is likely to be of a period of less than a year, then the period should be specified. d. The regulations, instructions and schedules to be followed (any or all of Chapter 5 along with QR 75, QR 1298). e. The auditor's responsibility to the CO for the correct management and accounting of the funds they audit, specifically: (1) Ensuring that accounts are run in accordance with the regulations and wishes of the membership, but not extravagantly (Management Audit). (2) Checking that books of account are accurate and free from evidence of fraud [Arithmetical Audit]. f. The particular fund(s) the individual is to audit. g. The audit technique to be employed (use green ink, leaving audit footprints). h. The standard of audit expected - logical, thorough and systematic. i. The frequency of the audit (monthly, quarterly, six-monthly, etc). j. The percentage of records to be checked on each occasion that the books are examined. k. Integration with the function of the audit clerk/civilian auditor if appropriate. l. The audit management requirements of the unit. m. The timing, format, signature level and distribution of audit reports. n. Follow-up action to be taken with the OIC of the funds concerned. AL3

51 o. The need to advise the President when posted or detached to ensure continuous cover. 2. Where more comprehensive TOR are required, the following, additional, points should be considered for inclusion either in the main body or in a separate brief. a. Detailed lists of references including copies of the most important leaflets from this AP. b. Guidance on common errors and simple frauds. c. Brief résumé of the preliminary, routine and end of audit period checks to be carried out. d. The need to check specifically on: (1) TOR and Cash Handling Certificates. (2) Protection for cash, stock and keys. (3) Regular Sales Evaluations. (4) Reconciliation of individual fund records with SFAS. (5) Property to be logged and insured. e. If appropriate, the additional requirements of computer audit: (1) Computer security. (2) Back-up procedures. (3) Authentication of printouts. (4) The need for monitoring of achievements against financial plans. (5) The importance of the financial planning/progress, including any professional advice given to fund management, being discussed in committee. (6i) The weight attached to SFIAB as an additional duty. 3. In addition to the TOR, each auditor should receive a letter of appointment from the stn cdr which emphasises the importance of the SFIAB's role both to the unit and to the auditor. An example of such a letter is at Appendix 3. Appendices: 1. Example terms of reference for members of the Service Funds Internal Audit Board. 2. Guidelines for internal auditors. 3. Example letter of appointment from stn cdr to Service Funds Internal Audit Board members. 504B-2 AL3

52 Back to Chapter Contents Page Back to Main Contents 504B-3 AL3

53 AP3223 Leaflet 504 Annex B Appendix 1 EXAMPLE TERMS OF REFERENCE FOR MEMBERS OF THE SERVICE FUNDS INTERNAL AUDIT BOARD... (Issued to named Individual) TERMS OF REFERENCE FOR MEMBERS OF THE RAF BRITON SERVICE FUNDS INTERNAL AUDIT BOARD Introduction 1. You have been appointed as a [permanent]* member of the RAF Briton Service Funds Internal Audit Board (SFIAB) [which has been convened for the audit period 1 Nov 09 to 31 Oct 10.]* You have a particular responsibility to the stn cdr for auditing the accounts of: Fund Audit Interval Audit Reports Due by Officers Mess Quarterly* 31 Jan 10* 30 Apr 10* 31 Jul 10* 31 Oct 10* * delete/amend as applicable Aim 2. The aim of the SFIAB is to ensure that Service Funds on this unit are being administered and accounted for in accordance with the detailed requirements in this AP and AP3223A. Copies of these APs are available on the intranet in the Service Funds area of the RAF Publications site. The SFIAB seeks to achieve its aim by means of a continuous audit throughout the audit period. To ensure compliance with regulations, you are to follow carefully the schedule of audit checks attached. The schedule is designed to make your job as easy as possible, consistent with the need for thoroughness. Role of SFIAB members 3. The stn cdr is trustee of all charitable Service Funds on the unit and the SFIAB is an essential element in safeguarding the stn cdr s role as trustee of these funds. Consequently, your role as an internal auditor has two elements. Firstly, you should satisfy yourself that all accounting is being carried out in accordance with the relevant regulations and that the fund(s) which you audit is (are) properly administered and controlled. Secondly, you must safeguard the stn cdr s role as trustee of these funds, by ensuring that funds are applied to meet charitable objects of the activity. In conducting your audit you must gauge the adequacy and application of internal management controls and the extent to which Service Funds assets and interests are accounted for and safeguarded from loss. Areas to which you should pay particular attention are detailed in the auditing guidelines attached to these TOR. 504B1-1 AL3

54 4. Unless an Audit Clerk is appointed and available for duty, you are also required to carry out an arithmetical audit of funds to check the accuracy of entries, calculations, totals and carry forward figures in the books of account. However, if the audit clerk post is vacant then you are to ensure that your audit includes an arithmetical check. Conscientious undertaking of this arithmetical audit should reduce the possibility of fraud and other criminal offences. Some common types of fraud are discussed in the attached guidelines. Service Funds accounting 5. Before you can undertake audit responsibilities you must understand the Service Funds accounting procedures operated in the RAF. The orthodox system of double-entry bookkeeping is used which follows the simple principle that there are two sides to every transaction ie a GIVING side and a RECEIVING side both sides of the transaction are recorded somewhere in the formal books of account. On most RAF Units, the SFAS staff maintain these books; however, before the transaction reaches the SFAS books it must be correctly recorded in various subsidiary books of account. This is your area of responsibility. You should examine all books of account, the most important of which are described in the attached guidelines. Audit technique 6. Frequency. Ideally, every fund should be 100% audited every month. However, this ideal is clearly impractical given the time we all have to devote to our regular duties. Therefore, you are to undertake the audit of the funds specified at para 1 as follows: a. Each fund is to be the subject of one 100% and two 10% audits during each reporting period outlined in para 1. (amend frequency of checks as desired by trustee). b. If a 10% audit reveals errors, a 100% audit for the month is to be carried out. c. Certain management elements require only a quarterly, bi-annual or annual check and are so indicated on the internal management audit schedule. 7. Standards. It may take you some time to familiarise yourself with the procedures and books for which you have audit responsibility but the continuous nature of the audit will enable you to gain confidence and improve your audit technique. The standard of internal audit required by the RAF, and the Stn Cdr, is high. Your audit duties are to be undertaken in a reliable and professional manner and all your audit work should be conducted in a consistent and accurate fashion. Audit reports are to be submitted by the date stated at para 1 above. If you are unable for any reason to carry out your audit duties or submit your reports within the prescribed timescale at para 1, you are to inform me in writing without delay. 8. Procedure for audit. Before you start your regular audit, give adequate notice to the fund holder so that he can ensure that the books of account will be available to you. You should liaise closely with the audit clerk, especially prior to your first look at the books, and ensure that you follow up any management points which are spotted in the course of 'number crunching'. Any observations which you are unable to resolve with the fund holder are to be recorded on an observation sheet. Completed check sheets for the month concerned are to be forwarded to me by the 15th day of the following month. 504B1-2 AL3

55 9. Follow-up action. Upon receipt of your observations, I will forward them, with a covering note, to the fund holder and monitor the response and any follow-up action. You are to ensure that a formal response from the OIC has been received before commencing your next audit. Your first check in the subsequent audit should be to see that the previous comments have been actioned. If not, highlight the fact in your next report. 10. Computer audit. The audit approach to computers will vary depending on their function and complexity; however, the overall objectives of computer audit are covered in the attached audit guidelines. 11. Evidence of audit. When auditing books of account you must ensure that you leave evidence of your checks in the form of a trail of ticks and initials in green ink with a date alongside the latter. You should inform me immediately of any suspicion of fraud, financial impropriety or use of charitable funds outside of the objects of the charity. Responsibility 12. Being a member of the SFIAB is a most important responsibility. You need to plan your workload to ensure a methodical and thorough audit; at the end of the audit period your signature will appear on the audit board proceedings certifying the accuracy and integrity of the Service Fund concerned. However, you are not alone. Regular meetings will be held to discuss progress, with a final meeting in to finalise the proceedings of the Board. If you require further advice or guidance, please contact me or OC Accts Flt. Signed Name.. Rank Date PSFIAB Certified I have received, read and understood my Terms of Reference as a member of the RAF Briton SFIAB. Signed (Recipient) Name... Rank.. Service number. Date 504B1-3 AL3

56 Back to Chapter Contents Page Back to Main Contents 504B1-4 AL3

57 AP3223 Leaflet 504 Annex B Appendix 2 GUIDELINES FOR INTERNAL AUDITORS 1. Weaknesses in the following areas have proven in the past to be prevalent and require particularly close scrutiny. a. Terms of Reference (TOR). Review the content of all TOR issued to all fund holders to ensure that they accurately reflect the duties required of the incumbent, that they are adequate, comprehensive and meaningful. Ensure that those whose duties involve handling cash have signed a Cash Handling Certificate, an example of which is contained in Annex A to Leaflet 207. b. Contracts of employment. Ensure that all employees have been issued with contracts of employment as appropriate and ensure that they do not exclude statutory rights. c. Assets. Ensure that protection is given to cash and stocks and that keys giving access to these assets are adequately controlled and safeguarded. d. Sales evaluations. Ensure that, wherever trading stocks are held, sales evaluation sheets are raised on the occasion of each stock check and countersigned by both the custodian of the stock and the checking officer. e. Property. Ensure that all property that is either owned, hired or on loan to the fund is entered in a property book and adequately insured. Ascertain that, where required, a depreciation and capitalisation policy has been set and that it is being adhered to. Depreciation and capitalisation of property applies mainly to the largest funds on a unit (eg messes and JRWF). Check with SFAS if unsure which funds are concerned on your unit. f. Supervision. Ensure that the OIC is conducting regulational checks of cash, stock (including cross checking invoices), and where appropriate, gaming machine reconciliations, tickets and subscriptions. In particular, ensure that the OIC is carrying out the required surprise checks of stock at the prescribed frequency, using the correct procedure and that the checks do not coincide with other routine checks. g. Source documentation. Ensure that the OIC has carried out percentage checks of receipted SFAS paying-in proforma against source records (see para 4 below) to ensure that all money received has been paid-in. Is an auditable record of these checks maintained and clear evidence of them left on records inspected? 2. Some of the most successful frauds are the most basic. Often they thrive because fund holders assume that they can trust their staff. You should be aware of: a. Income. The retention or misappropriation of cash (often from disco receipts or gaming machines) is the simplest and most usual form of fraud. Income frauds can be detected by careful monitoring of the regularity of paying into SFAS. 504B2-1 AL3

58 b. Minor expenditure. Small amounts may be appropriated by fictitious payments purchases. Expenditure frauds can be countered by careful checking of signatures for cash payments and invoices to support cash purchases. c. False wages. False wage claims for hours not worked are a common occurrence which can be limited by closer supervision of employees. d. Theft of equipment and stocks. Theft is an area which is sometimes neglected by auditors. Property books may be out of date and security arrangements may not recognise the possibility that fund members could be involved in theft. Ordering and selling stock that does not go through the stock book is a classic fraud that can be prevented by good management. e. Authorisation of payments. Ensure that there is separation of approving and payment authority so that no one person has the ability to authorise their own expenditure. 3. All funds should be working to a financial plan, no matter how simple. This gives the OIC and the fund membership a good framework for managing the fund. You should check: a. Financial plan. Has the fund produced a financial plan for this year that includes, where appropriate, capital fund growth, gross profit percentage targets for bar and other trading stocks, subscriptions, charges and standing grants? b. Extraordinary General Meeting (EGM). Has the plan been approved by members at an EGM held prior to the start of each financial year, and are the details recorded in the minutes? c. Monitoring. Does fund management compare actual achievement against the targets in the plan? Is the monthly financial statement discussed in committee? 4. The number of books of account used by individual funds depends on the complexity of their activities. However, the following aspects will be common. a. Source records Coin operated machines. Messes, subsidiary activities and banked funds are required to maintain records for various coin-operated amenities such as gaming machines, telephones and washing machines. Each time these machines are emptied, the value of the cash removed is recorded in the relevant register. The cash is passed to the Mess Manager/Fund Treasurer who issues a receipt. The money is then paid into SFAS and the paying in slip stamped and signed. b. Ticket sales and subscriptions. This system applies equally to the collection of subscriptions, the sale of tickets etc. Every transaction should be recorded in a suitable register or cashbook and the cash takings paid to SFAS for credit to the fund's account. As an auditor you are required to ensure that whenever cash is transferred from one person to another, receipts are issued, the transactions are correctly recorded, the amounts involved correspond and there is not unnecessary delay in monies being passed from one stage to the next. c. Bar and other trading stocks. Trading activities such as alcoholic bars, JRWF shops, 'tea swindles' and souvenir or memorabilia accounts must record all stock purchases, sales and issues in an appropriate stock book. These books, and supplementary records such 504B2-2 AL3

59 as order books, wastage books, sales evaluation sheets and transfer details, have to be audited. It is your job to ensure that all purchases, whether for cash or credit, have been properly authorised and are correctly recorded, and that all issues and sales can be reconciled with cash paid in and stock on hand. d. Property. All property and consumable stores with a reasonable life must be recorded in a suitable book so that regular supervisory checks can be carried out and noted. 5. Computer systems of various sizes are increasingly common in Service Funds accounting. Some of the systems such as the SAGE Financial Controller or BACCHUS (Bar Accounting Checking and Updating System) comprise proven software with a clear and tamper-proof audit trail. Others, such as tea bar records kept on spreadsheet packages, present more problems. You should be aware of the following requirements: a. System procedural controls. You should look at the system to see whether it incorporates procedural controls, which have not been superseded by subsequent amendment, and which prevent the user carrying out unauthorised actions. b. System development controls. You should also look at the controls on development and maintenance of the system within the fund or account to satisfy yourself that the end result is a well documented computer system incorporating an adequate trail and properly defined accounting records. c. Administration and organisational controls. Finally you should review the adequacy of controls to promote secure and efficient day to day operation of the computer such as password security, controlled access, back-up of data and programs and maintenance of an operational log. 504B2-3 AL3

60 Back to Chapter Contents Page Back to Main Contents 504B2-4 AL3

61 AP3223 Leaflet 504 Annex B Appendix 3 EXAMPLE LETTER OF APPOINTMENT FROM STATION COMMANDER TO SERVICE FUNDS INTERNAL AUDIT BOARD MEMBERS SERVICE FUNDS INTERNAL AUDIT BOARD 1. You are appointed as a member of the Station Service Funds Internal Audit Board (SFIAB) with effect from and I am aware that the President of the SFIAB (PSFIAB) has issued you with detailed TOR. The purpose of this letter is to emphasise to you the importance which I attach to the vital task of auditing the large number of Service Funds at RAF... Your performance throughout the audit period will have a direct and quantifiable effect on a large important area of station administration and safeguard my responsibility as trustee of the Service Funds on the unit. I therefore require you to carry out your duties thoroughly, to the best of your ability, and in a timely manner. 2. I appreciate that, initially, you may find the prospect of audit work daunting, particularly if you have little or no previous experience. Moreover, like any other responsible duty, auditing can be both time consuming and, occasionally, frustrating. However, your TOR are comprehensive and specialist advice, from the PSFIAB or OC Accts Flt, is always available should you need it. 3. Finally, in the knowledge that auditing duties are both demanding and important, I will insist that an appropriate comment on your performance is made in your annual confidential report. To this end, I have copied my letter to your reporting officer. Your dedication to this task will be fully appreciated by myself and the PSFIAB. Ben Bunter B O Bunter Station Commander Trustee of Service Funds RAF Briton 504B3-1 AL3

62 Back to Chapter Contents Page Back to Main Contents 504B3-2 AL3

63 AP3223 Leaflet 504 Annex C EXAMPLE TERMS OF REFERENCE FOR INTERNAL AUDIT CLERK... (Issued to named Individual) TERMS OF REFERENCE FOR INTERNAL AUDIT CLERK Introduction 1. You have been appointed as the Internal Audit Clerk to the RAF Briton Service Funds Internal Audit Board (SFIAB) which is convened for each audit period... to... You are responsible to me in my role as the President of the SFIAB (PSFIAB) for the arithmetical audit of the accounts (excluding those charitable accounts for which a civilian auditor has been appointed) of all Service Funds which the Stn Cdr has decided are to be subject to internal audit. Aim 2. The aim of the SFIAB is to ensure that Service Funds on this unit are being administered in accordance with APs 3223 and 3223A. Complete copies of these references are available on line in the RAF Publications Library or via SFAS. The SFIAB seeks to achieve its aims by means of a continuous audit throughout the audit period Role of the internal audit clerk 3. Your role as an audit clerk is primarily concerned with the accuracy of the books of account maintained by the various Service Funds activities on the unit for which a civilian auditor has not been appointed. You are to carry out an arithmetical audit of the following funds: Fund Frequency of Audit % Audit Officers Mess Quarterly 1 mth x 100%; 2 mths x 10% SNCOs Mess Quarterly 1 mth x 100%; 2 mths x 10% Junior Ranks Welfare Fund Quarterly 1 mth x 100%; 2 mths x 10% Other major fund eg Quarterly / 6-monthly 1 mth x 100%; 5 mths x 10% etc The audit is to be carried out in conjunction with the SFIAB members assigned to each fund. You are responsible for calling in the books of account at the prescribed frequency basis and are to inform me of any funds which do not submit their books promptly. 4. You are to check the accuracy of entries, calculations, totals and carry forward figures in the books of account and cross refer entries to the source records in accordance with the rules for conduct of the internal audit detailed in AP3223 Leaflet 505. All items which you check are to be ticked or initialled and you are to sign or stamp the point up to which each audit is conducted. 504C-1 AL3

64 5. You are also to check the accuracy of gaming machine reconciliation statements and to test the GPP calculations for trading activities. You are responsible for keeping up to date the check sheet for Service Funds contained in the audit file for each fund. You may also be required to conduct independent stock checks of trading activities at my direction. 6. Following your audit you are to raise a comprehensive audit report on your findings which is to be forwarded to the OIC for their action and assurances that action has been initiated or completed in respect of the observations raised. Where your audit reveals weakness in the management of the funds, these are to be reported to the SFIAB member for further action. Each audit report raised by you is to be copied to me and the appropriate SFIAB member for information. You are also to maintain a progress chart in respect of your audit reports showing when the report was raised, when dispatched to the OIC, when responded to and the date cleared which should be available for my scrutiny. 7. Conscientious undertaking of the arithmetical audit should reduce the possibility of fraud and other criminal offences; however, if you do discover anomalies which you cannot resolve or a high error rate, you are to advise me as soon as possible. 8. In addition to your arithmetical audit, you are required to carry out the annual health check (AHC) on all funds with an annual income between 5,000 and 9,999 exempted from full audit by the Stn Cdr. Delete this paragraph if the Audit Clerk is not required to undertake the AHC. 9. The standard of internal audit required by the RAF, and the Stn Cdr, is high. Your audit duties are to be undertaken in a reliable and professional manner and all your audit work should be conducted in a consistent and accurate fashion. Signed.. Name Rank. PSFIAB Certified I have received, read and understood my Terms of Reference as the Audit Clerk to the RAF Briton SFIAB. Signed (Recipient) Name.. Date Note: Two copies of this document must be signed by both parties, and one retained by each. 504C-2 AL3

