- New London Music Society (‘NLMS’) is a registered charity, with control of its management and strategy being vested in a Committee of Trustees and other elected representatives of the membership (‘the Committee’).
- This document governs the conduct of financial management in NLMS by trustees and staff. It may only be amended or varied by resolution of the Committee. It is one of NLMS’s governing policy documents providing guidance for trustees and members of staff on financial matters and should be read in conjunction with Charity Commission guidance on financial management, financial accounting and reporting, financial control, risk management, investment, financial compliance, charity trading and other current relevant publications.
- The trustees of NLMS have overall responsibility for managing its resources responsibly, by ensuring that financial management, financial control and risk management in NLMS is adequate and effective, in accordance with Charity Commission requirements.
- Each year, prior to approving the Annual Report and Accounts for presentation to the Annual General Meeting, the Committee should review the effectiveness of NLMS’s internal controls and ensure that NLMS’s financial affairs satisfy the standards set by the Society’s independent assessor.
- NLMS Trustees are expected to follow these requirements to avoid bringing the role of Trustee into disrepute and exposing NLMS to harm or undue risk. A breach of these requirements by either a Committee member or a member of staff may result in disciplinary proceedings.
- The Committee is responsible for any decision regarding:
a. setting the annual budget
b. approving accounting statements
c. approving the annual report and accounts
d. writing off bad debts
e. addressing recommendations in any report from the independent assessor
f. approving an investment strategy and policy.
- The Committee is responsible for appointing a Trustee to the position of Honorary Treasurer, with oversight of NLMS finances on behalf of the Committee, in accordance with a set of responsibilities determined from time to time by the Committee Chair and approved by the Committee.
- The Committee is responsible for securing the expertise of a suitably experienced and qualified external person to produce the Annual Final Accounts and Balance Sheet for inclusion in NLMS’s Annual Report and to meet external reporting requirements under Charity Commission requirements.
- The Treasurer is responsible for overseeing financial administration and ensuring that these controls are adhered to.
- The NLMS Director is designated as budget manager for NLMS’s operational music budget and the Administrator for the administrative budget.
- Trustees and senior officers of NLMS may be required to sign a declaration in accordance with HMRC requirements to the effect that they are ‘fit and proper persons’ to control and manage NLMS and its assets. Staff who act as responsible persons in managing NLMS, and handle gift aid claims and make tax returns, must be registered with Her Majesty’s Revenue and Customs (HMRC).
- Trustees are subject to the NLMS terms of Reference for Trustees, adopted by the Committee. Trustees must comply with these Terms of Reference when a decision to authorise or instruct payment is made, or any other matter, in which they have a disclosable pecuniary or other interest.
B. ACCOUNTING AND AUDITING
- NLMS uses a manual accounts system and payroll, with data being held in an Excel spreadsheet maintained by the Treasurer. From time to time, as determined by the Committee, system requirements should be reviewed, and the system updated or replaced to ensure the financial system needs of NLMS are always met.
- The Treasurer is responsible for determining all accounting procedures and financial records of NLMS, consulting, if necessary, with the Chair, NLMS’s independent examiner, and other staff with financial responsibilities. The accounting records must ensure that any income and expenditure accounts, statements of balances, and/or management information prepared for NLMS Council comply with accounting standards and legal requirements.
- Accounting records must show the day to day entries of all income and expenditure and an explanation of each transaction and must be updated as is soon as is practical and reasonable after the transactions have occurred.
- Accounting and financial records must be retained for six audited financial years, plus the current financial year.
- The Committe is responsible for setting the date for reporting the audited Annual Statement of Accounts and Annual Report to its Annual General Meeting, and the Treasurer will agree with the independent examiner the date for certification of the accounts within that timescale.
- The Treasurer is responsible for obtaining the information required for the Annual Statement of Accounts and Annual Report from the independent examiner as soon as practicable after the end of the financial year and for providing a financial summary for the Annual Report in the form required by the Charity SORP.
- NLMS must file annual financial returns required by the Charity Commission within the legal deadlines set for such returns.
- The Committee, at its Annual General Meeting, will propose the appointment of an independent examiner to carry out the work in relation to the annual examination.
- All members of staff and trustees of NLMS must make available all documents and records required by the independent examiner, together with any information and explanations as are necessary for the purpose of fulfilling the annual audit.
