PRIVATE AND VOLUNTARY FUNDS TABLE OF CONTENTS

Transcription

1 SECTION 7 PRIVATE AND VOLUNTARY FUNDS TABLE OF CONTENTS Page Contacts for Section Introduction Public and private funds Internal Audit coverage Other accounts 6 Appendix A Tests to determine eligible expenditure 9 Part IV: Guidance - Section 7 Page 1 RESO3523 Issue 2 : April 2002

2 Part IV: Guidance - Section 7 Page 2 RESO3523 Issue 2 : April 2002

3 SECTION 7 PRIVATE AND VOLUNTARY FUNDS CONTACTS Private, voluntary and trading accounts, including audit and submission of annual audit certificates for these accounts Nigel Studley Internal Audit Income Tax legislation VAT queries Edward Deville Taxation Services Corporate Services Gary Elmes Alex Fitzpatrick Taxation Services Corporate Services Part IV: Guidance - Section 7 Page 3 RESO3523 Issue 2 : April 2002

4 Part IV: Guidance - Section 7 Page 4 RESO3523 Issue 2 : April 2002

5 SECTION 7 PRIVATE AND VOLUNTARY FUNDS 7.1 Introduction This Section sets out: the Authority s position in relation to these accounts and the distinctions between official accounts, governor controlled accounts and the funds and accounts of other bodies associated with the school the requirement to submit an annual audit certificate to the Chief Internal Auditor for all such accounts general guidance on the operation of such accounts including their tax status (Appendix A sets out some tests as a guide to whether the use of the funds in these accounts could be regarded as reasonable). 7.2 Public and private funds It is important to distinguish between those public funds provided by the LEA/Government, and possibly other official bodies, and those generated or raised by the governors or school. Funds falling into the first category are governed by the Authority s Scheme for Financing Schools and the provisions of this Handbook. Funds falling into the second category are controlled by the Governing Body and will be held in a separate (private) account. A third category of funds may exist belonging to bodies which, although they may be closely associated with the school, are not part of it and therefore the accounts and transactions should be wholly separate, e.g. parent teacher associations. More guidance regarding this separation of accountability is provided below, under Section 7.4. Although the funds held in a private, voluntary or trading account are not the responsibility of the Authority, parents, pupils and, arguably, the wider community should expect standards of propriety and stewardship in relation to these funds to match those expected for official funds. This is particularly relevant since such funds will often be administered by members of staff as part of their duties. The Governing Body is potentially liable to Corporation Tax on any income and gains arising from, or generated by, these accounts, but the Inland Revenue has indicated that it will not levy any tax provided that: the funds are used for activities which are broadly educational, support the running of the school, or are for charitable purposes (Appendix A to this Section provides further guidance); the activities used to generate funds are not business like in their scale or nature (although major fund raising initiatives and/or the income generated from assets financed through these accounts may not attract a tax liability but prior discussion Part IV: Guidance - Section 7 Page 5 RESO3523 Issue 2 : April 2002

6 with the Inland Revenue may be advisable where a private, voluntary or trading account becomes involved in major initiatives, e.g. in connection with Lottery bids); the accounts are subject to regular and adequate audit. In relation to VAT please refer to Part IV, Section 12, for advice on purchases made from donated funds and for advice on VAT on private, voluntary and trading accounts. 7.3 Internal Audit coverage Where a school has opted to have a private, voluntary or trading account included as part of Internal Audit s normal coverage, then the audit will seek to establish that the following controls are in place: proper recording and substantiation of all payments proper recording and substantiation of all receipts maintenance of such additional and subsidiary records as are necessary to support the first two bullets, e.g. records of income expected and received from individual sources recording of transactions and balances at a level of detail sufficient to properly reflect the sources of income to the account and the purposes for which the funds are used use of the account for appropriate purposes only reconciliation of account - frequency, method and evidence of proper recording regular reporting of and monitoring of income, expenditure and the net position on the account by the Headteacher and Governing Body separation of duties in the key accounting functions identification of turnover on business activities where this may exceed the VAT registration threshold clear separation of funds and transactions from other accounts. 7.4 Other accounts Charitable Trusts and the funds and accounts of separate organisations, e.g. parent teacher associations, should be separated from those controlled and managed by the governors and school staff. These Other accounts would include the Governors accounts of Voluntary Aided and Voluntary Controlled Schools, since these accounts are subject to the control/influence of a separate body, e.g. the local Diocese. The fund raising or management committee for other funds/accounts will normally be set up and constituted as a separate body, whose members may be wholly or partly non-county Council employees. These funds will generally be controlled by a nominated member of that body, whereas decisions regarding the use of funds in the school s private, voluntary or trading account(s) can be determined only by the governors of the school, (although the dayto-day running of the account is usually delegated to the Headteacher). Part IV: Guidance - Section 7 Page 6 RESO3523 Issue 2 : April 2002