65 Back to Chapter Contents Page Back to Main Contents 504C-3 AL3

66 AP3223 Leaflet 504 Annex D RETURN OF SERVICE FUNDS CALLED FOR BY QR 75(4) FINANCIAL YEAR 20XX/XY Name of Fund or Account Cash Holding Limit/s (See Note 1) Stock Holding Limit/s (See Note 1) Gross Annual Income in Current Audit Year (See Note 2) VATable Income in Current Financial Year (See Note 3) VAT Status of Fund in Current Audit Year (See Note 4) Frequency of SFIAB Audit in Current Audit Year (See Note 5) MEMORIAL AWARD/PRIZE FUNDS Name of Memorial Award/Prize Fund Legally Appointed Managing Trustee(s) Gross Annual Income in Current Audit Year (See Note 2) Frequency of SFIAB Audit in Current Audit Year (See Note 5) Notes: 1. Cash and stock holdings limits should match those covered by unit insurance policy. 2. Expected total of all income, regardless of source, to the fund by the end of the current financial year. 3. Total of all standard and zero rated VATable inputs during the financial year. 4. Explain whether unregistered, independently registered or registered as part of parent fund. 504D-1 AL3

67 5. Quarterly, 4 monthly, half yearly, Annual Health Check or exempt audit. Back to Chapter Contents Back to Main Contents Page 504D-2 AL3

68 AP3223 Leaflet 504 SERVICE FUNDS INTERNAL AUDIT BOARD - DIARY OF ACTIONS Annex E Month Action Remarks Reference Issue order (traditionally an SRO) calling for Return of Service Funds iaw QR 75(4) in preparation for new FY. Complete QR 75(4) Return for new FY. Trustee (Stn Cdr) to issue Terms of Reference (TOR) for President of the Service Funds Internal Audit Board (PSFIAB). Required for Form 2 and to prepare Stn Cdr s list detailing audit requirements for new FY. New TOR to be issued before start of every FY, or where there is a change of PSFIAB Annex A Stn Cdr to provide PSFIAB with list of funds to be audited, those to be subject to annual health checks (AHC) and those exempted audit for the new FY. May be issued as annexes to TOR. Trustee to decide on frequency of audit required (quarterly audits recommended) PSFIAB to prepare TOR for SFIAB members for new FY and review TOR for Internal Audit Clk. Audit Clk s TOR to include updated list of funds required to be subject to audit or AHC. TOR for SFIAB members to include requirement to carry out arithmetical checks and AHC where no audit clerk appointed. Annex C Annex B para 1 SFIAB to include at least one Pers (Spt) officer Issue letter of appointment to civilian auditors or independent Leaflet References relate to Leaflet 504 unless otherwise stated 504E-1 AL9

69 Month Action Remarks Reference 1 examiner if applicable. Promulgate composition of SFIAB for new FY. Start of Financial Year. To be published in SROs prior to the first working day of the audit period. Changes to composition of SFIAB to be promulgated as and when they occur. Hold initial SFIAB meeting on first working day of the FY Issue TOR and audit schedules to SFIAB members. Notify arrangements for 1 st Qtr s audit. Annex B Appendix 1; Leaflet 505; Annex A to Leaflet 505 Produce Audit Progress Chart. 2 Monitor completion of audits. 1 st quarter audit in progress. 3 Monitor completion of audits. 1 st quarter audit in progress. End of First Quarter. Hold Audit Board Meeting to review progress. 4 Notify arrangements for 2 nd Qtr's audit. 5 Monitor completion of audits. 2 nd quarter audit in progress. 6 Monitor completion of audits. 2 nd quarter audit in progress. End of Second Quarter. Hold Audit Board Meeting to review progress. 7 Notify arrangements for 3 rd Qtr s audit. 8 Monitor completion of audits. 3 rd quarter audit in progress. 9 Monitor completion of audits. 3 rd quarter audit in progress. End of Third Quarter. Hold Audit Board Meeting to review progress. 10 Notify arrangements for 4 th Qtr s audit. Annex F E-2 AL9

70 Month Action Remarks Reference 1 11 Issue order (traditionally an SRO) calling for Return of Service Funds iaw QR 75(4) in preparation for new FY. Complete QR 75(4) Return for next FY. Monitor completion of audits. Monitor completion of audits. Required for Form 2 and prior to issue of Stn Cdr s list detailing audit requirements for new FY. 4 th quarter audit in progress. 4 th quarter audit in progress Trustee (Stn Cdr) to issue Terms of Reference (TOR) for President of the SFIAB (PSFIAB). Stn Cdr to provide PSFIAB with list of funds to be audited, those to be subject to annual health checks (AHC) and those exempted audit for the new FY. New TOR to be issued before start of every FY, or where there is a change of PSFIAB. May be issued as annexes to TOR. Trustee to decide on frequency of audit required (quarterly audits recommended). Annex A PSFIAB to prepare TOR for SFIAB members for new FY and review TOR for Internal Audit Clk. Audit Clk s TOR to include updated list of funds required to be subject to audit or AHC. TOR for SFIAB members to include requirement to carry out arithmetical checks and AHC where no audit clerk appointed. SFIAB to include at least one Pers (Spt) officer. Issue letter of appointment to civilian auditors or independent examiner if applicable Leaflet 501 To be published in SROs prior to the first working day of the audit period. Changes to composition of SFIAB to be promulgated as Promulgate composition of SFIAB for new FY and when they occur. End of Financial Year. Hold SFIAB Meeting to review progress Commence collation of information required for Form 2. Leaflet Progress completion of Form Finalise completion of Form 2. a. To be submitted to Stn Cdr, through OC BSW, by no later E-3 AL9

71 Month Action Remarks Reference 1 than 10 weeks after the end of the audit period. Leaflet 506 b. Submit copies of audited annual balance sheets and SFIAB certificate of correctness to major funds for ratification at their Annual General Meetings. Leaflets 601; 60101h and 70201g 504E-4 AL9

72 Back to Chapter Contents Back to Main Contents Page 504E-5 AL9

73 AP3223 Leaflet 504 AUDIT PROGRESS CHART TEMPLATE Annex F Fund or Activity Auditor Audit Due Audit Completed Hastening Action OIC Reply Hastening Action Cleared SFAS Officers Mess SNCOs Mess JRWF Sports & Social Club Flt Lt Backus 7 Sqn (Ext 4343) Flt Lt Winfield Cat Sqn (Ext 5327) Fg Off Hunter ATC (Ext 5877) WO Learner 18 Sqn (Ext 4455) Flt Lt Mackenzie Flt Ops (Ext 5656) Period 1 Period 2 Period 3 Period 4 Period 1 Period 2 Period 3 Period 4 Period 1 Period 2 Period 3 Period 4 Period 1 Period 2 Period 3 Period 4 Period 1 Period 2 Period 3 Period 4 504F-1 AL3

74 Back to Chapter Contents Back to Main Contents Page 504F-2 AL3

75 AP3223 Leaflet 505 CONDUCT OF THE INTERNAL AUDIT Introduction It must necessarily be for the President of the Service Funds Internal Audit Board (PSFIAB) to decide the programme for each audit and the extent of the check on accounting records. Nevertheless, an audit is valueless unless it is conducted intelligently and by a systematic programme of checking, such as will enable the audit board to certify, within reasonable expectations, that the books and accounts are correct. The president is therefore to ensure that details of income as well as expenditure are properly and comprehensively checked. The percentage check of specific items may be varied as circumstances dictate but when a percentage check reveals a number of errors; a full check is to be carried out. Only when no errors are found after a substantial percentage check can the rest of the entries be assumed to be correct. To assist the president in formulating an audit programme and for the guidance of audit boards generally, the paragraphs which follow set out the checks which should normally be made. Where civilian auditors are employed much of the detailed work may be entrusted to them in accordance with Leaflet 501. Preliminary checks Balance sheet for previous period. As part of the SOY audit process, the SFIAB is to obtain the balance sheet for the previous audit period. The board must perform the following checks against the books of account (whether computerised or manual) to ensure that the balances have been brought forward correctly in the accounts for the new period: a. Cash and bank balances are to be checked against the opening balances in the cash book. b. The balances of funds, stocks, investments, etc are to be checked against the balances shown in the respective accounts in the Sage nominal ledger or the manual impersonal ledger. c. The amounts shown against each name in the schedule of creditors are to be checked against the balances brought forward in the Sage or manual personal ledger accounts (or in the Sage or manual purchases book when a personal ledger as such is not maintained). d. The total of mess bills outstanding is to be checked with the totals shown in the computerised mess bill package or summary of charges book e. The amounts shown against each name in the schedule of debtors are to be checked against the balances shown in the Sage or manual personal and impersonal ledgers (or in the Sage or manual purchases book where a personal ledger as such is not maintained) List of books to be checked. At the start of the audit period the president of the audit board will receive from the stn cdr a list of the funds and activities to be audited. Using that list, the president is to obtain from each fund or activity a list of the accounting records used by them and is then to ensure that all accounting records are examined during the course of the audit AL12

76 Internal control and management The use of a comprehensive system of internal control by management will normally uncover errors and fraud at an early stage and may certainly do much to prevent their occurrence in the first place. The SFIAB is therefore to examine the system of internal control in operation, paying particular attention to the points set out in para 50505, and is to draw the attention of the officer responsible for the fund to any apparent weaknesses in the system Checks. The SFIAB s examination of the internal control system operated by managers should include: a. Clearance of previous observations. Have the observations made by the previous audit board been cleared? b. Standard of bookkeeping. Examine the Sage or manual accounting records to ensure that they are up to date, well documented and maintained; Sage accounts are to be maintained in accordance with the requirements of AP3223A and must conform to the standard layout for RAF accounts. Where manual records are maintained any erasures or obliterations are to be investigated. c. Control and security of cash. Check that: (1) Up to date written instructions have been issued to all persons whose duties involve the handling of cash and that the instructions detail their responsibilities for the safe custody and paying in of cash received. Check that where Service personnel and civilians handle cash the provisions of Leaflet 207 have been met. (2) Cash holding limits have been set by the stn cdr or other authorised person and notified in writing to all concerned (Leaflet 102); examine the cash records to ensure that the limit has not been exceeded and that it remains realistic. (3) Cash takings from bars, gaming machines, messing receipts, telephone and regular activities, eg tombola, dances etc, have been cleared and paid to SFAS or the appropriate fund holder at the earliest opportunity. (4) Cash holdings are kept to a minimum and that cash is banked frequently. (5) Cash has been subject to routine and surprise checks in accordance with the procedure set out in Leaflet 106. (6) The proper procedures have been carried out for the handover and takeover of funds during both the temporary absence of fund holders and on permanent transfer of control and that the appropriate certificates have been raised; Leaflet 106 refers. (7) Serially numbered receipts have been issued for all cash received and that receipted bills were obtained for all cash purchases; Leaflets 217 and 405 refer AL12

77 (8) The issue of cash floats has been correctly recorded (in the back of the cash book where a manual system is operated see Leaflet 405) and each float has been issued against a current signature. (9) Fidelity guarantee insurance cover has been taken out; Leaflet 211 refers. (10) Personal cheque encashment procedures are in accordance with the provisions of Leaflet 212. d. Control of expenditure and stocks. Check that: (1) Invoices are cross-referred to the relevant delivery notes and stock books. (2) Stock holdings have been consistent with normal consumption (see Leaflet 305) and that mandatory stock checks (see Leaflet 205) have been carried out at the prescribed frequency and using the correct procedures. (3) Stock records have been well maintained (investigate any erasures, obliterations or large scale amendments) and are up to date, that surpluses and deficiencies were recorded in the stock books and that these have been investigated by the officer responsible. e. Control of debtors. Ensure that the correct hastening action has been taken in respect of outstanding mess bills (see Leaflet 611) and check that there is an effective system for hastening action and control over outstanding payments such as JRWF garage rents, repayments to the CO's Benevolent Fund, etc. f. Terms of Reference. Check that current terms of reference have been issued to every non-public fund and activity official, that they have been addressed personally to the recipient and signed by the issuing officer and the recipient (see Leaflet 107). g. Particulars/Contracts of Employment. Check that current Statements of Particulars of Employment or Contracts of Employment have been issued to every Service Funds employee and that they have been signed by the issuing officer and the employee. h. Contracts and Rental Agreements. Check that all contracts and rental agreements have been entered into in accordance with Leaflet 216. i. Property. (1) Ensure that property checks have been carried out as required by Leaflet 209. (2) Ensure that no items of property have been written-off without proper authority (see Leaflet 209). (3) Check that the property has been re-valued for insurances purposes prior to the renewal of the insurance policy and on the acquisition of new items (see also k(3) below). (4) Check that all capital property has been professionally revalued within the last five years, for accurate recording of assets in the balance sheet (see Leaflet 209) AL12

78 j. Gaming machines. Ensure that gaming machines have been administered in accordance with the requirements of Leaflet 223; examine the disposal of profits. k. Telephones and coin operated machines. Check that these have been administered as directed in Leaflet 223 paying particular attention to the control of bulk stocks of phonecards. l. Insurance. Examine insurance policies and check adequate cover exists for: (1) Employers' liability in respect of employees. ( 5million). (2) Public liability in respect of members of the public. ( 10 million). (3) All risks and fire and theft cover, as appropriate, for property (including nonpublic buildings). (4) Fire and theft cover for stocks. (5) Fidelity guarantee cover for employees handling cash or stocks. (6) Cash losses, including cash in transit. (This may be linked with the fidelity guarantee at (5) above). (7) Direct debit indemnity cover is held where mess bills or other recoveries are made by direct debit. (8) Legal expenses cover is held when any Service Funds employ civilian staff. Also check the date the insurance cover was last reviewed and that all premiums are paid up to date. Leaflet 211 gives detailed guidance on all aspects of Service Funds insurance. m. Keys. Check the arrangements for the control of keys (see Leaflet 213). n. By-products account. Check that this account is being administered in accordance with the regulations laid down in the Manual of Catering, (AP3344 Chap 13). o. VAT (UK only). Check the taxable turnover of each Service Funds account, including subsidiary activities, to ensure that where there is a liability to register the fund/account for VAT purposes with HMRC, this has been done. Audit of cash and bank transactions The cash book balances will have been reconciled by the previous audit board before start of business on the first day of the new audit period. During the period under audit monthly and surprise checks will also have been carried out by the fund and station management. These checks, however, simply test the accuracy of the cash book against the cash and bank balances; they do not confirm the accuracy of posting to and from the cash book nor do they provide for detailed check of each entry. In consequence it is likely that errors, such as omissions from the cash book or errors of commission (eg transposition of amounts), may not be revealed. The SFIAB is therefore to check all cash books and other cash records to confirm that the entries are accurate; AL12

79 that they are supported by authentic vouchers and that they have been posted correctly to the personal and impersonal ledgers Cash book. Instructions for the maintenance of the Sage cash book are contained in AP3223A. Instructions for the maintenance of manual cash books are given in Leaflet 405. The type of cash book in use will vary with the size of the fund or activity; there may be separate cash books for the cash and bank accounts, both accounts may be controlled from within the one book and in the case of Service Funds which bank with the SFAS, it is most likely that the bank column will be headed 'SFAS' and used to record payments to and receipts from the SFAS cashier. The audit board is to pay particular attention to: a. Additions. Arithmetical additions are to be checked to ensure that the totals are correct and accurately carried forward from page to page etc. b. Analysed cash books. Entries in an analysed cash book are to be checked to ensure that they have been correctly entered in the departmental columns and that crosscastings are correct. c. Postings. For manual accounts only, check postings between the cash book and the personal and impersonal ledgers, both for accuracy and checking that the amounts have been entered into the correct accounts. Where a separate personal ledger is not maintained, postings should be checked to the purchases book. d. General. Check for frequent errors, erasures, delays in recording receipts, frequent delays in banking cash receipts etc all of which could hide an illegal manipulation of funds Bank account. When examining the bank account entries, in either manual or Sage cash books, the SFIAB is to carry out the following checks. a. Payments. (1) Compare entries in the cash book with those in the bank statements. (2) Ensure that payments by cheque are supported by an appropriate statement or bill annotated with the number of the cheque, that payment has normally been made within 30 days of presentation of the statement or bill and that advantage has been taken of any discounts available. (3) Examine payments by direct debit, standing orders, etc and ensure that the authority for payment still exists and is valid. (4) Check contra entries. (5) Test check a number of payments against the cheque book stubs. (6) For manual records only, ensure that the cashier has signed the cash book against an entry for the receipt of cash received as a result of a cheque encashment at the bank. b. Receipts AL12

80 (1) Compare entries in the Sage cash book or manual cash book with those in the bank statements. (2) Check contra entries. (3) Ensure that receipts paid directly to the bank account, ie interest, are recorded in the cash book Cash Account. The cash account is to be checked as follows: a. Payments. (1) Ensure that cash payments are supported by a receipted bill or statement bearing a receipt for the goods/services and the authority for payment. (2) Examine supporting vouchers to ensure that any discount allowable at the time of payment has been received. (3) Examine vouchers supporting purchases of stock or property and check that the details have been entered in the stock or property book as appropriate. (4) Check that a receipt has been obtained for monies paid into the bank this applies where the bank account is held separately from SFAS. Check particularly the date of the entry in the cash book and the date of receipt by the bank. (5) Check amounts paid to the bank against the paying-in slip counterfoils. (6) For manual records only, ensure that a signature has been obtained in the cash book for the transfer of any monies to a subsidiary cash book. b. Receipts. (1) Check contra entries. (See also para 50508a (6)). (2) Ensure that receipts are supported by a voucher (eg paying-in slips) or receipts given in a subsidiary record (eg the daily cash takings book), and check vouchers against the corresponding entries in the source records, eg Gaming Machine Register, Sales Evaluation Schedule (Bar), Receipt Books (Messing), etc, paying particular attention to the dates on each entry. The procedure for checking entries in the daily cash takings book is given in para Subsidiary cash book. The procedure for checking a subsidiary cash book is identical to that given in paragraphs and above Petty cash book. Instructions on the use of the petty cash book are given in Leaflet 405. When checking a petty cash book the audit board member is to: a. Examine amounts transferred from the main cash book and confirm that they have each been signed for against the appropriate entry in the main cash book AL12

81 b. Check that appropriate vouchers exist in support of each item of expenditure. c. Check that expenditure has been correctly analysed and posted to the appropriate departmental accounts in the impersonal ledger. (For Sage computerised accounts, postings should be to the appropriate nominal codes in the nominal ledger.) d. If cash purchases of property or stock have been made, check that the details have been entered in the property or stock book. e. Check arithmetical accuracy Postage book. The postage book provides a record of a fund's expenditure on postage and is to be checked as follows: a. Compare amounts shown as transferred from the main cash book with the corresponding entries in that cash book, and confirm that each entry is supported by a signed receipt. b. Check that expenditure has been correctly analysed and posted to the appropriate departmental accounts in the impersonal ledger. (For Sage computerised accounts, postings should be to the appropriate nominal codes in the nominal ledger.) c. Check additions Wages and gratuities book. The wages and gratuities book (see Leaflet 221) will either take the form of a book or a series of acquittance rolls which should be held in serial number order. When checking the wages and gratuities book the audit board is to: a. Confirm that cash payments are being made against the signature of the employee or are supported by a request for payment by proxy affixed to the page or acquittance roll. b. Check that the employees listed in the wages and gratuities book actually exist. c. Where bulk sums of cash are drawn to pay wages or gratuities (usually associated with acquittance rolls) to a number of employees, check that the total of individual payments made corresponds to the total cash drawn. d. Check calculations of amounts deducted for PAYE and NI and compare these with the amounts shown on individual Tax and National Insurance cards. e. Check that rates and amounts paid have been authorised by cross reference to minute books and Statements of Particulars of Employment/Contracts of Employment. f. Where acquittance rolls are used, check that they are all accounted for by reference to the master list maintained by the fund clerk Gaming machine records. A check of gaming machine records is to include: a. A comparison of the amounts shown in the gaming machine register as having been paid in with the corresponding entries in the cash book AL12

82 b. A check of the arithmetical accuracy of the gaming machine register. c. Confirmation that entries in the gaming machine register are signed by two people. d. Confirmation that any deficiencies between the monthly meter readings and the total cash removed from the machines are within the limits set by the stn cdr. d. Confirmation that the disposal of gaming machine profits is being effected in accordance with the provisions of Leaflet 223 and that the authority is still current Coin-operated machines. The checks to be performed on the records for coinoperated machines ( Leaflet 223) are virtually identical to those required for gaming machine records (see paragraphs above). The standard format of the register for recording the proceeds from coin-operated and telephones machines is shown at Annex A to Leaflet 223. The audit board may find that some coin-operated machines are supplied with metering devices although others are not. Telephones do not have such meters. Whilst checking these records the board is to note any excessive fluctuations in the level of income, and any cases where the type, purpose or location of a machine suggests that the takings should be higher than shown Daily cash takings book. During their examination of the daily cash takings book the audit board is to: a. Check the amounts of casual cash receipts against the supporting vouchers or records. b. Check cash received from the bar against the sales evaluation schedules. c. Compare cash received from gaming machine takings with the corresponding entry in the gaming machine register and ensure that a receipt has been given in that register. d. Check that cash paid to the OIC (the fund holder) or SFAS is signed for and that the amounts are written in both figures and words. e. Compare payments to the fund holder or SFAS with the corresponding entry in the cash book, paying particular attention to dates and that payments are made regularly so that excess funds are not retained by the subsidiary holder. f. Check amounts received for mess bills against the amounts shown as due in the subscriptions and charges book. g. Check the addition of columns and cross casts and ensure that totals carried forward have been copied correctly. h. Check postings to the impersonal ledger. Trading activities The trading activities of messes and clubs normally provide some of the most important sources of income; unfortunately, these activities tend to be susceptible to loss through either fraud or theft. It is therefore essential that the procedures for handling and accounting for AL12

83 cash and stock are strictly complied with. The SFIAB's task is therefore twofold; firstly it has to examine the accounts of trading activities to be satisfied as to their accuracy; and secondly, it has to review the procedures used in processing each type of transaction and advise management of the need to resolve any problems arising from the processing of cash, invoices, etc The Purchase Book (Sage and Manual). The audit board is to check: a. Invoices. (1) That invoices are franked with the control stamp (see Annex A to Leaflet 703) and that each section of the stamp is being completed by a responsible official who has certified that the invoice is correct and that the goods have been received. (2) Each invoice against the order books and minute books (where necessary) to ensure that expenditure is properly authorised. (3) That trade discount has been deducted from the suppliers' invoices, where applicable, and only the net amount has been entered in the purchases book. (4) That when property or stocks have been purchased, appropriate entries have been made in the property or stock books. (5) That the total of each trader's invoices received during a month agrees with the amount shown in the trader's monthly statement. (6) That transactions which affect more than one fund (SFAS only) or nominal code (for messes and JRWF) have been analysed into the correct departments. b. Returns and credits. (1) Where stocks and property are returned, appropriate entries have been made in the property or stock records. (2) Returns and credit notes for each trader have been reflected in the trader's monthly statement, and they have been entered in the returns section of the purchases book or, alternatively, deducted from the totals of the traders' invoices entered for the month. c. General checks (manual records only). (1) Arithmetical accuracy including cross-casts (where applicable). (2) The postings of totals to the impersonal and personal ledgers. (3) Where the personal ledger has been discontinued: (a) The individual postings from the cash book. (b) That the amounts due to traders at the end of the audit period agree with the creditors and debtors' schedules which support the current balance sheet AL12

84 Stock Records. When checking the Bacchus (or other) computerised stock record or manual stock books for mess or club bars the audit board is to perform the following: a. Cellar stock record. (1) Confirm that the balances brought forward are correct. (2) Check the details of stock received from invoices, paying particular attention to the invoices for stock received at the end of the audit period to ensure that the delivery dates quoted on the invoices correspond to the receipt dates recorded in the stock book. (3) Confirm that the dates and quantities of stock issued agree with receipts shown in the bar stock book. (4) Check the issues for home consumption sales against the issue vouchers and the summary of charges book. (5) Check that independent and surprise stock checks have been carried out in accordance with Leaflet 205. (6) Check the arithmetical accuracy (not necessary for Bacchus) and compare the stock record with the stock certificate given by the responsible official. b. Bar stock book. (1) Confirm that the balances brought forward are correct. (2) Check the details of stock received from invoices and/or cellar stock record and that delivery dates quoted on invoices/dates of issue from the cellar correspond with the date that items are entered in the bar stock record. (3) Confirm the unit quantities at which stock is brought on charge, eg tots per bottle. Any commodities brought on charge at less than the unit quantities are to be investigated. (4) Check sales evaluation sheets; compare with the monthly totals of credit sales (messes only) and/or cash takings and wastage allowances; ensure any difference is within tolerance limits. (5) Ensure that entries relating to issues to official guests are supported by the signature of an authorised official in the mess or club guest book. (6) Confirm that entries for losses, wastage, gratuities, free drinks, etc are recorded in the appropriate record book, supported by the signature of a responsible official, and that these amounts are within his delegated powers. (7) Ascertain the date on which the stock was checked at the end of the audit period and, by reference to the purchases book, confirm that all receipts into the bar are supported by corresponding entries in the purchase book, and that no goods received after this date have been entered in the purchases book during the period under review AL12

85 Similarly, check that receipts for stock sold after the date have not been entered in the bar account for the period under review. Inclusion of these figures will result in a distortion of the gross profit percentage achieved. (8) Check that items issued free or sold at reduced prices have been properly authorised and where necessary, adjusting action has been taken in the bar account to allow for any distortion to the gross profit percentage. (9) Check the arithmetical accuracy (excluding Bacchus) and investigate alterations and erasures. (10) Check that independent and surprise stock checks have been carried out in accordance with Leaflet 205. (11) Compare the book stocks at the end of the period with the certified stock list provided by the responsible official Daily/weekly charges book (messes only). The audit board is to check: a. Charges entered for messing, liquor sales, etc with the casual meal register, individual bar books, and other subsidiary records. b. The payments made by individual members, against the cash book. c. That the correct rates of subscription are being charged against members. d. Postings to the computerised or manual summary of charges book. e. The arithmetical accuracy of manual records Subscriptions and charges book (messes only). During the examination of the manual and computerised subscriptions and charges book (SCB) the audit board is to: a. Check the arithmetical accuracy including the cross-casts of manual records. b. Check the postings to the Sage nominal ledger or manual impersonal ledger accounts. c. Ensure that the receipts recorded in the computerised or manual summary of charges book have originated from Sage or manual cash book entries and that the same date is shown in both records. d. That the correct subscription rates have been charged and accounts opened for all members. e. The amounts charged to members from subsidiary books, eg casual meals register or banked funds charges. Where errors are found the test check is to be extended until the board is satisfied as to the accuracy of the record. f. The totals of cash payments by members with the entries in the daily cash takings book/subsidiary cash book AL12

86 g. Compare the total for outstanding mess bills with the figure shown on the balance sheet and ensure that the mess bill control account has been reconciled where differences between the value of outstanding mess bills and the Sage balance sheet and the computerised mess bill package exist. An observation is to be raised for any mess bill outstanding for more than one month. h. Confirm that a list of outstanding mess bills has been forwarded to the PMC/CMC/stn cdr by the 20th day of each month. Subsidiary activities, Banked Funds and Memorial Award/Prize Funds Subsidiary activities, Banked Funds and Memorial Award/Prize Funds at stations vary considerably in size and function according to their objects, and it is, therefore, impossible to develop a standard programme of audit checks. Nevertheless, it is very important that the records of subsidiary activities, banked funds and memorial award/prize funds are thoroughly checked during the course of an audit and, to this end, audit boards are to produce individual programmes of checks, applicable to their own station, by: a. Obtaining the list of Service Funds on the station as called for by the stn cdr (QR75(4)) at the start of the audit period. b. Verifying that the gross annual income of those funds which have been exempted from audit by the stn cdr remains below the 10,000 limit; and ensuring that an annual health check (AHC) has been carried out on any such funds with gross annual income between 5,000 and 9,999. c. Requesting the officers in charge (OIC) of the funds to be audited to provide lists of the books of account and associated records maintained by their fund. In the case of the messes and JRWF, OICs must also provide details of all subsidiary activities within their fund together with the name of each subsidiary OIC. d. Requesting the OIC of each subsidiary activity to provide a list of the books of account and associated records maintained. e. Pursuing a programme of checks covering all books and records notified at c and d above: any relevant books and records discovered which have not been listed by the OIC should, of course, also be examined Checks. The accounting records maintained by subsidiary activities, banked funds and memorial award/prize funds will, generally, be similar to those kept by the major Service Funds: eg cash book, petty cash book, stock books, subscription registers, minutes books and property books, (although operated in most cases on a much smaller scale) and the detailed checks which must be carried out on the books are listed elsewhere in this chapter. Other records, eg tombola records, petrol sales and stock accounting records held by car clubs, and bowling centre accounts may, however, differ from the standard form of documentation. Whatever form the record takes, the basic principles of Service Funds accounting still apply and the audit board is to refer to the appropriate leaflets contained in this manual for guidance on the administration of and accounting for the more specialised activities AL12

87 Non-listed activities. In addition to checking the accounting records revealed by the QR75(4) return (and any others which may subsequently be discovered), the audit board is to draw the attention of the stn cdr to any area of accounting and/or administration in which permanent records are not being maintained and where their introduction would be beneficial. The nominal ledger After the individual postings to the personal and impersonal ledgers have been checked from the books of prime entry, the ledgers themselves are to be examined and checked. The balances at the end of the period are to be checked against those shown in the trial balance. In the case of the impersonal ledger, it is not sufficient for the audit board merely to check the arithmetic; they must ensure that reserves have been correctly made for all outstanding liability, that income and expenditure is reasonable in comparison with the previous period, and has been allocated to the correct accounts. The audit board is also to satisfy itself as to the reasons for undue surpluses and deficiencies and comment on any irregularities The personal ledger. When examining the personal ledger accounts the audit board is to check: a. Traders' monthly statements and compare the balances with the entries shown in the accounts (see also 50518a(5)). b. Arithmetical accuracy (manual records only), including balances brought forward. c. That the double entry has been completed for adjustments for discount, etc. d. That transactions affecting more than one fund are recorded in all the accounts concerned. e. The details of creditors and debtors agree with the figures shown in the balance sheet at the end of the period. f. The reasons why any balance is outstanding for over 2 months The impersonal ledger a. Standard checks for all impersonal accounts. When examining the impersonal ledger the audit board is to check the accounts and confirm that: (1) The fund or activity still exists. (2) All inter-account transactions have been correctly authorised and actioned in the accounts concerned. (3) The double-entries for each posting shown in the accounts appear elsewhere in the accounting records. (Note: by this stage all postings to the impersonal ledger will have been checked and those shown as unchecked in the accounts should only relate to inter-account transactions at (2) above) AL12

88 (4) The carry forward of balances, accruals, etc throughout the period has been correctly actioned. (5) Provisions have been created to account for income due but not received and for all liabilities outstanding at the end of the period. (6) The account is arithmetically accurate. (7) The fund is not in debt. (8) The balances agree with those shown in the trial balances. In the case of the major impersonal accounts, eg bar and gaming machines, a number of additional checks are to be made which are specific to each account and which must be carried out at the same time as those listed above; details are given in sub-paragraphs b to f below. b. Capital account. As the transfers of surpluses and deficits (equivalent to profits and losses) from other impersonal accounts will not be entered in the capital account until after the end of audit period trial balance has been prepared, the audit board is advised to defer its examination of this account until the final details have been entered. In checking the capital account the board is to: (1) Compare the balance at the beginning of the period with that shown in the balance sheet for the last period. (2) Examine the authority for the payment of capital expenditure. (3) Compare the final balance with that shown on the balance sheet. (4) Ensure that unrealised profits/losses have been correctly actioned. c. Bar and other trading accounts. The audit board is to check: (1) The value of stock at the end of the month/period with the certificate signed by the stockholder and with the stock books. (2) That the percentage of gross profit (achieved) for each month (see Leaflet 309) is in accordance with mess or club policy on bar profits and that satisfactory explanations are obtained in respect of discrepancies in excess of the limit laid down in para (3) That, at the end of the audit period, the balances of the trading income and expenditure, (after having provided/accrued for known future income/expenditure), are transferred to the capital account. (4) Where the bar is contractorised, ensure that the contractor provides the mess with a monthly bar trading account and an annual audited bar trading account as specified at sub-sub-para 21955a(2), and that the bar officer has been carrying out the random checks of contractor invoices against bar selling prices (sub-sub-para 21955b(1)) AL12

89 d. Subscription income (messes and clubs). When auditing the subscription income, the audit board is to check that the subscriptions charged are adequate to cover normal expenditure. e. Maintenance expenditure. The audit board is to: (1) Check that amounts debited are appropriate to the account. (2) Where maintenance stock records are maintained, check the value of stock held at the end of the month/period with the certificate signed by the stockholder and with the stock book, and consider whether excess stock is being held. Verification of assets and liabilities One of the most important parts of the audit is the verification of the assets and the liabilities appearing in the balance sheet. It is not sufficient merely to check that the entries in the balance sheet correspond to the balances remaining in the books of account. It is the auditor's duty to verify that the assets shown in the books of account really exist and that amounts shown as liabilities are the amounts due to the creditors concerned Cash and bank balances. The balances of cash in hand and at bank (including in deposit accounts) as at close of business on the last day of the audit period are to be checked and verified by the audit board before the start of business on the first day of the next audit period. In addition, the fund control account reconciliation is to be checked and agreed. With regard to deposit (or other interest bearing) accounts, the board is to check the amount of interest credited to the account during the audit period and that due allowance has been made for interest due but not received: the balance shown in the balance sheet should be that shown on the bank certificate; any interest due but not received by the last day of the audit period is to be treated as a debtor (see para 50531c(i)) Investments. In order to verify investment holdings the audit board is to: a. Examine investment certificates or, where these are held by the bank, confirm with them that they hold the certificates free from any restrictions as to title. b. Obtain from the bank the names of the persons holding title to the investments together with details of who may negotiate the investments. c. Where money has been invested in Common Investment Funds, obtain confirmation of the amount currently invested by the particular Service Fund. d. Confirm that the investments held conform to the stn cdr's written investment policy (see Leaflet 115) Debtors. The audit board is to examine the amounts shown on the balance sheet as debtors and, in particular, carry out the following checks: a. Mess bills. Check the amounts outstanding for over one month to ascertain the reasons for non-payment and confirm that recovery action is being taken. Verify that the mess bill control accounts have been reconciled AL12

90 b. Inter-fund indebtedness. Confirm that the balances due from other Service Funds on the station agree with the amounts shown as owing in the other funds' books. c. Other debtors. Check all amounts outstanding for over one month to ascertain the reasons for non-payment and confirm that recovery action is being taken. (1) Provision for unreceived income. Ensure that provisions have been created for all income relating to the period under audit, but for which actual receipts are expected in the following audit period (eg investment income and bank interest). In this context examine the cash book, statements, etc as to actual receipts in the month following the end of the audit period Stocks. When examining the stock figures the board is to: a. Test the arithmetical accuracy of the certified stock lists and certificates provided by the departmental officials. b. Confirm that the stock is valued at cost price or market value, whichever is the lower, and test a proportion of the prices against current invoices. c. Check the quantities listed in the stock lists against those shown in the relevant stock books at the end of the audit period Pre-payments. Check the original payment vouchers, confirm that the service which has been paid for is still provided and check the computation of the unexpired value of the payment as shown on the balance sheet Property checks. At the end of the audit period the audit board is to examine the property books of all funds to confirm that checks have been made as specified in Leaflet 209, and that any discrepancies found during the checks have been cleared. The audit board is also to check that property has been valued and appropriate insurance obtained in accordance with Leaflets 209 and Trade creditors. Towards the closing stages of the audit period the PSFIAB is to write to all regular creditors, enclosing a prepaid envelope addressed to him/herself, requesting that they submit a statement of account as at the last day of the audit period. The balances shown on the creditors' accounts are to be checked with the personal ledger (or the modified purchases book where applicable). Any discrepancies are to be investigated and corrected, if necessary, in order that the confirmations agree with the balances shown on the schedule of trade creditors attached to the balance sheet Accrual for outstanding expenses. Ensure that reserves have been created for all expenditure relating to the period under audit, but for which actual payments will be effected in the following audit period. In this context examine the cash book, statements, etc as to payments made in the month following the end of the audit period Banked funds (where applicable eg UAS). Check the balances shown on the balance sheet for each banked fund against those shown in the impersonal ledger accounts AL12

91 Minute books. The minute books of each fund, and those of subsidiary activities, are to be examined to ensure that expenditure recorded in the journal and ledgers has been properly authorised Checks of cash and bank balances. A check of the cash and bank balances is to be made as specified in Leaflet 106, as early as possible on the first working day of the month following the period under audit. The checks are to include all funds and subsidiary activities which operate subsidiary cash books and/or hold floats. During the check of the main cash book the audit board is to note the dates of the surprise checks as required by QR75 (5). Audit schedules To assist the audit board in the performance of its duty, audit schedules covering all the major regulations for Service Funds are at Annexes A - D. It should be noted that the Start of Year (SOY) and End of Year (EOY) schedules should be completed in addition to the quarterly schedules. For those funds that are to be subject to an Annual Health Check, a schedule is at Annex E. Retention of accounting records All accounting records, including original accounting records and supporting vouchers, till rolls, Sage prints etc, should be retained for a minimum period of 6 years before destruction. Annexes: A. Service Funds management audit schedule SOY. B. Service Funds management audit schedule Quarterly. C. Service Funds management audit schedule SFAS. D. Service Funds management audit schedule EOY. E. SFIAB Annual Health Check schedule AL12