7 Donations to the school from these organisations can be made to the General Account or to a private, voluntary or trading account(s). Once monies have been donated to any of these accounts the donor ceases to have any control over the fate of these monies, although both school employees and governors should be expected to act in good faith to use the donation in accordance with the wishes of the donor, especially where this is agreed in advance. Part IV: Guidance - Section 7 Page 7 RESO3523 Issue 2 : April 2002

8 Part IV: Guidance - Section 7 Page 8 RESO3523 Issue 2 : April 2002

9 APPENDIX A SECTION 7 TESTS TO DETERMINE ELIGIBLE EXPENDITURE The funds in these accounts are expected to be used for activities that are broadly educational in their nature and/or support the running of the school. The governors are potentially liable to pay corporation tax on these accounts, but the Inland Revenue has indicated that it will not levy any tax provided that the funds are used in this way or for charitable purposes. A number of tests should be applied to judge whether expenditure from the account is proper and reasonable. a. Is the expenditure for items or activities that contribute to the education of the pupils or the running of the school? b. Would the people who raised or donated money (or contributed towards the cost of certain activities) be likely to regard the expenditure as appropriate? c. Should the expenditure be more properly met from another source, e.g. a specific collection from among staff, parents and pupils, or a specific fund raising initiative? d. Is the scale of the expenditure reasonable? e. Would this expenditure breach any financial regulations in law, e.g. some cash in hand payments to persons for services rendered? f. Has the expenditure been approved in advance by the Headteacher or Governing Body? (For the more sensitive areas of expenditure such as hospitality, etc, development of a policy by the Governing Body is recommended.) The following paragraphs set out what Internal Audit regards as the appropriate treatment of certain types of expenditure which have been made through these accounts. Refreshments including alcohol: such purchases are not expected other than for modest hospitality, for visitors, etc, and any provision for staff and governors should be incidental to its provision for visitors, guests, etc. The Governing Body should always sanction the use of funds in this way. Such expenditure should be reported separately in the accounts in an Entertainment/Hospitality/Refreshments column. Part IV: Guidance - Section 7 Page 9 RESO3523 Issue 2 : April 2002

10 Leaving gifts for regular members of staff etc. should not normally be paid for from the account unless funded by specific collections, and even small tokens of appreciation for casual staff or helpers, flowers for sick staff etc., may be regarded by the Inland Revenue as a taxable benefit. The Governing Body should always sanction the use of funds in this way. Cash payments to any individuals, whether they are normally employed by the school or not, e.g. swimming instructors, parent helpers, etc. should not be paid from the account unless self-employed status has been confirmed using the questionnaire in Part IV, Section 13, Appendix A. Activities organised by the Parent Teacher Association (PTA) should not be transacted through the school s fund account(s), but should be accounted for and administered wholly separately. The PTA should be set up and constituted as a separate body. The finances of the PTA will generally be controlled by a member of that body, whereas the fate of money passing through the fund account can only be determined by the Headteacher and governors of the school. Part IV: Guidance - Section 7 Page 10 RESO3523 Issue 2 : April 2002