92 Back to Chapter Contents Page Back to Main Contents AL12

93 AP3223 Leaflet 505 Annex A SERVICE FUNDS START OF YEAR MANAGEMENT AUDIT SCHEDULE - FY Ser Applicable to fund: 1 SFAS, OM, SM JRWF Action PRIOR TO COMMENCEMENT OF AUDIT CONFIRM THAT ALL OBSERVATIONS RAISED DURING THE LAST QUARTER HAVE BEEN CLEARED Obtain the Sage balance sheets for the end of the previous audit period and check: a. Examine all Sage end of year records to ensure that they follow the standard RAF format. Reference (AP3223 unless otherwise stated) Para 50505a Para AP3223A Lflt 102 Auditor s Notes b. Closing cash and bank balances agree with the opening balances shown on Sage. c. The closing balances of funds, stocks, investments etc agree with the opening balances shown on Sage. d. The amounts shown in the schedule of creditors agrees with the figures brought forward on the Sage accounts. e. The total of mess bills outstanding agrees with the figure shown on the computerised mess bill package. f. The amounts shown in the schedule of debtors agree with the figures brought forward on the Sage accounts. 505A -1 AL12

94 g. Compare the Unrestricted Income Fund (UIF) balance at the beginning of the period with the closing balance from the previous audit period and ensure that they agree, unless affected by capital expenditure. Banked Funds Compare the Treasurer s records against the EOY Monthly Statement of Account to ensure that the carried forward figure agrees with the statement. 2 All Contracts of Employment. Have all locally employed, non-publicly paid, civilian staff been issued with formal contracts of employment? Lflt 112 Position Employed by Audit Clerk PSFIAB JRWF Clerk Other contracted staff OC Accts Flt OIC of fund Lflt 107 Terms of Reference (TOR). Check that officials of the fund have been issued with and signed for comprehensive TOR appropriate to the position, which are personally addressed to them, have been reviewed within the last 12 months and signed by the issuing officer as follows: Position OC Accts (or equiv) Signed by Stn Cdr/OC PMS 505A -2 AL12

95 SFAS Staff OC Accts PMC Stn Cdr Officers Mess Committee Members PMC Lflt 507 OIC SNCOs Mess and/or CMC Stn Cdr SNCOs Mess Committee Members OIC or CMC PJRWF Stn Cdr OIC Stn-wide funds (eg Thrift Shop, Bowling Alley) OC BSW Other Banked Funds OC Wg/Sqn JRWF Committee Members President or Chair JRWF Constitution. Confirm that the Club/Fund has a Constitution and that 505A -3 AL12

96 it conforms to AP All Cash holding limit. Check that the OIC has issued, in writing, a cash holding limit for the fund safe (Stn Cdr must issue this for the SFAS safe). Additionally, for trading funds, check that stock holding limits have been issued (including a limit for maintenance/spares stock where necessary) and confirm that any cash/stock insurance cover agrees with the limit set. 4 SFAS Investment policy. Confirm that the Stn Cdr has issued a written investment policy and that it is subject to an annual review. Para 10203l Lflt All Floats. Confirm that the issue of all floats has been correctly recorded, that a signature has been obtained for each float in issue, and that the total of outstanding floats agrees with the figure shown on the respective fund balance sheets. 6 All Performing Rights Society and Phonographic Performance Limited Licenses. Confirm that, where appropriate, a current PRS and PPL licence is held. Para Para OM, SM, JRWF and Banked Funds Renewal dates; PRS. PPL. Meetings. Confirm that an Extraordinary General Meeting has approved a Financial Plan for the current FY. State date of meeting:.. Para A -4 AL12

97 Signature: Name & Initials: Rank: Position: Contact Number: Date: 505A -5 AL12

98 SERVICE FUNDS POST AUDIT REPORT (name of fund) Period from OIC Chair Auditor s Observations (summary of major observations) Rank: Name: Signature: Date: OIC Fund Comments (To be forwarded to PSIAB Flt within XX days) Rank: Name: Signature: Date: PSFIAB Comments Rank: Name: Signature: Date: Back to Chapter Contents Page Back to Main Contents 505A-5 AL12

99 AP3223 Leaflet 505 Annex B SERVICE FUNDS QUARTERLY MANAGEMENT AUDIT SCHEDULE - (FY AUDIT PERIOD ) Ser Applicable to fund: Action PRIOR TO COMMENCMENT OF AUDIT, CONFIRM THAT ALL AUDIT OBSERVATIONS RAISED DURING THE LAST QUARTER HAVE BEEN CLEARED. 1 All Terms of Reference (TOR). a. Has there been a change of any Fund officials since the last audit? If so, have the new incumbents been issued with and signed for TOR which are: personally addressed to them, up-to-date, and signed by the issuing officer? b. For messes, confirm that the mess managers have been issued with TOR (not applicable to contractorised messes). c. For JRWF, confirm that all current OIC subsidiary activities have been issued with, and signed for, their TOR. d. Check that TOR cover the arrangements for handling and safeguarding monies in their charge. Cash Handling Certificates (CHC). Confirm that all service and civilian personnel who handle money have signed a cash- Reference (AP3223 unless otherwise stated) Para 50505a Lflt 107 Para and Annex 207A Auditor s Notes 505B-1 AL12

100 handling certificate (not applicable to contractorised mess staff). 2 OM, SM JRWF and Banked Funds Meetings. Check that: a. Minutes are taken of all Fund meetings and circulated to the OIC (Managing Trustee for messes, major funds (as directed by the Managing Trustee) and JRWF) within 10 working days of the meeting either in electronic format or in a permanently bound minute book. Where electronic format is used, confirm that copies of minutes with all comments are filed to Meridio (or other appropriate record area). Paras b. Check minute book, note all financial decisions/grants and ensure that OIC/Stn Cdr s approval has been given before payment is made. Confirm that grants are in accordance with the charitable remit of the relevant fund. Confirm that purchases of property have been recorded in the property book. Confirm that the minutes have been seen by the SFAS or Contractors clerk who should have signed them as having completed any action as required. c. Confirm that actual financial performance is being monitored against the plan, as a standing item on the Para Para B-2 AL12

101 2 (Contd) agenda, that the OIC or treasurer provides formal written comment on the monthly statement of account and performance is reviewed and amended when diversions from the plan are noted. 3 OM, SM JRWF and Banked Funds Property. a. Confirm that the property book is current and maintained in accordance with the requirements of Lflt 209. b. Confirm that all items on hire or loan are recorded in a separate section of the property book and hired property is cross-referenced to the hire agreement. c. Confirm that: (i) Where responsibility for the property has changed since the last audit a handover/takeover check of property has been carried out. Give the date of the check. Date (ii) A check has been carried out annually prior to the compilation of the final year accounts Date (iii) Property with a value in excess of 500 has been entered on the Balance Sheet and that Tangible Assets have been depreciated correctly. d. Current insurance valuations are recorded in the property book and dated. Lflt 209 Para 20904b Para 20909a Para 20909b Para B-3 AL12

102 e. Confirm that insurance cover has been requested for all new items of property bought since the last audit. Paras (cont) f. Check that all write-off of property has been approved by the Trustee/OIC as appropriate. 4 OM, SM, JRWF & Banked Funds g. If a computerised property book is maintained check: (i) Where details of property written-off are recorded and confirm that all write-off action has been correctly authorised. (ii) That old property sheets are retained on file for audit. h. Confirm that Nuffield Trust property is entered in a separate section of the property book and that the entry includes the Nuffield Trust reference number. Ensure that the Nuffield Trust page is annotated Donated by the Nuffield Trust for Forces of the Crown for disposal instructions see AP3223 Lflt 119. Insurance. a. Confirm that adequate cover exists for: Lflt 209 Annex C Para Para 20904c Lflt 211 (i) Employers liability in respect of employees (not applicable to contractors staff in Messes). (ii) Public liability. (iii) Property and non-public buildings. (iv) Fire and theft cover for stocks (not applicable where stock is owned by the contractor in contractorised messes). 505B-4 AL12

103 (v) Fidelity guarantee cover for employees handling cash or stocks (not applicable to contractors staff in Messes). (vi) Cash losses, including cash in transit (not applicable for money safeguarded by the contractor). (vii) Legal expenses cover where any Service Fund employs civilians. b. Confirm that an annual review of property values has been carried out. Give the date of the review. Date Para (Contd) c. Check the current insurance valuations recorded in the property book (in pencil) against the cover provided by the insurance policy and recommend any necessary changes. d. Confirm that any increase in stock holdings have been notified to OC Accounts/SFAS/Mess Clk for an increase in the insurance cover. In particular, that additional insurance cover has been requested for any additional stocks held prior to functions. 5 OM, SM JRWF and Banked Funds e. Confirm that the Employers Liability Insurance Certificate is displayed prominently in the mess/club where the fund has employees/volunteers (not applicable to messes on contractorised units). Keys/Combinations. (Serials not applicable where a contractor is responsible for/owns the safe/stock or machines) a. Check that safeguards exist for the storage of in-use Para B-5 AL12

104 safe keys overnight. b. Inspect receipts for the duplicate safe keys/combinations as appropriate. Para Para c. Check that keys are rotated/combinations changed at least annually. When were the keys/combinations last rotated/changed? Date Date (Keys) (Combinations) d. Confirm the access to stock and property keys is restricted to one appropriate person only. 5 (Contd) 6 OM, SM, JRWF & Banked funds (not contractor owned machines) e. Check the procedure for the security of the keys to the following coin-operated machines to ensure that no one individual has sole access to the machine s cash contents. (i) Gaming Machines. (ii) Payphones (iii) Washing machines and any other coin-operated machines. g. Check where duplicate keys to the coin-operated machines are lodged. Coin Operated machines (where self-managed) Gaming Machines a. Confirm that each machine is emptied at the frequency specified in the TOR but not less than once per month, on Para Paras 21310/21311 Para B-6 AL12

105 the last working day, and that two people empty the machine. b. Confirm that a separate register of takings is maintained for each machine and that two persons sign the register as having emptied the machine. Para c. Confirm that takings are paid-in on the same day that the machine is emptied. 6 (Contd) d. Confirm that a monthly reconciliation between meter readings and cash removed from the machine is carried out and that any discrepancies in excess of +/-1% are investigated. e. Check receipts for cash paid-in against the takings recorded in the register. f. Confirm that the Club holds a gaming machine permit and licence (if appropriate) and that it is/they are current. g. Confirm that the gaming machine and the cash contents are insured. Other Coin-operated Machines. Check what other coinoperated machines are in use/operation (telephones, washing machines, pool table, jukebox, video games etc) and confirm that: a. Registers of takings are maintained for each machine. b. Each machine is emptied by two people who both sign the register of takings. c. The machines are emptied at the frequency specified in the TOR. Para Para Para 22319/22320 Para Lflt 223 Para Para Para B-7 AL12

106 7 OM, SM (NOT ISS Units) d. No individual has sole access to the keys to the machine. e. Where meters are fitted, meter readings are reconciled with cash takings each month and significant discrepancies in excess of +/-1% are investigated with the result of the investigation recorded in the register. f. Where machines are operated with an external supplier, confirm that when the contractor empties the machine the emptying is witnessed by a representative of the Fund. Confirm that the machines are emptied on a regular basis and that the Fund is receiving all income due to it. g. Confirm that all Fund owned/rented coin-operated machines are insured (inc cash contents). Sage. a. Confirm that the TOR for the staff using Sage include details of their Sage responsibilities? (not contractor staff) b. How often are back-up disks/files taken and where are they stored? Confirm by carrying out a visual check of the backed up data. c. Confirm that data verification is carried out and back up actions are taken daily, including the maintenance of a back-up log. Lflt 213 Para Para Para Para AP3223A Lflt OM, SM Cash and bank. a. Confirm that checks of the cash and bank balances are being carried out using the correct procedure. Lflt 106 QR 75(5) Para b. Give the dates of the last 4 checks and the checking 505B-8 AL12

107 officer. Date Date Date Date Checking Officer Checking Officer Checking Officer Checking Officer OM, SM (S/CRL Only) d. Confirm that the bank account is formally reconciled when any check of the bank account is carried out, and the appropriate certificate is raised. Lflt 106 Annex A Appendix 1 OM, SM (S/CRL Only) e. Confirm that a surprise check certificate in the correct format is completed and signed by the checking officer on the occasion of each surprise check. Lflt 106 Annex A Appendix 2 f. Confirm that where Sage is used the reconciliation is carried out using the Sage facility. If not, why? AP3223A Lflt (Contd) OM, SM (S/CRL Only) g. Confirm that whenever responsibility for the cash changes (either permanently or temporarily) the correct procedures are followed. Lflt 106 Annex B OM, SM (S/CRL Only) h. Confirm that at the close of business each day the mess clk reconciles the cash in hand with the cash balance shown on the corresponding Sage print and signs the Sage print to this effect. AP3223A Para OM, SM (S/CRL Only) i. Confirm that the OC Accts (or equivalent) carries out checks of the cash held at least once during each calendar month. Give the dates of the last 3 checks. Date Date Date OM, SM 505B-9 AL12

108 8 (Contd) (S/CRL Only) j. Confirm that all floats on issue have been signed for. k. Confirm that a list is held of all personnel authorised to approve payment or collect cash on behalf of the Mess. Para Para OM,SM (S/CRL Only) l. Check that cash to bank payments as recorded in the cash transaction history agree with the total on the bank paying-in slip. m. Check cash receipts against the corresponding payingin proforma and verify that the amounts agree and the correct account has been credited. n. Check cash payments against the supporting voucher and verify that the amounts agree and that the correct fund has been debited. Verify that the approving official s name is included in the cashier s list of fund officials authorised to approve payments. Para OM, SM (S/CRL Only) o. Confirm that all direct debits on the Mess client bank account have been authorised by appropriate individuals. 9 OM, SM, and trading funds Stocks. (Only required for funds that are recorded on SAGE as separate companies (eg Messes) where stock values are required to be entered on the balance sheet and where a fund owns stock). a. Confirm that stock certificates are being submitted to SFAS/Mess Clk each month by messes and other trading funds, and that no excessive delay is being experienced. Confirm what action is taken when such information is not received. Lflt 105 Annex D b. Confirm that end of month stock figures shown in the accounts agree with the end of month stock certificates and that the stock certificates match the stock records. 505B-10 AL12

109 10 Mess bills/subscriptions. OM, SM OM, SM OM, SM, JRWF and Banked Funds 11 OM, SM, JRWF and Banked Funds 12 OM, SM JRWF and Banked Funds a. Confirm that a list of outstanding mess bills is produced by the 20 th of each month and forwarded to the PMC/CMC & Treasurers. b.. Investigate the reason for any mess bill outstanding for more than 2 months and confirm that appropriate hastening action is being taken. c. Confirm that Retired and honorary civilian members each constitute no more than 10% of the fund membership. Sage audit trail. Obtain a copy of the Sage audit trail and check a percentage of transactions recorded in the audit trail against source records (ie vouchers, minutes, journal etc) to ensure that each one is appropriately authorised. Financial management. a. Financial plan. Confirm that: (i). The fund has a current financial plan and that it is adequate for its needs. Confirm that the plan includes the target GPPs for all trading activities, the charges to be levied for subscriptions (broken down as appropriate), Honorary and Retired Members charges,maintenance, goods/services, facilities hire, Consumable Stores Limits and Extraordinary Expenditure (where authorised) and in the case of messes, Duty Visitor Charges etc. (ii). An administrative charge to cover the cost of administering the membership of civilian honorary Para Para AP3223A Para Lflt 307 Para B-11 AL12

110 12 (Contd) members has been agreed. b. Monthly statement of account. Check that: (i) A monthly statement of account/transaction history is received from SFAS/Mess Clk by the 20 th of the month. (ii) A written Statement of Account is presented to the committee on a monthly basis. (iii) Stock levels are at an optimal level. (iv) Movements within designated funds are monitored on a monthly basis. c. Extraordinary expenditure. Confirm that the Stn Cdr has set a limit on extraordinary expenditure for Messes/JRWFs, and that the OIC has done so for other funds. Where is the limit recorded? Confirm that any extraordinary expenditure has not exceeded the limit specified by the Stn Cdr/OIC. d. Contracts. Check whether the Fund has entered into any contracts since the last audit, and confirm that due consideration was made to Lflt 216. If any such contracts are for a period in excess of one year, confirm that the Trustee s approval has been given. Para Lflt 308 Para Para 30207b Para Para and e. Loans. Does the fund have any outstanding loans? If so, confirm that; (i) The financial plan includes provision for the repayment of the loan. (ii) The fund is setting aside money to meet the loan 505B-12 AL12

111 12 (Cont) repayments. (iii) Repayments are being made on time. (iv) The outstanding balance of the loan is shown as a liability on the balance sheet. 13 OM, SM JRWF and Banked Funds Stock for re-sale a. Check whether the fund sells any items and, if so, confirm that a stock book is maintained that conforms to the requirements of Lflt 210. b. Confirm that surprise checks of stocks have been carried out at intervals not exceeding 3 months. Who carries out these checks? State the date of the last 4 surprise checks. Date Date Date Date c. Confirm that stock checks follow the appropriate procedure. Lflt 210 Lflt 205 Annex A Para B-13 AL12

112 d. Confirm that a sales evaluation and reconciliation schedule is produced on each occasion that stock is checked and that it conforms to the requirements of Lflt 228. e. Is a stock order book used and who countersigns it? If one is not used, confirm the OIC carries out a percentage check of invoices. Para Annex A Para f. Test check the arithmetical accuracy of the stock record. 14 OM, SM JRWF and Banked Funds Consumable stores (maintenance). a. Has the Stn Cdr given authority for maintenance stock to be treated as being consumed immediately it is purchased and removed the requirement to maintain a stock book? If so: Para (i) What limit has been set on the maximum amount that can be spent on one order and the maximum total spend monthly/annually? (ii) Are the limits specified in the Financial Plan? Para (iii) Does the House/appropriate committee member approve each invoice before payment? Para b. If a maintenance/spares stock record is maintained, check that it conforms to the requirements of Lflt 210. Lflt 210 c. Confirm that stock checks follow the correct procedure. 14 d. Confirm that the custodian carries out a 10% stock check at the end of each month. Para B-14 AL12

113 (Cont) e. Confirm that the OIC carries out a 100% surprise stock check once every 6 months. Give the dates of the last 2 surprise checks. Annex 205A Date Date 15 OM, SM JRWF 16 OM, SM JRWF and Banked Funds f. Test check the arithmetical accuracy of the stock record. Garages (where Service Fund maintained). a. Confirm that all occupants of Mess/JRWF owned garages have completed a licence for the occupation of the garage and that the licence conforms to the example at Annex 222A. b. Confirm that a garage rent register is being maintained in the format of Annex 222B and that rents are being recovered monthly in arrears. c. Check that recovery of garage rent is made in respect of all occupants. Where rent is not being charged check the authority for this action. d. Confirm that the garage register is submitted to the OIC each month for checking and signature. Cash and credit control. a. Where credit has been authorised, confirm that only authorised personnel place orders on credit on behalf of the fund. b. Confirm that the appropriate committee member (OIC, Annex 205A Para and Annex A Para and Annex B Para Para Para B-15 AL12

114 16 (Cont) sec or treasurer) checks and countersigns all invoices relating to expenditure from their department. c. Confirm that serially numbered receipts are given for all cash received by the fund and that the receipt books are properly safeguarded. d. Confirm that the fund sec/treasurer/oic is carrying out a percentage check of receipted SFAS paying-in proforma against source records and leave a clear indication of the check on all records inspected. Carry out a percentage of receipted SFAS paying-in proforma against source records. Give the date of the last 2 checks: Date: Date: e. Confirm that cash is paid into SFAS (or ISS Mess Clk) on a regular basis and that no undue delays occur in paying-in cash from the bar, coin-operated machines etc. f. Confirm that the appropriate committee member countersigns all orders placed on behalf of their department. g. Confirm that a list is held of all personnel authorised to handle cash and a separate list is held of all personnel authorised to withdraw monies on behalf of the fund. Paras 10805j and 40504a Para 10806j Para10808 Para 21706b Para OM, SM Cheque encashment. Where cheques are encashed over the bar, or the mess provides a float behind the bar for cheque encashment, check that: a. The Stn Cdr has issued an authority for cheque encashment to take place. Check the letter of authority. b. A cheque encashment register is maintained and that a signature is obtained for all cash issued. Para Lflt 212 Annex A 505B-16 AL12

115 c. The limit of cheque encashment laid down by the Stn Cdr has not been exceeded. Para 21201a 17 OM, SM, All other funds with bars (may include JRWF) Bar. a. Confirm the target GPPs. b. Check the GPPs achieved against the target and confirm that any discrepancies in excess of the laid down limits have been investigated and the result of the investigation recorded. Check that the explanation for the discrepancy is reasonable. c. Confirm that changes in cost prices are reflected by an immediate adjustment to selling prices. Paras 10807, and Para 30907e 17 (Cont) d. Bacchus (where used). (i) Verify the existence of the original master disk. SAMA Bacchus Manual Para 307 (ii) Check where the written record of the current password is held and how often it is changed. Note the date the password was last changed. Para 311 Date Paras 607b and 702 (iii) Confirm that a Bacchus log is maintained and that it records details of all actions taken on Bacchus. Confirm that the Bacchus print number, date of the print and signature of person actioning Bacchus are clearly entered in the register. Confirm that end of month and surprise checks together with the name of the checking officer are clearly identified in the log. Paras (iv) Confirm that all data disks are backed-up as a matter of routine. Ensure that back-up disks are 505B-17 AL12

116 properly safeguarded. Where is the end of month backup disk secured? Para 412 e. Stock checks. 17 (Cont) (i) Where Bacchus is operated confirm that stock checks are carried out using the correct procedure and, in particular that the checking officer appends the surprise check certificate and signs the front of the Bacchus print. (ii) Where non-bacchus stock records are kept, confirm that stock checks are carried out using the correct procedure and, in particular, that the checking officer enters details of stock found in the stock book in their own handwriting and appends the surprise stock check certificate (para 20512j). (iii) Confirm that the bar officer/oic//bar Manager carries out end of month stock checks. (iv) Confirm that the bar officer/oic has carried out surprise stock checks at intervals not exceeding 3 months. Give dates of last 4 surprise stock checks. Lflt 205 Lflt 205 Annex A Lflt 205 Annex A Para 20513f Date Date Date Date (v) Where Bacchus is used, confirm that the manual stock check sheet is completed and signed by the checking officer and then retained with the corresponding Bacchus print. (vi) Carry out a check of invoices and returns for stock check figures against the corresponding entries in the stock book. Para B-18 AL12

117 17 (Cont) (vii) Check GPP calculations (not Bacchus) and confirm that any discrepancies outside the specified limit have been investigated and satisfactorily resolved. (viii) Confirm that bar wastage, ullage and expenses records are maintained and the bar officer has approved all write-offs. Check write-offs and confirm that expenses claimed are reasonable. (ix) Confirm that where a limit on write-offs has been set, expenses outside the limit have been referred to the OIC for approval. (x) Check whether a limit on the amount of credit (orders) that the bar staff may pledge on behalf of the mess has been set. If so, confirm that the limit has not been exceeded without authority. (xi) Is a bar stock order book maintained and who countersigns it? If one is not used, who carries out a percentage check of invoices? (xii) Check the procedure for the handover of responsibility for keys, cash and stocks on change of bar staff. Confirm that the incoming bar staff sign as accepting responsibility for these. (xiii) Check bar books to confirm that they have been signed by the mess member. Carry out a percentage check of prices recorded in the bar books against selling prices shown on Bacchus or the bar stock book. (xiv) Confirm that bar prices are prominently displayed in the bar. Test check against the Bacchus or stock record selling prices. Paras Para Para Para Para Lflt B-19 AL12

118 (xv) If a separate cellar is maintained, confirm that: (a) Surprise stock checks are carried out on the same occasion as those for the bar. List the dates of the last 4 surprise checks. Date Date Date Date Para (b) End of month checks are carried out on the same occasion as end of month checks for the bar. (c) Check cellar issue book to confirm that all issues to the bar are recorded and brought on charge in the bar stock record correctly. Para (Cont) OM, SM (d) Has the Stn Cdr authorised Home Consumption sales from the OM/SM? If so, check the home consumption book to ensure that signatures have been received for all sales. Check the method of advising SFAS of the amounts to be recovered through mess bills. Check cash control for cash sales. Para (e) Confirm that the required GPP is being achieved and any discrepancies outside the laid down limits investigated. Lflt 309 (f) Carry out a check of invoices and returns for stock check figures against the corresponding entries in the stock book. (g) Is a cellar stock order book used and who countersigns it? If one is not used, who carries out a percentage check of invoices? 505B-20 AL12

119 (h) Confirm that any write-offs are properly recorded and authorised. Paras d. Manual stock records. (i) Confirm that the manual stock record conforms to the example given in Lflt 210. (ii) Confirm that the stock book is correctly completed and that amendments to figures are correctly made and initialled by the person amending the figure. Ensure that correcting fluid is not used. (iii) Confirm that the cost and selling prices are annotated at the top of each column. Lflt 210 Para Lflt 210 (iv) Confirm that all items are brought on charge at the full tottage/pintage. (v) Confirm that invoice numbers are entered. (vi) Test check the arithmetical accuracy of the stock record. 18 OM, SM S/CRL units. Check that the contractor is providing: Lflt 612 a. Monthly accounting records and statements (Balance Sheet, Income and Expenditure, Mess Bill Defaulters List, Profit and Loss, Bar Trading records, client bank account statement, VAT reconciliation, Trade Creditors and Mess Bill Control Account reconciliations, Aged Creditors list, print of un-reconciled payments and receipts) to OC Accts Flt by 20 th of each month. b. Open visibility of its activities to the mess committee as detailed in the contract. This will typically include allowing 505B-21 AL12

120 access to bar price lists (so the committee can check the correct GPP has been applied) and allowing jointly supervised bar stock checks to take place at least quarterly. Give dates of last 4 checks, indicating which one covered 100% of invoices: Date Date Date Date Purchases. Check that: a. Invoices. (i) Invoices are stamped with the purchases control stamp and that each section is completed. Where the purchases control stamp is not used, verify that the system being used conforms to the requirement of the reference. Para (Contd) (ii) Any discounts allowed by the supplier have been deducted. (iii) The total of each traders invoices received during the month agrees with the amount shown on the traders monthly statement. (iv) Transactions which affect more than one fund or department have been analysed to the correct fund. (v) Check a percentage of entries in the purchase ledger/book against corresponding invoices. b. Returns and credit notes for each trader have been reflected in the traders monthly statement and correctly actioned through the accounts. 505B-22 AL12

121 c. Confirm that trade creditor accounts have been set up on Sage as detailed in AP3223A, Lflt 108 and that invoices, credit notes and payments are correctly recorded. AP3223A Lflt JRWF, Banked Funds Capital Assets (eg Motorhome, Minibus, Narrowboat). If the JRWF or a Banked Fund has a capital asset: a. Does it have the correct permits and adequate insurance? b. Confirm that hiring is adequately controlled and all income from hire charges is received. c. Confirm that a maintenance/replacement account has been opened and that a share of the annual profits is allocated to the account. Signature: Name & Initials: Rank: Position: Contact Number: Date: 505B-23 AL12

122 SERVICE FUNDS POST AUDIT REPORT (name of fund) Period from OIC Chair Auditor s Observations (summary of major observations) Rank: Name: Signature: Date: OIC Fund Comments (To be forwarded to PSIAB Flt within XX days) Rank: Name: Signature: Date: PSFIAB Comments Rank: Name: Signature: Date: Back to Chapter Contents Page 505B-24 Back to Main Contents AL12

123 505B-25 AL12

124 AP3223 Leaflet 505 Annex C SERVICE FUNDS ACCOUNTING SECTION (SFAS) QUARTERLY MANAGEMENT AUDIT SCHEDULE - FY AUDIT PERIOD Ser Action Reference (AP3223 unless otherwise stated) PRIOR TO COMMENCMENT OF AUDIT, CONFIRM THAT Para 50505a ALL AUDIT OBSERVATIONS RAISED DURING THE LAST QUARTER HAVE BEEN CLEARED. 1 Terms of Reference (TOR). Lflt 107 Auditor s Notes (Observations to be consolidated in Post- Audit report) a. Has there been a change of any staff since the last audit? If so, have the new incumbents been issued with and signed for TOR which are: personally addressed to them, up-to-date, and signed by the issuing officer? b. Check that TOR cover the arrangements for handling and safeguarding monies in their charge. Cash Handling Certificates (CHC). Confirm that all service and civilian personnel who handle money have signed a cashhandling certificate (not applicable to contractorised mess staff). 2 Insurance. Confirm that adequate cover exists for: Para and Annex 207A Lflt 211 a. Cash holdings both in safe and on issue as floats. 505C-1 AL12

125 2 (Contd) b. Fidelity guarantee cover for employees handling cash or stocks (not applicable to contractors staff in Messes). c. Cash losses, including cash in transit. d. Direct debit indemnity insurance where direct debits are used. 3 Keys/Combinations. a. Check that safeguards exist for the storage of in-use safe keys overnight. b. Inspect receipts for the duplicate safe keys/combinations as appropriate. c. When were the keys/combinations last rotated/changed? Para Para 21322/21317 Para Date Date (Keys) (Combinations) d. Where OC Accts or the cashier is custodian of the duplicate Service Funds keys, confirm that: (i) TOR have been issued for this appointment. (ii) Receipts are issued for all keys/combinations lodged with the custodian. Para Para (iii) An up to date key register is maintained. (iv) Keys are rotated at least annually. 505C-2 AL12

126 4 Sage. a. Confirm that the TOR for the SFAS staff using Sage include details of their Sage responsibilities? b. How often are back-up disks/files taken and where are they stored? Confirm by carrying out a visual check. c. Confirm that data verification is carried out and back up actions are taken daily, including the maintenance of a back-up log. AP3223A Lflt Monthly statements of account. a. Confirm that the monthly statements of account for the major funds are produced, in conjunction with Treasurers, by the 20 th of the following month. Provide reasons for any delays. b. Confirm that the Sage transaction history is forwarded to each individual fund at the end of every month for reconciliation and review returns. c. Confirm that a record is maintained of confirmation from OICs of all funds that they have reconciled their fund balance with the Sage transaction history balance. Lflt 308 Lflt 308 para AP3223A para Lflt Cash and bank. a. Confirm that the cashier maintains a cash paying-in programme and that it is being maintained correctly. Confirm that hastening action is taken in respect of funds that do not pay-in at the prescribed frequency. b. Confirm that checks of the cash and bank balances are being carried out using the correct procedure. Para Lflt 106 QR 75(5) 505C-3 AL12

127 6 (Contd) c. Give the dates of the last 4 Surprise checks and the checking officer. Date Date Date Date Checking Officer Checking Officer Checking Officer Checking Officer d. Confirm that the bank account is formally reconciled when any End of Month or Surprise check of the bank account is carried out, and the appropriate certificate is raised. e. Confirm that a surprise check certificate in the correct format is completed and signed by the checking officer on the occasion of each check. f. Confirm that where Sage is used the reconciliation is carried out using the Sage facility. If not, why? g. Confirm that whenever responsibility for the bank and cash changes (either permanently or temporarily) the correct procedures are followed. h. Confirm that at the close of business each day the cashier reconciles the cash in hand with the cash balance shown on the corresponding Sage print and signs the Sage print to this effect. i. Confirm that the OC Accts (or equivalent) carries out checks of the cashiers cash (including ISS clks cash holdings where applicable) at appropriate intervals since the date of the last routine or handover/takeover check. Lflt 106 Annex A Appendix 1 Lflt 106 Annex A Appendix 2 AP3223A Lflt 114 Lflt 106 Annex B Lflt 105 Annex B Lflt C-4 AL12

128 6 (Contd) Give the dates of the last 3 checks. Date Date Date j. Confirm that all floats on issue have been signed for. k. Confirm that a list is held of all personnel authorised to approve payment or collect cash on behalf of each Service Fund l. Check that cash to bank payments as recorded in the cash transaction history agree with the total on the bank paying-in slip. m. Check cash receipts against the corresponding SFAS paying-in proforma and verify that the amounts agree and the correct account has been credited. n. Check cash payments against the supporting voucher and verify that the amounts agree and that the correct fund has been debited. Verify that the approving official s name is included in the cashier s list of fund officials authorised to approve payments. Para Para Para o. Confirm that all direct debits on the Service Funds bank account have been authorised by OC Accts Flt. p. Confirm that all electronic payments made from the Service Funds bank account have been authorised by OC Accts Flt. 7 Control accounts. a. Confirm that balances on the fund control accounts are reconciled with the SFAS cash and bank balances at the Para 23304/ AP3223A Para C-5 AL12

129 end of each month and a record of the reconciliation is maintained. Verify the reconciliation. b. Confirm that mess bill control accounts are reconciled at the end of each month and a record of the reconciliation is maintained. Verify the reconciliation. AP3223 Lflt 407 and 3223A Lflt VAT. a. Check the taxable turnover of each fund account to ensure that where there is a liability to register for VAT purposes this has been done. b. Verify that the quarterly VAT return has been completed on time and any tax due has been paid. Lflt 218 para Para c. Confirm that where there is a delay in submitting the VAT return the local VAT office has been informed and verify that arrangements have been agreed for interim payments to be made. d. Verify that correct Sage VAT codes have been applied to all funds within VAT registered activities. 9 Purchases. Check that: a. Invoices. (i) Invoices are stamped with the purchases control stamp and that each section is completed. Where the purchases control stamp is not used, verify that the system being used conforms to the requirement of the reference. Para (ii) Any discounts allowed by the supplier have been deducted. 505C-6 AL12

130 9 (Contd) (iii) The total of each traders invoices received during the month agrees with the amount shown on the traders monthly statement. (iv) Transactions which affect more than one fund or department have been analysed to the correct fund. (v) Check a percentage of entries in the purchase ledger/book against corresponding invoices. b. Returns and credit notes for each trader have been reflected in the traders monthly statement and correctly actioned through the accounts. d. Confirm that trade creditor accounts have been set up on Sage and that invoices, credit notes and payments are correctly recorded. AP3223A Lflt Stocks. (Only required for funds that are recorded on SAGE as separate companies (eg Messes) where stock values are required to be entered on the balance sheet). a. Confirm that stock certificates are being submitted to SFAS each month by messes, JRWF subsidiary funds and other trading funds, and that no excessive delay is being experienced. Confirm what action is taken when such information is not received. Lflt 105 Annex D c. Confirm that end of month stock figures shown in the accounts agree with the end of month stock certificates submitted by funds. 11 Wages and gratuities. a. Confirm that cash payments are being made against the signature of the employee or are supported by a Paras C-7 AL12

131 request for payment by proxy affixed to the gratuities book or acquittance roll. b. Confirm that forms P11 are held for all non-public employees. Confirm that employees do not have unrestricted access to their own P11. c. Check calculations of amounts deducted for income tax and national insurance contributions are correct and compare these with the amounts shown on individual P11s. d. Confirm that amounts paid have been correctly authorised. 12 Sage audit trail. Obtain a copy of the Sage audit trail and check a percentage of transactions recorded in the audit trail against source records (ie vouchers, minutes, journal etc) to ensure that each one is appropriately authorised. AP3223A Para Signature: Name & Initials: Rank: Position: Contact Number: Date: 505C-8 AL12

132 SFAS POST AUDIT REPORT _Q Period covered: Auditor s Observations (summary of major observations) Rank: Name: Signature: Date: OIC SFAS Comments (To be forwarded to PSFIAB Flt within XX days) Rank: Name: Signature: Date: PSFIAB Comments Rank: Name: Signature: Date: Back to Chapter Contents Page Back to Main Contents 505C-9 AL12

133 AP3223 Leaflet 505 Annex D SERVICE FUNDS END OF YEAR MANAGEMENT AUDIT SCHEDULE - FY Ser 1 Applicable to fund: Action PRIOR TO COMMENCEMENT OF AUDIT CONFIRM THAT ALL OBSERVATIONS RAISED DURING THE LAST QUARTER HAVE BEEN CLEARED Verification of assets and liabilities. One of the most important parts of the audit is the verification of the assets and liabilities appearing on the balance sheets at the end of the audit period. You are, therefore, to: Reference (AP3223 unless otherwise stated) Lflt 505 Auditor s Comments SFAS (OM, SM - where contractorised) a. Cash and bank balances. Personally carry out a check of the SFAS cash and bank (including any deposit accounts) balances as at the close of business on the last day of the audit period and complete the appropriate check certificate. Confirm that surprise checks have been carried out as required by QR 75(5). SFAS b. Investments. Verify all investments held by examining all certificates, confirm that they have been re-valued as at the end of the audit period and that unrealised profits and/or losses have been correctly reflected in the balance sheet. Paras SFAS (OM, SM c. Debtors. Carry out the following checks on the amounts shown on the balance sheets. 505D-1 AL12

134 1 (Cont) - where contractorised) (i) Mess bills. Check that where mess bills have been written-off this has been correctly authorised by a general mess meeting. SFAS SFAS (OM, SM - where contractorised) SFAS SFAS (OM, SM - where contractorised) 2 OM, SM and JRWF (ii) Inter-fund indebtedness. Confirm that all monies due from other Service Funds on the station agree with the amounts shown as owing in their accounts. (iii) Other debtors. Check all amounts outstanding for more than one month to ascertain the reason for non-payment and that recovery action is being taken. d. Prepayments. Check that correct entries have been made in the accounts in respect of all reserves made for prepayments by verification with the original payment invoices. e. Trade creditors. Check that the balances shown on the trade creditors statements as at the end of the period agree with that shown in the accounts and investigate any discrepancies. f. Banked funds. Check that no banked fund is in debt. If funds are in debt investigate the reason, and confirm that an action plan is in place to recover the debt. g. Accruals and outstanding expenses. Check that accruals have been created for all expenditure relating to the period under audit, but for which actual payment will be made in the following period. To this end, examine cash receipts, statements etc for payments made in the following month relating to the current audit period. Balance sheet capital account. a. Confirm that all grants and other capital expenditure is correctly authorised and recorded. AP3223A Lflt 117 para D-2 AL12

135 3 OM, SM, JRWF and Banked Funds b. Compare the closing balance of the UIF with the fund contingent liability as advised by HQ Air. If less than the contingent liability figure investigate the reason. Meetings. Confirm that the Annual General Meeting approved the annual audited balance sheet from the previous FY. State date of meeting:.. Para Signature: Name & Initials: Rank: Position: Contact Number: Date: 505D-3 AL12

136 SERVICE FUNDS POST AUDIT REPORT (name of fund) Period from OIC Chair Auditor s Observations (summary of major observations) Rank: Name: Signature: Date: OIC Fund Comments (To be forwarded to PSIAB Flt within XX days) Rank: Name: Signature: Date: PSFIAB Comments Rank: Name: Signature: Date: Back to Chapter Contents Page Back to Main Contents 505D-4 AL12

137 AP3223 Leaflet 505 Annex E SFIAB ANNUAL HEALTH CHECK SCHEDULE (Only to be completed for funds exempt full audit) Period from...to.. Fund:. Total/gross annual income 1 :. OIC: Serial Check 1. Does your activity have an up to date constitution? Does it state the fund s objectives, responsibilities, powers of the committee and officials, together with formal written rules for the conduct of its affairs? 2. State current membership in the following categories: (As detailed in Lflt 801) 3. Has a handover/takeover of responsibility for the fund taken place within the last 12 months? When was the last formal handover / takeover certificate completed? 4. Have you been issued with, and signed for, TOR for your appointment? Are the TOR addressed to you by name and signed by the issuing officer? 5. Have you issued TOR, signed by you, to all fund officials? Are the TOR issued to them by name and have they signed as OIC Response Full Associate... Others Date Audit Comments 1 Gross annual income is defined as the sum of all receipts into the fund regardless of source or type. 505E-1 AL12

138 Serial Check having received their TOR? Does the fund have any employees (either service or civilian)? Give numbers Have all employees been issued with contracts of employment? Are employees wages/gratuities paid from cash in hand? If not, are all wages/gratuities paid via SFAS? Are tax and national insurance contributions paid where applicable. 6. Have authorities to handle Service Funds been completed by all personnel authorised to handle monies on behalf of the fund? See Leaflet 207 AP What are the current cash and stock holding limits for your fund? Confirm that these limits are adequate and are not being exceeded. 8. Other Trading Activities: What is/are the current GPPs? OIC Response Employees: Cash Stock Detail: Audit Comments Give the date of the last AGM/EGM that approved the current GPPs. Are monthly GPP calculations carried out? Are discrepancies outside the limits laid down in AP3223 Leaflet 309 (para 30907) investigated Date 505E-2 AL12

139 Serial Check and satisfactorily resolved? Give the date of the last investigation into discrepancies outside the set limits. 9. List the books of account that are maintained by your fund. Are they adequate for the size of the fund? 10. Cash Book: Does the fund maintain a cashbook? Are entries made in the cashbook as transactions occur? Give the date to which the cashbook has been completed. Is the cashbook reconciled with the monthly SFAS transaction history? Record opposite the last reconciliation carried out with the SFAS transaction history and its date. Do you check the monthly reconciliation and sign the cashbook? 11. Are all invoices and payments authorised by you or other authorised fund officials? Have you provided SFAS with a list of all fund officials authorised to approve payments and to collect cash for the fund? When was the list last reviewed and updated? 12. Does the fund use an order book? Who checks and certifies invoices OIC Response Date Date Date Date Audit Comments 505E-3 AL12

140 Serial Check for good purchased on credit? What is the limit placed on the amount of credit that may be pledged? 13. Do you check a percentage of receipted SFAS paying-in proforma against source records? How are these checks recorded? Give the dates of the last 4 checks. 14. Are monies paid into SFAS on a regular basis with no undue delay between receipt and paying-in? 15. Is a property book maintained? Give the dates of: The last handover / takeover check of property. The last annual check of property. The last review of insurance valuations. What is the fund property depreciation and capitalisation policy (if applicable)? 16. Who carries out end of month (EOM) and surprise stock checks? Give the dates of the last 4 surprise stock checks. 17. Are the arrangements for the physical security of cash and stocks adequate? How are in-use keys OIC Response Date Date Date Date Date Date Date EOM Surprise Date Date Date Date Audit Comments 505E-4 AL12

141 Serial Check safeguarded? 18. Where are the duplicate keys that give access to safes, cash boxes, stock or coin-operated machines lodged? Give the date the keys were last rotated. 19. How frequently are committee meetings held? Give the date of the last AGM and EGM? Are minutes produced for all meetings and circulated to the approving officer without delay? (Minutes may be circulated electronically as long as responses are also recorded and retained) Are all minutes kept in a permanent bound minute book or binder, or filed to meridio (or other equivalent e-filing system) with approving officers remarks? 20. Is the emptying of gaming machines, telephones and other coin-operated machines witnessed? Are registers of takings maintained and, where appropriate, takings reconciled with meter readings and discrepancies in excess of +/- 1% investigated? 21. Are subscriptions levied against members? If so, is a subscriptions register maintained? Is the register checked and signed by you at the end of each month? OIC Response Date AGM EGM Audit Comments 505E-5 AL12

142 Serial Check What is the amount of outstanding debt to the fund through subscriptions? 22. Is an annual financial plan produced? How is actual performance against the plan monitored? Give the date of the last General Meeting that approved the current financial plan 23. Is an Annual Statement of Account produced? Give the date of the Annual General Meeting (AGM) that ratified the statement. 24. What is the total income of your fund to date for this financial year? OIC Response.. Date Date Audit Comments 26. Does your club/fund provide music or entertainment (including TV)? If so, confirm renewal dates for licences: PRS PPL TV Others (eg Theatre Group) Date Date Date Date CERTIFICATE OF COMPLIANCE BY THE OIC Certified that I have personally checked the replies given above and that to the best of my knowledge all responses are correct. Where deficiencies have been noted as a result of this health check I have initiated corrective action. I certify that the. (Name of fund) is managed and accounted for in accordance with the requirements of AP3223. Signature. Name... Rank. Date. 505E-6 AL12

143 OIC (Fund name). CERTIFICATE BY SFIAB Certified that I have carried out a health check on..name of fund) and I have/do not have any major concerns with the conduct of this fund or its management and accounting practices. Add any additional comments that you wish to make. Signed. Name... Rank Date. Appointment Distribution: Original PSFIAB (for action/info and inclusion in Form 2), Copy to OIC Fund for action/info 505E-7 AL12

144 Back to Chapter Contents Page Back to Main Contents 505E-8 AL12

145 506-1 AP3223 Leaflet 506 PRESENTATION OF THE PROCEEDINGS OF THE SERVICE FUNDS INTERNAL AUDIT BOARD Introduction The President of the Service Funds Internal Audit Board (PSFIAB) is to ensure that the audit task for the FY has been fully completed before presenting the SFIAB s proceedings to the stn cdr. The original proceedings are to be retained on unit for six years for future reference by HQ AIR Service Funds staff, independent examiners, the Charity Commission (CC) or any other interested party. Specific excerpts detailed in para are to be sent to HQ AIR Service Funds for oversight purposes, no later than 16 weeks after the completion of the FY. An example of a completed Service Funds Form 2 is shown at Annex A. Preparation of Service Funds Form The PSFIAB is responsible for the preparation of the Service Funds Form 2 and for the compilation of all related exhibits and certificates. In particular the PSFIAB is to ensure that the balance sheets, trial balances and income/expenditure accounts of all the audited Service Funds on the station are included with the proceedings of the Form 2, together with the trial balance for the banked funds. Balance sheets and income/expenditure accounts are to be presented in both the Service Funds format and the CC s Statement Of Financial Activity (SOFA) format, which are both available on the Sage computerised accounting package. After completion of the SFIAB s findings, the PSFIAB is to submit the proceedings through OC BSW (or equivalent) to the stn cdr Service Funds Form 2. The front sheet of the Service Funds Form 2 is self-explanatory; however, the following points should be taken into account during its preparation: a. Proceedings. These are the proceedings of a SFIAB. b. Purpose. The wording to be used will be; auditing the accounts of the Station Service Funds for the period*. to. (*Note that the SFIAB is to be shown as having been convened on the first working day of the audit period as per QR 1298). c. President and members. All officers, WOs and SNCOs who are or were full or coopted members of the SFIAB are to be listed, including details of their branch or trade and any trade annotation. Where changes of personnel have taken place during the audit period, the dates of arrival or departure, as appropriate, are to be recorded against the members names. d. In attendance. An entry is required where civilian professional auditors, an audit clerk or personnel without any appropriate trade annotation have been engaged to assist the SFIAB, in which case it is to include the name of the firm or individual together with their professional accounting qualification or status. Additionally, where OC Accts Flt has been tasked to assist with the management and control of the work of the SFIAB, then his/her details should be included in this section Witnesses and exhibits. The section headed List of Witnesses should not be required by the SFIAB. The List of Exhibits provided on the lower half of the form is to be completed with each exhibit being listed in the order in which it is referred to in the findings and lettered alphabetically. AL9

146 Findings. The findings of the SFIAB are to follow the form and content given in the example at Annex A. The majority of the Findings section can be completed by the PSFIAB with assistance from OC Accts Flt, SFAS staff and the audit clerk (if applicable). Members of the SFIAB are individually to sign a certificate for each fund they have audited; briefly detailing any major observations and outstanding issues Additional findings. In addition to the certificate discussed at para 50605, the SFIAB may wish to make further comments on certain aspects of the audit. There is no formal requirement to make any further comments in the additional findings section; however, explanations are required in respect of apparent anomalies in the accounts where these may affect the accuracy of the balance sheet or income/expenditure account; or if fraud has been identified during the FY. The SFIAB may also make any additional comments on any matter affecting the accounts which it considers appropriate to do so. These additional findings are to appear on Service Funds Form 2A after the findings, and they are to be grouped together under the title of the funds to which they refer. Additional findings must include details of important audit observations which have not been cleared by the fund management to the satisfaction of the SFIAB and which must, therefore, be specifically drawn to the attention of the stn cdr. The SFIAB must also observe on any major losses or serious weaknesses in administration Recommendations. The Board is to make appropriate recommendations arising from both its primary and additional findings. The recommendations provide a valuable guide to management by highlighting those areas of administration and accounting which potentially require action. The SFIAB s recommendations are to be recorded on the Service Funds Form 2A. Preparation for scrutiny by the stn cdr Signature. Once the findings and recommendations have been recorded on Service Funds Form 2A the PSFIAB is to sign the form in the space provided Remarks by OC Unit. The first section of the Service Funds Form 2B should be completed by OC BSW (or equivalent) who, having regard to the findings and recommendations of the SFIAB, will add his/her comments including details of action taken, or to be taken, to remedy any problem areas. Signature by the stn cdr The stn cdr is to scrutinise the findings and recommendations of the SFIAB. Any observations raised by the stn cdr on the proceedings are to be initially referred to the PSFIAB for clarification. The stn cdr, when satisfied with the proceedings, is to add any comments considered necessary. The comments are to include the following statements: I certify that: a. In accordance with QR 75(4), with the exception of those minor funds for which audit has been waived, all accounts of Service Funds for the Unit under my command have been audited by a SFIAB. The balance sheets of the Unit s major Service Funds are included with these proceedings. b. I have carried out my duty as trustee of all Service Funds at RAF Briton* in accordance with the guidance issued by the CC. I am content that my duty to safeguard these AL9

147 charitable funds, for which I am trustee, has been met by the work of the SFIAB in completing a timely and thorough audit of those funds. Annual accounts have been completed in the format of the CC s form CC17a, and I have signed Trustee s Annual Reports (TARs). Annual Independent Examinations have been arranged/conducted* to validate the CC17a and TARs. Copies of the CC17a, TARs and independent examiner s certificates are attached to these proceedings, and further copies will be forwarded to HQ AIR Service Funds. c. The Proceedings of the SFIAB were completed no later than 16 weeks after the end of the financial year to which they relate. The Form 2 will be retained on Unit for 6 years and will be made available to HQ AIR Service Funds staff, independent examiners and the CC on request. Independent examination/external audit An independent examiner or external auditor may rely upon the work of the SFIAB when carrying out their independent examination (IE) or audit of the station Service Funds. The original all-inclusive proceedings of the SFIAB are, therefore, to be made available to the independent examiner or external auditor if requested. The IE or external audit is, where possible, to be completed prior to the submission of the proceedings to HQ AIR Service Funds, and a copy of the IE report is to be included with the proceedings. Submission to HQ AIR Service Funds Following signature by the stn cdr, the original signed copy of the proceedings (including all annexes and exhibits) is to be retained on unit for six years, for audit purposes and the use of interested parties. Electronic copies of the completed CC form CC17a and the TAR, with signatures, are to be sent to HQ AIR Service Funds within 16 weeks of the end of the audit period for oversight and data collection purposes. An electronic copy of the Form 2 narrative, a scanned electronic copy of the stn cdr s signed Form 2B statement sheet and the independent examiner s certificate(s) must also be submitted to HQ AIR Service Funds within 16 weeks of the end of the audit period. Paper copies of these documents are not acceptable. This data will be used by HQ Air to ensure that each Trustee has met his/her legal responsibilities. No other annexes or exhibits from the Form 2, other than those electronic items listed in this paragraph, are to be sent to HQ AIR Service Funds staff. * amend as appropriate Annex: A. Example Service Funds Form 2. Back to Chapter Contents Page Back to Main Contents AL9

148 Leaflet 506 Annex A EXAMPLE SERVICE FUNDS FORM 2 ROYAL AIR FORCE PROCEEDINGS OF A SERVICE FUNDS INTERNAL AUDIT BOARD Proceedings of a Service Funds Internal Audit Board (SFIAB) convened at Royal Air Force Briton on the 1st September XXXX by order of Group Captain A K R Basker OBE RAF for the purpose of auditing the Service Funds accounts of the Station for the period 1 September XXXX to 31st August XXXY. PRESIDENT Sqn Ldr P C East - Pers (Spt) (to 23 Jun XXXY) Sqn Ldr I V Smith - Pers (Spt) (from 24 June XXXY) MEMBERS Flt Lt B Ill - Pers (Spt) Flt Lt D Lost - GD(N) Flt Lt A Spinner - GD(P) Flt Lt A Short - Eng Plt Off I M Justin Log WO Y Knott Logs (Supplr) FS B Y Eck Logs (Cat Mgr) Sgt P Ace RAFP IN ATTENDANCE Messrs Smith and Jones (Certified Auditors) 506A-1 AL12

149 THESE PROCEEDINGS ARE TO BE PASSED THROUGH EACH STAGE WITHOUT DELAY LIST OF EXHIBITS A. List of funds and accounts audited. B. Return of Service Funds and accounts called for by QR75(4). C. End of year Sage electronic back-ups for the: 1 (1) Officers Mess. (2) SNCOs Mess. (3) Junior Ranks Welfare Fund (JRWF). (4) Other medium/large funds (to be listed). 2 D. Form CC17a, balance sheet, Income/expenditure account and trial balance - Officers Mess. E. Form CC17a, balance sheet, Income/expenditure account and trial balance - SNCOs Mess. F. Form CC17a, balance sheet, Income/expenditure account and trial balance - JRWF. G. Form CC17a/CC16, balance sheet, Income/expenditure account and trial balance all other medium/large funds. H. SFAS control account reconciliation as at 31 Aug XXXY. I. Mess bill control account reconciliations/debtors List (Officers and SNCOs Messes) as at 31 Aug XXXY. J. List of outstanding mess bills (Officers and SNCOs Messes). K. Schedule of monthly GPPs achieved by trading activities. L. Trial balance for all banked funds. M. Letters of appointment to professional civilian auditors/independent examiners. N. Audit/independent examination certificates. O. Trustee s Annual Reports for Officers Mess, SNCOs Mess, JRWF and other medium/large funds. P. Contractor s annual audited bar trading accounts for Officers & SNCOs messes: 3 Q. Risk Register. 1 Where back-ups are saved to Meridio of an alternative record system, a certificate should be included within the Form 2 confirming the exact saved location of the back-ups. Where mess accounts are administered by contract staff (eg ISS), electronic copies are to be retained with the Form 2. 2 Medium/Large funds as defined in Leaflet Applies where a contractor owns bar stock in order to provide evidence that the distribution of profit accords with the GPP and the contract. 506A-2 AL12

150 Findings 1. It is certified that: a. The internal audit of all Unit Service Funds and accounts specified by the Stn Cdr, attached at Exhibit A, has been carried out in accordance with the instructions contained in QR1298 and AP3223 Chapter 5. The Stn Cdr has exempted all funds, except alcoholic bars, with an annual income under 5,000 from the provisions of AP3223*/ The Stn Cdr has not exempted funds with an annual income under 5,000 from the provisions of AP3223*. A copy of the return of Service Funds required by QR75(4) is attached as Exhibit B. b. The accounts have been produced on an accruals basis. Copies of the end of year Sage back-up disks for each major fund are attached as Exhibit C./Back-ups have been created and filed as a record for the following funds:. c. Bank and cash balances, including deposit accounts, petty cash, floats, postage stamps and sub-imprests, of all Service Funds and activities, were checked and verified before any transactions for the ensuing period took place. d. Investment certificates or evidence of holdings supplied by the bank or investment company were examined and found to be in order. It is confirmed that the investments held are as shown on the balance sheets attached at Exhibits D, E and F. Investments held in Common Investment Funds are shown at market value as at the last day of the audit period. e. Insurance policies of all Service Funds and activities, including fidelity bonds and legal expenses insurance have been examined. The SFIAB is satisfied that the premiums are upto-date and that the cover is adequate. f. The existence of all assets and liabilities have been verified in accordance with the guidance given in AP3223 Leaflet 505 paras to and, as far as can be ascertained from the accounts and records produced and by independent checks of creditors, no liabilities have been omitted. The balance sheets (included within Exhibits D, E and F) have been compared with those of the previous period to ensure that all outstanding items have been brought to account. g. Any irregularities and discrepancies including disbursements which in the opinion of the SFIAB were excessive, extravagant or outside the charitable objectives of the activity have been brought to the attention of the trustee and the fund/account holders. Satisfactory replies or assurances have been received except where indicated in the additional findings. h. Surprise checks of the Service Funds cash and bank balances were made in accordance with QR75(5) and AP3223 Leaflet 106 on the following dates during the audit period: Fund checked (1) Officers Mess (2) SNCOs Mess (3) JRWF Date of last check In previous period 506A-3 Dates checked in current audit period AL12

151 (4).. i. The SFAS control accounts have been reconciled as at the end of the audit period and a copy of the reconciliation is attached as Exhibit G. j. Checks of all stocks have been carried out as required by AP3223 Leaflet 205. The SFIAB has inspected the monthly stock certificates. End of Month (EOM)/Surprise checks of bar stocks were carried out on the following dates: Fund checked (1) Officers Mess (2) SNCOs Mess (3) JRWF (4).. Date of last check in previous period Dates of EOM/surprise stock checks in current audit period k. The property books are being maintained in accordance with AP3223 Leaflet 209. Capital property is recorded at cost or last formal valuation, and tangible property purchased during the audit period valued at 500 or more has been capitalised and is subject to depreciation. The insurance cover was last reviewed and revised figures entered in the property books on the following dates: Fund (1) Officers Mess (2) SNCOs Mess (3) Junior Ranks Welfare Fund (4).. Date Property checks were carried out in accordance with AP3223 Leaflet 209 on the following dates: Fund (1) Officers Mess (2) SNCOs Mess (3) Junior Ranks Welfare Fund (4).. Date l. The arrangements for the custody of cash, including bar takings, are satisfactory and cash holdings have been kept within the limits authorised by the Stn Cdr in accordance with AP3223 Leaflet 102. m. Mess bill control accounts have been reconciled and a copy of the reconciliation is attached as Exhibit H. n. All mess bills outstanding for more than one month have been paid with the exception of the following for which recovery action is being taken: (1) Officers Mess (list here or attach as Exhibit I). (2) SNCOs Mess (list here or attach as Exhibit I). 506A-4 AL12

152 o. The arrangements for safeguarding stock and property of all Service Funds and activities have been examined and are satisfactory. p. Terms of Reference (TOR) have been issued to all fund holders and to fund officials. q. All Service Fund employees have been issued with contracts of employment. r. All personnel whose duties involve handling Service Fund monies have signed a copy of AP3223 Leaflet 207. s. Income and expenditure accounts have been produced in respect of each gaming machine and are attached to the balance sheets. t. The planned and actual gross profit percentages on sales turnover of bars for the period under audit are listed at Exhibit J. All variations in excess of the limit laid down in AP3223 Leaflet 309 para have been satisfactorily investigated except where indicated in the additional findings. Income and expenditure accounts have been produced in respect of each bar and are attached to the balance sheets. u. The taxable turnover of each Service Fund account, including banked funds, has been examined and, where there is a liability to VAT, the fund has been registered with HM Revenue and Customs. v. The trial balance for banked funds is attached as Exhibit K. Where a banked fund is in overdrawn, action has been taken for the debt to be cleared. w. Auditors/Independent Examiners*, (eg Messrs Jones and Riley), were engaged/appointed* under the provisions of AP3223 Leaflet 501 to perform the detailed audit/independent examination* of the books of account required under the Charities Act. Copies of their letters of appointment are attached as Exhibit L. Copies of their audit/independent examination* reports are attached as Exhibit M. The confirmed statements of accounts have been published in the format of the Charity Commission s Form CC17a (included within Exhibits D, E and F). x. Trustee s Annual Reports for the major Service Funds are included at Exhibit N. (For contractorised units only) y. Percentage and full checks of the contractor s cost prices recorded on their invoices were checked against the bar selling prices as required by AP3223, Leaflet 219 para 21955b (1) on the following dates. (1) Officers Mess. Date of check Checking officer 100% or 10% 506A-5 AL12

153 (2) SNCOs Mess. Date of check Checking officer 100% or 10% z. Copies of the annual audited bar trading accounts provided by the contractor for the Officers and SNCOs Messes are attached as Exhibit O. The profit shown on the contractor s audited bar trading accounts has been reconciled against the amount actually received by the mess and verified as correct. * delete as applicable 506A-6 AL12

154 Service Form 2A Funds Additional findings 1. As appropriate Recommendations 1. As appropriate PSFIAB CERTIFICATE RAF Briton s* Service Funds Internal Audit Board for Financial Year XX/XY* has been convened and operated in accordance with QR1298. These findings have been compiled in accordance with AP3223 Leaflet 506 and are accurate. Name: Rank:. Appointment: Service number:.. Telephone extension: 506A-7 AL12

155 Date: A-8 AL12

156 ROYAL AIR FORCE BRITON SFIAB MEMBER S MANAGEMENT AUDIT CERTIFICATE (A copy of this certificate is to be completed by all members of the SFIAB) I certify that, as a member of the SFIAB in Financial Year XX/XY*, I have conducted the following management audits: Fund Dates The principle observations raised during Financial Year XX/XY were: Outstanding observations as at the end of Financial Year XX/XY were: Signature: Rank/Name:. Appointment: Service number:.. Telephone extension:. Date: A-9 AL12

157 ROYAL AIR FORCE BRITON* OFFICERS MESS* / SNCOS MESS* / JUNIOR RANKS WELFARE FUND* AUDIT CERTIFICATE AS AT 31 AUGUST XXXY 1. Certificate of correctness Certified that the RAF Briton Officers Mess* / SNCOs Mess* / JRWF* balance sheet is correct. PMC/CMC/PSI*: Signature Rank / Name Date OC Accts Flt: Signature Rank / Name Date 2. SFIAB certificate Certified that the RAF Briton Officers Mess / SNCOs Mess / JRWF has been audited in accordance with QR1298 and AP3223 Chap 5. PSFIAB: Signature Rank / Name Date SFIAB Member: Signature Rank / Name Date Audit Clerk: Signature Grade / Name Date 3. Civilian professional auditor's certificate (If applicable) Certified that the RAF Briton Officers Mess* / SNCOs Mess* / JRWF* balance sheet is in agreement with the books of account and gives a true and fair view of the state of affairs of the fund as at the date of the end of the audit period. Civilian Auditor: Signature Name. Date * amend as applicable 506A-10 AL12

158 Service Funds Form 2B REMARKS BY OC BSW (or equivalent) Unit Signature of OC BSW (or equiv) RAF Briton 31 Aug XY Wg Cdr REMARKS BY STATION COMMANDER / TRUSTEE 1. I certify that: a. In accordance with QR75(4), with the exception of those minor funds for which audit has been waived, all accounts of Service Funds for the Unit under my command have been audited by a SFIAB. The balance sheets of the Unit s major Service Funds are included with these proceedings. b. I have carried out my duty as trustee of all Service Funds at RAF Briton* in accordance with the guidance issued by the Charity Commission. I am content that my duty to safeguard these charitable funds, for which I am trustee, has been met by the work of the SFIAB in completing a timely and thorough audit of those funds. Annual accounts have been completed in the format of the Charity Commission s form CC17a, and I have signed Trustee s Annual Reports (TARs). Annual Independent Examinations have been arranged/conducted* to validate the CC17a and TARs. Copies of the CC17a, TARs and independent examiner s certificates are attached to these proceedings, and further copies will be forwarded to HQ AIR Service Funds. c. The Proceedings of the SFIAB were completed no later than 16 weeks after the end of the financial year to which they relate. The Form 2 will be retained on Unit for 6 years and will be made available to HQ AIR Service Funds staff, independent examiners and the Charity Commission on request. 2. I wish to report the following additional matters to HQ Air Command Service Funds: Unit Signature of Stn Cdr RAF Briton 31 Aug XY Gp Capt 506A-11 AL12

159 Back to Chapter Contents Page Back to Main Contents 506A-12 AL12

160 AP3223 Leaflet 507 GOVERNING DOCUMENTS CONSTITUTIONS Compliance with the Charities Act requires that all charities have a governing document which sets out the objects and purposes of the charity and contains other pertinent information about it. The governing document constitutes the trustees instruction manual for the charity as well as a legal document Each charitable fund on the unit is required to have a governing document (constitution) and included at Annex A is a standard model for a governing document of a Service Fund. Annex A was first issued under T-Letter 503/09, (amended 11 May 09). All funds (including any relevant banked funds) on your stn must incorporate this standard governing document template before they register with the Charity Commission. Any amendments made in Part 2 Clause 2 should initially be referred HQ AIR Service Funds so that agreement may be sought from the Charity Commission to their incorporation in the document. It must also be noted that if there are any changes to the standard constitution then that fund will not be eligible to register with the Charity Commission using the online Fast Track method as detailed in Leaflet 508. Annex: A. Recommended constitution for RAF Service Funds AL3

161 Back to Chapter Contents Page Back to Main Contents AL3

162 AP3223 Leaflet 507 Annex A RECOMMENDED CONSTITUTION FOR RAF SERVICE FUNDS CONSTITUTION OF (Insert name of Fund/Charity). adopted on the (Insert date)...20 PART 1 1. Adoption of the Constitution The association and its property will be administered and managed in accordance with the provisions in Parts 1 and 2 of this Constitution. 2. The Name The Fund s/association's name is (and in this document it is called the Charity). 3. The Object The Charity's object (the Object) is the promotion of efficiency of the armed forces of the Crown by the provision and support of facilities and activities for the efficiency and well-being of Service personnel. 4. The Charity Trustees The charity trustees (in this document they are together called the Trustees) are: a. The Commanding Officer, Officer Commanding, Senior Officer or Officer in Charge, the title of whom will depend on the Service, (also known as the Managing Trustee) together with b. Any other persons who, collectively with the Commanding Officer (or equivalent title) form a Board of Trustees and thereby are responsible for controlling the management and administration of the charity. 5. Duties of the Trustees The Trustees must manage the business of the Charity and they have the following powers in order to further the Objects (but not for any other purpose): a. to raise funds. In doing so, the Trustees must not undertake any substantial permanent trading activity (unless it is primary purpose trading) and must comply with any relevant statutory regulations; 507A-1 AL3

163 b. to buy, take on lease or in exchange, hire or otherwise acquire any property and to maintain and equip it for use; c. to sell, lease or otherwise dispose of all or any part of the property belonging to the Charity. In exercising this power, the Trustees must comply as appropriate with sections 117 to 122 of the Charities Act 2011; d. to borrow money and to charge the whole or any part of the property belonging to the Charity as security for repayment of the money borrowed. In exercising this power, the Trustees must comply as appropriate with section 124 Charities Act 2011; e. to co-operate with other charities, voluntary bodies and statutory authorities and to exchange information and advice with them; f. to establish or support any charitable trusts, associations or institutions formed for the Object; g. to acquire, merge with or enter into any partnership or joint venture arrangement with any other charity formed for the Object; h. to set aside income as a reserve against future expenditure but only in accordance with a written policy about reserves; i. to obtain and pay for such goods and services as are necessary for carrying out the work of the Charity; j. to open and operate such bank and other accounts as the Trustees consider necessary and to invest funds and to delegate the management of funds in the same manner and subject to the same conditions as the trustees of a trust are permitted to do by the Trustee Act 2000; k. to do all such other lawful things as are necessary for the achievement of the Object. 6. Assent of Managing Trustee No decision of the Trustees shall be valid unless it receives the assent of the Commanding Officer, or other equivalent title (the Managing Trustee) as shown at Paragraph from 4 (a) above. 7. Membership Uniformed personnel of the armed forces of the Crown, qualifying civilians and other civilians may be admitted to membership subject to the provisions of the appropriate single service instruction. 8. Application of the Income and Property a. The income and property of the Charity shall be applied solely towards the promotion of the Object. b. A Trustee may pay out of, or be reimbursed from, the property of the Charity reasonable expenses properly incurred by him or her when acting on behalf of the Charity. 507A-2 AL3

164 c. None of the income or property of the Charity may be paid or transferred directly or indirectly by way of dividend bonus or otherwise by way of profit to any member of the Charity. This does not prevent: 9. Dissolution i. a member who is not also a Trustee from receiving reasonable and proper remuneration for any goods or services supplied to the Charity; ii. a Trustee from buying goods or services from the Charity or otherwise enjoying the facilities provided by the Charity upon the same terms as other members; iii. the purchase of indemnity insurance for the Trustees against any liability that by virtue of any rule of law would otherwise attach to a trustee or other officer in respect of any negligence, default breach of duty or breach of trust of which he or she may be guilty in relation to the Charity but excluding: a. fines; b. costs of unsuccessfully defending criminal prosecutions for offences arising out of the fraud, dishonesty or wilful or reckless misconduct of the Trustee or other officer; c. liabilities to the Charity that result from conduct that the Trustee or other officer knew, or ought to have known, was not in the best interests of the Charity, or in respect of which the person concerned did not care whether that conduct was in the best interests of the Charity or not. d. No Trustee may be paid or receive any other benefit for being a Trustee. a. If a Charity is to be dissolved, either by resolution of the members or by any directive of the Ministry of Defence, the Trustees will remain in office as charity trustees and be responsible for winding up the affairs of the Charity in accordance with this clause. b. The Trustees must collect in all the assets of the charity and must pay or make provision for all the liabilities of the charity. c. The Trustees must apply any remaining property or money as directed by the appropriate single Service higher authority: i. directly for the Object; ii. by transfer to any charity or charities for purposes the same as or similar to the Charity; iii. in such other manner as the Charity Commission for England and Wales ("the Commission") may approve in writing in advance. d. The members may pass a resolution before or at the same time as the resolution to dissolve the Charity specifying the manner in which the Trustees are to apply the remaining 507A-3 AL3

165 property or assets of the Charity and the Trustees must comply with the resolution if it is consistent with sub-clause (c) above. e. In no circumstances shall the net assets of the Charity be paid to or distributed among the members of the Charity. f. The Trustees must promptly notify any United Kingdom charity regulator with which the charity may be registered that the charity has been dissolved. The Trustees are obliged to comply with the requirements of any such regulator for the submission of final accounts and related paperwork as they may specify from time to time. 10. Choice of Law and Interpretation a. The governing law of the Charity shall be the law of England and Wales. b. This document shall be interpreted in accordance with the law of England and Wales, provided that it will not permit the charity s property to be applied for any purpose or transferred to any organisation which is not charitable in accordance with any statutory provision in force in any part of the United Kingdom. 11. Amendments a. Any provision contained in Part 1 of this constitution may be amended provided that: i. no amendment may be made that would have the effect of making the Charity cease to be a charity at law; ii. no amendment may be made to alter Clauses 3, 6, 7,8,9,10,11 or 12 without the prior written consent of the Commission iii. any resolution to amend a provision of Part 1 of this constitution is passed by not less than two thirds of the members present and voting at a general meeting and by the Commanding Officer or other equivalent title (the Managing Trustee) as shown at Paragraph 4 (a) above. b. A copy of any resolution amending this constitution must be sent to the Commission within twenty-one days of it being passed. 12. Definitions For the purposes of this document: Service personnel shall mean serving uniformed personnel of the armed forces of the Crown and qualifying civilians. qualifying civilians shall mean personnel who are wholly or mainly engaged in activities which directly support the armed forces of the Crown. PART 2 1. The Charity shall be managed and administered in accordance with the provisions of Part 1 of this constitution and, insofar as they are not inconsistent with the provisions of Part 1, the 507A-4 AL3

166 Queen s Regulations from time to time applicable to the relevant Service and the relevant single Service instructions as amended or replaced from time to time. 2. Subject to Clause I of Part 2 the following provisions shall apply to the charity: [Include any specific provisions that are not covered by Queen s Regulations or single Service regulations] 3. Accounts a. The Trustees must comply with their obligations under the Charities Act with regard to: i. the keeping of accounting records for the Charity; ii. the preparation of annual statements of account for the Charity; iii. the transmission of the statements of account to the Charity; iv. the preparation of an annual report and its transmission to the Commission; b. Accounts must be prepared in accordance with the provisions of any Statement of Recommended Practice or other instructions issued by the Commission (and any other United Kingdom charity regulator with which it may be registered from time to time), unless the Trustees are required to prepare accounts in accordance with the provisions of such a Statement prepared by another body. 4. Central Register of Charities The Trustees must notify the Commission promptly of any changes to the Charity's entry on the Central Register of Charities and such other United Kingdom charity regulators with which it may be registered from time to time. 5. Rules and Bye-Laws a. The Trustees may from time to time make rules or bye-laws for the conduct of their business. b. The bye-laws may regulate the following matters but are not restricted to them: i. the admission of members of the Charity (including the admission of organisations to membership) and the rights and privileges of such members, and the entrance fees, subscriptions and other fees or payments to be made by members; ii. the conduct of members of the Charity in relation to one another, and to the Charity's employees; iii the setting aside of the whole or any part or parts of the Charity's premises at any particular time or times or for any particular purpose or purposes; 507A-5 AL3

167 iv. the procedure at general meetings and meetings of the Trustees in so far as such procedure is not otherwise regulated by this constitution; v. the keeping and authenticating of records. (If regulations made under this clause permit records of the Charity to be kept in electronic form and require a Trustee to sign the record, the regulations must specify a method of recording the signature that enables it to be properly authenticated.) vi. generally, all such matters as are commonly the subject matter of the rules of an unincorporated association. c. The Charity in general meeting has the power to alter, add to or repeal the rules or bye-laws. d. The Trustees must adopt such means as they think sufficient to bring the rules and bye-laws to the notice of members of the Charity. e. The rules or bye-laws shall be binding on all members of the Charity. f. No rule or bye-law shall be inconsistent with, or shall affect or repeal anything contained in, this constitution. Back to Chapter Contents Page 507A-6 Back to Main Contents AL3

168 507A-7 AL3

169 AP3223 Leaflet 508 CHARITY COMMISSION REGISTRATION In general, RAF Service Funds are considered to be excepted 1 charities under Statutory Instrument 1056/65, on the presumption that they are established for charitable purposes which promote the military efficiency of the armed forces. The Charities Act 2006 limits charities which can claim excepted status to those with income below 100,000, and this threshold is expected to be reduced in the future. Therefore, the Charity Commission require all officers and SNCOs messes, JRWFs and banked funds with gross annual income of over 100,000 to register as charities. If registration is not successful for any reason, then these Service Funds would stand to lose their charitable status. It is anticipated that all messes and JRWFs will be accepted for registration. However, some banked funds may have to adapt their business model to suit the charitable status (for example if they currently gain more than 25% of their income from trading with the general public such levels of non-primary purpose trading are against HMRC rules) As it is likely that the registration threshold for charitable registration will be reduced in the future for the purpose of issuing guidance on future governance, Service Funds can be grouped by income size as shown in the following paragraphs. Small Service Funds Small Service Funds are those with a gross annual income below 25k. These funds represent the overwhelming majority of Service Funds on most units, and they are to continue to operate exactly as they currently do for the foreseeable future. The only action required of them is to adopt the generic RAF Service Fund charity constitution contained in Leaflet 507 Annex A and it is recommended that the trustee (Stn Cdr) authorises the adoption of this constitution. In the case of messes and JRWFs with this size of income, the membership is to adopt the consitution at an AGM or EGM and it should be formally endorsed in the minutes and also by the trustee s signature. Medium Service funds Medium Service Funds are those with a gross annual income of between 25k and 100k. These funds remain within the limits for excepted charitable status and should adopt the generic RAF Service Fund charity constitution contained in Leaflet 507 Annex A. The adoption of such a constitution will confirm them as charities under the auspices of Statutory Instrument 1056/65. The club/fund rules can be maintained separately, but the term constitution should not be used for any other document. The funds must then perform the following actions: a. Constitution. Committees should adopt the generic RAF service fund charity constitution contained in Leaflet 507 Annex A and the trustee (Stn Cdr) should authorise the adoption. In the case of messes and JRWFs with this size of income, the membership is to adopt the consitution at an AGM or EGM and it should be formally endorsed in the minutes and also by the trustee s signature. 11 ie excepted from the need to register with the Charity Commission and to submit annual accounts AL6

170 b. Accounts. Committees, in liaison with SFAS, are to produce annual accounts in the form of a CC17a if the fund is a separate company on Sage; or by using the simplified CC16a receipts and payments accounts if the fund is within the banked funds company on Sage. c. Trustee s Annual Report (TAR). Produce a TAR. All units will already be producing TARs for their Offrs Mess, SNCOs Mess and JRWF. d. Independent Examination (IE). Undergo annual IE. Annual IEs for medium banked funds should be less time consuming than for messes and JRWFs, especially if CC16s are used. Large Service Funds Large Service Funds are those with a gross annual income in excess of 100,000. They are to register as charities once their gross annual income exceeds 100,000, although they are also permitted to register before they have reached the threshold. Annex A provides a step-by-step guide on how to register each eligible fund on your stn. For successful registration, the following documents will be required: the governing documents (i.e. the constitution as per Leaflet 507), previous year s accounts (as per Leaflet 502) and personal details of the stn cdr (home address). Once registered, stns are to forward the confirmation that will be received from the Charity Commission to the HQ AIR Service Funds. Typically, units will have 3 large Service Funds (normally includes the Officers Mess, Sergeants Mess and JRWF), and can often have more (e.g. Bowling Alleys or Gliding Clubs) Before registration of a large Service Fund can be conducted, it is essential that the membership adopts the generic Service Funds Charity Constitution template in accordance with Leaflet 507 Annex A. If the generic Service Funds charitable constitution is not adopted, or if the CC refuse to accept any particular fund for charitable status, then specific advice will be required and the fund officials should contact HQ AIR Service Funds staff. Those funds that are accepted by the CC as meeting charitable criteria under the Promotion of Military Efficiency criteria, must perform the following actions: a. Constitution. Committees should be strongly recommended to adopt the generic RAF Service Fund charity constitution contained in Leaflet 507 Annex A at their next AGM. The trustee (Stn Cdr) is recommended to authorise the adoption. b. Accounts. Committees, in liaison with SFAS, should produce annual accounts in the form of a CC17a if the fund is a separate company on Sage or its gross annual income exceeds 250k. c. Trustee s Annual Report (TAR). Produce a TAR for each applicable Mess/fund. d. Independent Examination (IE). Undergo annual IE. Annual IEs for large banked funds should require a similar amount of time as for an average sized JRWF. e. Registration. Register with the CC using the on-line application process at Annex A. Once the Service Fund is registered as a charity with the CC, it will receive reminders that it must submit annual returns to the CC after each financial year. The information required in the annual returns is basically an online update of the basic trustee/charity/administration information, and also summary figures from the accounts (CC17a). These details can be uploaded online to the CC once the Independent Examiner has certified the accounts. It is AL6

171 vitally important that annual returns are completed. Furthermore, the CC17a, Trustee s Annual Report and the Independent Examiner s certificate must also be uploaded to the CC website (as pdf documents). There is a facility to upload these documents at the same time as completing the annual return, or they can be submitted on a separate occasion. Funds already registered as charities must complete their annual returns when notified by the CC. CHARITY STATUS DECLARATION ENGLAND AND WALES LAW Registered charities operating in England, Wales or overseas are required 2 to state that they are a registered charity on the items listed below: a. Notices, advertisements or other documents issued by or on behalf of the charity which solicit money or property for the charity s benefit. (Eg Christmas Draw advertisements) b. Bills of exchange, promissory notes, endorsements, cheques and orders for money or goods purporting to be signed on the charity s behalf. c. Bills, invoices, receipts and letters of credit It is suggested that this requirement is met by stating, RAF Xxxxxxx Officers Mess / SNCOs Mess / Junior Ranks Welfare Fund / Banked Fund is registered charity number XXXXXX on all such documents, and care must be taken that the text is clear and legible. Anyone who signs, issues or authorises the issue of a non-compliant item is liable to criminal penalties (fines) whether or not he/she did so knowingly it is a strict liability offence. This requirement may be new to RAF Service Funds but it must be actioned immediately. NON-CHARITABLE SERVICE FUNDS (ENGLAND AND WALES) Funds not having a charitable constitution may have a legacy governing documents that establish them as unincorporated associations (effectively members clubs) or similar. In England and Wales, such funds are to be strongly encouraged to vote at AGM on replacing their governing documents with a standard generic RAF charitable constitution contained in Leaflet 507 Annex A. This will: a. Facilitate standardisation throughout the RAF Service Funds. b. Provide charitable tax exemptions (should trading ever be required). c. Ensure that if the fund closes the residual holdings are distributed to other charities with common objects (eg JRWFs or the RAF Central Fund) rather than the members own pockets. 2 Strictly speaking this requirement only relates to registered charities with gross annual income exceeding 5,000 which by definition will include all registered RAF Service Funds charities AL6

172 Funds that are not deemed to be charitable do not have to comply with CC requirements. However, they may have to close, review their operations such that they qualify as charitable, or merge with the JRWF. Non-charitable funds should not be supported by units and will not be supported by HQ AIR Service Funds. Annex: A. Instructions for RAF Service Funds online charity registration. Back to Chapter Contents Page Back to Main Contents AL6

173 INSTRUCTIONS FOR RAF SERVICE FUNDS ONLINE CHARITY REGISTRATION AP Le afl et 508 An ne x A 1. These instructions have been written for use with the Charity Commission s (CC) online registration application system and do not apply to service funds submitting manual applications. HQ Air Service Funds encourage all eligible funds to be registered online using the Fast Track system. 2. A Service Fund will be fast tracked for consideration once the application and paperwork is received if it: a. Has adopted the latest version of the approved governing document (or a version which closely matches it) ie the constitution in Leaflet 507 Annex A. b. Complies with the registration instructions set out in this document. c. Submits its application online. d. Does not work with children. 3. If a Service Fund works with children it may be possible to fast track the registration application providing the applicant can confirm a child protection policy is in place and the required CRB checks have taken place. 4. Copies of the latest versions of the approved governing document can be obtained from Annex A to Leaflet 507, through HQ AIR Service Funds, or by using the following link: 5. If a Service Fund has made material amendments to the approved governing document (eg objects, trustee provisions, membership clauses) or has adopted a different form of governing document it will not be possible to fast track the application. Material amendments to the approved governing document or adoption of a non approved governing document will result in a lengthier application process. In these circumstances the commission s case workers will need to make further enquiries to clarify the fund s charitable status. Therefore, unless you must, do not amend Part To process your registration instruction you will need a range of information including: a. Contact details for the application, telephone number and address. AL6

174 b. The fund s governing document. c. The fund s last set of annual accounts. d. Contact details for the fund. e. Full trustee names, home addresses and dates of birth. f. Optional: a PDF version of the governing document adopted by the fund. 7. It is not necessary to complete the application all at once. There are four stages when completing your online application: a. Stage 1. Set up the registration application. b. Stage 2. Set up the fund details. c. Stage 3. Set up the fund activities. d. Stage 4. Set up who is involved. 8. Once you have set up your registration application after Stage 1, and have an application number from the commission, you can log off at any time and then resume filling out your application at your convenience. The system will save your work as you progress. 9. Please note that submission of an application, whether online or by hard copy, does not guarantee registration. 10. It is important to note that there are three symbols that are used throughout the registration process that you need to be aware of their meanings: Any fields with this symbol next to it mean that the data will be made available to the general public. Therefore, do not use personal addresses in these fields. Provides further information explaining a particular field or section. This denotes a mandatory field and so must be completed to progress with the registration AL6

175 508-7 AL6

176 STAGE 1 SET UP THE REGISTRATION APPLICATION 1. Type in into the web browser. 2. From the Charity Commission homepage click on the Registering a Charity under Quick Links. 3. On the left hand side click on Online Application For Registration AL6

177 4. The next screen contains narrative about the Online Application process. Click on here where it says Complete and submit your online registration application here AL6

178 5. Obtaining logon password. If you are not already logged onto the system it will take you to a message screen AL6

179 If you have not already opened an account you may open a new account by clicking the "Enter this service" button on the right of the screen and clicking on the "Apply for an account" button on the next screen. Once you have done this, your secure password will be sent directly to your address. Once you have received your password press the Enter this service button and you can then proceed to log on AL6

180 6. Registration. Once logged on you will see the Welcome to online application for registration. Click on the left of the screen Apply to register a new charity 7. Enter the Name of the Fund and the date the governing document came into effect for the fund. The date will be when the governing document was originally agreed at the Fund s AGM AL6

181 Once you have entered the data press the Save button. 8. Contact Details. Now enter the main contact details for this registration application, this should be the OC Accounts of the unit (the ongoing contact details for the fund will be entered at a later date). Although there is a facility to enter an organisation it is recommended that a named individual is nominated as contact for the application. This will enable the commission to promptly resolve any queries it has with the application AL6

182 You must enter a contact address and telephone number (This should be the civilian telephone number including STD code). Press Save when finished in this screen. 9. Confirm your eligibility to register by answering yes to all three questions. Press Save when finished in this screen. 10. Governing Document. Enter the type of governing document the fund is using: If the fund has membership or subscribers fund click on the Constitution button. This applies to all messes, JRWF and most other funds on a station. If the fund does not have membership or subscribers click on the Trust Deed or Declaration of Trust button. Save your choice when you have made your selection AL6

183 11. Identify the type of governing document the fund is using. a. Funds who have adopted one of the approved Service Fund governing documents (or an earlier version of them) select the Yes button to AL6

184 Have you adopted an approved governing document? If you have not adopted one of the approved service fund governing documents go to step 11d below. b. Next select the type of governing document under the heading What is the name of the body that issued the approved governing document? Armed Forces with managing trustee should be selected because all Service Funds are managed by a sole managing trustee (eg the CO) or by a managing trustee with a committee. c. The final question on this section asks Have you changed objects, trustee remuneration, dissolution clause or power of amendment? i. If you answer Yes to this question complete a brief description of the changes you have made in the narrative box which appears on the form and save your answer. The system will then bring up the objects for the adopted approved governing document. Please update any changes that have been made to the fund s objects before saving this section. ii. Most funds should choose No. d. Only for Service Funds which have not adopted an approved governing document; i. Enter No and press Save. ii. Enter the Fund s objects in the next screen and press Save AL6

185 12. You should now have reached the end of Stage 1 Set up your registration application. The next screen will confirm that you have completed the eligibility assessment and give you an Application Number. This screen explains what you need to do to work through the online application. Please take note of its instructions. 13. Now that you have an application number you can log off at any time and then resume filling out your application at your convenience. The system will save your work in progress. Click the Next button when ready to proceed AL6

186 STAGE 2 SET UP THE FUND DETAILS 14. If the fund has a working name or acronym enter this in the box below the main name: Once you have entered it press the Next button AL6

187 15. Fund s Public Address. Now enter the Fund s public address. a. For UK addresses type in the post code and then select the premises identified in the drop down list. Please note the address provided will be shown on the public register of charities on the CC website. In most cases the address would be the working address from which the fund is administered or operates from eg Accounts Flt, so that correspondence can be handled without undue delay and does not go astray. The CC may consider withholding the fund s address from the public register of charities if its publication could be harmful. This is rarely done (eg special forces funds). If they do agree not to make the address public then they must have an alternative address for the public Register of Charities (eg a PO Box number). b. Confirm if the contact address is where the fund is administered or operates from. Select Yes or No. If you select Yes you can skip to step If you select No you will be taken to an extra screen to confirm the operating address of the fund. You will then have to explain in the narrative why you wish us to AL6

188 accept the alternative contact address on the register. When complete click the next button. 17. Now type in an address which the Commission may use for correspondence purposes. You can optionally add in an address and website address for public use. It is unlikely that Service Funds will wish to use this facility. 18. Now enter details of finance and funding. Most Service Funds have existed for more than one year, when you type in Yes the screen should look like this: AL6

189 Now enter: a. The fund s gross income as reported in your last accounts. b. The next financial year end date. c. Briefly state how the fund derives its income ( eg mess subscriptions, investments). d. Whether the fund uses professional fundraisers (unlikely). If your fund has operated for less than one year select the No button at the top of the form. The screen will be very similar to this screen shot except it will ask for estimate annual income and year to date income. Click next on this screen when finished. 19. You have now completed stage 2 Set up the fund details. You should see this screen telling you have completed the organisation details for the fund. If there are incomplete details then it will highlight the section on this page AL6

190 Select the Next button and it will take you to a Review screen. STAGE 3 SET UP THE FUND ACTIVITIES 20. Review organisation details entered. You can now review the organisational details entered and edit any incorrect entries. Click Next AL6

191 21. Now confirm that the fund is using the approved wording for the objects (the purposes) of the fund by clicking on the confirm box. Now click Next. 22. Fund activities. Next type in your activities: AL6

192 a. It is suggested that you tailor the following standard wording to the specific fund application: This fund provides public benefit by assisting service personnel to more effectively perform their roles within the Royal Air Force. It does this by xxxxxxxxxxx**. This assistance enables service personnel to face the challenges and danger associated with military service by developing and maintaining teamwork; skills; fitness; confidence, character, spirit and attitude; and morale*. As a result the fund promotes the efficiency of the Royal Air Force s capability to undertake the roles demanded of it including the defence of the United Kingdom and its interests. *delete as appropriate. ** replace with wording appropriate to activities of fund e.g. providing and supporting mess facilities and social activities ; or providing and supporting sporting and adventure training activities. A tailored example is included in this screen shot: Click Next AL6

193 23. Classifications. Now enter the charity classifications. a. Under the heading What does your organisation do? click the button next to 114 Other or none of these b. Then type Promotes the efficiency of the armed forces of the crown in the box under the heading If Other or none of these please specify AL6

194 23. Cont. c. Under the heading Who does your organisation help? click the button next to 206 Other defined groups. d. Then type Armed Forces personnel in the box under the heading If Other defined groups please specify. e. Under the heading How does your organisation operate? select the relevant options eg makes grants to individuals, makes grants to organisations, provides services. Click the next button when complete AL6

195 24. Identifying Area of Operation. You should now see this screen: Click on the button on the left hand side of the screen Now Working. 25. You will now see the following screen: AL6

196 For funds based in England and Wales: Click on the button next to Throughout England and Wales (more than 10 local authority areas). Click Next when ready. 26. You have completed stage 3 of 4 Set up the fund activities and you should see the following screen: AL6

197 27. Click Next to provide an opportunity to review what you have entered about the fund s activities AL6

198 STAGE 4 SETTING UP WHO IS INVOLVED 28. Click the next button to move onto the screen for entering the fund s contact details. It is recommended that contact and details for a role or post eg BRI-PMS OC Accounts, are provided rather than a person s details because of the frequent changeover in personnel. You must supply an address that the CC can use for official correspondence. Please note the fields marked with a the commission s website. will appear on the public register on Click Next when complete AL6

199 29. Enter trustee details. To do this you will need full names of the trustee, their home address and date of birth. Optionally you can also provide an address for the trustee. If you give an optional address for your charity trustee, the Commission may them with important updates about trusteeship from time to time. Check the box on this screen if they do not wish to receive these updates. Please note that the commission may send correspondence to the registered home address of trustees. Civilian titles (eg Mr,Mrs) should therefore be used rather than military rank for security reasons. To add new trustee details click on the Add Trustee button and you will be presented with a screen to fill in the details of the Trustee AL6

200 30. You must provide the home address, date of birth and a telephone number for each trustee. ( address is optional). You must ensure that the Title is a civilian title eg Mr, and not their rank, because the CC may have occasion to send correspondence to home addresses AL6

201 If you wish to apply for a dispensation for the name to be listed on the public register and website you must state the reason for this. (Home addresses and telephone numbers of trustees are not made public). Dispensations are rarely provided eg SAS. Click Save. 31. When you have completed adding the details for a trustee they will appear on the screen: AL6

202 When you have finished entering the details of the trustee tick the confirm box at the bottom of the page. If your fund has a sole managing trustee you will also need to tick the second confirm box Press Next to proceed AL6

203 32. Working with Vulnerable People. You now asked to confirm you have read the guidance on vulnerable people. This is available by clicking on icon on this page. Most Service Funds will not be working with children or vulnerable adults. If this is the case for your Service Fund click No for both questions. If your fund works with children then you will be required to answer additional questions which will appear on the screen. Press Next when ready to proceed AL6

204 33. Private benefit. You now asked to confirm you have read the guidance on private benefit. This is available by clicking on icon on this page. It is rare that a trustee of a Service Fund will be in receipt of a private benefit (eg receiving a payment for goods and services, salaried pay). On the rare occasion a trustee may be receiving a personal benefit then you will need to enter Yes and provide a brief description in the narrative box which will then appear. Click Next when ready to proceed AL6

205 34. Provided you have entered all the required details you should now see the following screen: This means you have now completed Stage 4 Setting up who is involved. Press 'Next' on the Summary Screen to move to the next section of your application AL6

206 35. You now have the opportunity to review the information entered for this section. Press next when ready to continue AL6

207 36. You have now completed all the information needed for the application to be submitted. Prior to submitting the application you have the option of letting the CC know if there are any special deadlines you are working to by clicking on the Special Circumstances box on the left hand side of the screen and entering additional information into the narrative box. If you can attach the copy of the governing document in PDF format this will help to speed up the registration process. When ready press the submit button AL6

208 You should now receive confirmation on the screen that your application has been submitted. Press OK to acknowledge the confirmation AL6

209 38. The CC will an electronic PDF version of the following documents to the address you have been using to log on: a. Your application form. b. The trustee declaration form. c. A registration cover note to use when sending any documentation connected with your registration application (this sets out any additional documentation you need to send to the CC). 39. Please ensure that the trustee declaration form is signed by all the Trustees and returned to the CC within the next 30 working days of submitting the online application. When you return the trustee declaration you must also enclose a copy of the governing document if you did not attach it with your electronic application. Please note that the CC will only consider your application when they have received the trustee declaration form and governing document. 40. Normally consideration of an application of this type will be completed within 10 working days to identify if the CC need further information or clarification. The CC will then be in touch with a nominated contact for the application who will identify a. If they require further information or clarification AL6