- The independent examiner must:
a. be independent of the management and financial operations of NLMS and/or its staff, and any external accountancy service
b. be competent and registered to carry out statutory charity examinations appropriate to the annual turnover and complexity of NLMS
c. demonstrate objectivity and independence, and be free from any actual or perceived conflicts of interest; and
d. be requested to report to NLMS Council in writing on the findings of the annual audit.
- A member of the Committee must sign and return the Annual Letter of Representation submitted by the independent examiner, promptly upon receipt.
- The Treasurer must bring promptly to the attention of all trustees any correspondence or report from the independent examiner.
C. BUDGETING AND STRATEGIC PLANNING
- NLMS currently reviews its strategy annually, within which it sets out, inter alia, its broad financial strategy for any planned developments. The strategy should be updated, considered and agreed by the Committee annually, no later than 31 October.
- The Treasurer is responsible co-ordinating and producing an accompanying income and expenditure draft budget by no later than 31 November. The draft budget should be based on the strategic objects approved by the Council, the income and expenditure forecasts set out in the strategy, and any other critical factors. During the preparation of the draft budget all potential sources of income and other funding for the following financial year should be reviewed, and expenditure budgets considered for efficiency.
- The Treasurer should review the draft budget prior to its submission to the Committee for consideration, to verify its robustness and achievability.
- Annually the Committee is responsible for setting and approving the budget for the following financial year, normally no later than the end of the first week in December.
- The Committee should ensure that, taking one year with another, NLMS does not incur repeated deficits on operational income and expenditure, and makes provision for an adequate level of reserves to be held by NLMS to ensure its continuing viability.
- If a deficit should be incurred, the Committee must, in its next Annual Report, identify the measures it is taking to eliminate the deficit, and ensure that they are effective and implemented, as required by the Charity SORP.
D. BUDGETARY CONTROL
- The annual budget as approved by the Committee forms the basis of budgetary control for the financial year. Once the annual budget has been approved, income targets are confirmed, and the Director and the Administrator have authority to spend their departmental operational budgets for the year ahead; however, in the event of a projected shortfall of income, or the onset of unexpected financial difficulties, the Committee must take measures to ensure the financial viability of NLMS, including, if deemed necessary, placing restrictions on spending operational budgets.
- If the need arises for unexpected urgent additional expenditure, the Director and the Administrator are authorised to make such expenditure, but a report of the action taken must be presented to the Committee as soon as possible and practicable thereafter.
- During the budget year, the Committee may approve available budgets to be transferred to other budget headings by budget virement, or to a specific reserve.
- Underspends in the annual budget cannot be carried forward to a subsequent year; however, specific (‘designated’) reserves may be created by the Committee to set aside money for particular purposes.
- Trustees require regular, robust financial management information. The Treasurer is responsible for the timely production of budget monitoring reports at the end of February and the end of June for review by the Trustees. The budget monitor is to be in a form approved by the Committee.
- The results of budget monitoring will be reported to the Committee at the earliest reasonable point following completion. Any necessary action resulting from budget monitoring will be agreed and implemented by the NLMS Director and Administrator, or the Committee, as required.
- The budget monitor will be presented to the Committee by electronic mail, or in a virtual (or, exceptionally, physical) meeting.
- The budget monitor report may be supplemented by the provision of specific information on those matters under the supervision of the Committee through the Treasurer, including Investments, Membership, Donations and transactions of an asset-related nature.
- Any overspend of budget which requires the use of NLMS reserves must be approved by the Committee as part of the budgetary control process.
E. BANKING ARRANGEMENTS
- The Treasurer is responsible for determining the bank mandate for NLMS, and must ensure that it is kept up to date and regularly reviewed. NLMS may seek credit references in respect of trustees or employees who act as signatories.
- NLMS’s day-to-day banking arrangements will ordinarily be managed by the Treasurer, who will ensure that funds are always available in NLMS’s current account to meet all routine liquidity requirements.
- The Treasurer is responsible for the regular reconciliation of bank balances. A report of cash balances is to be included in the quarterly budget monitor reports.
- Any significant change to NLMS’s banking arrangements, or borrowing of any kind, must be approved by the Committee.
- Excess funds over and above those necessary to maintain liquidity should be placed in term or deposit accounts to maximise interest earnings. Specific deposit accounts, including those maintained through the Charities Official Investment Fund (COIF) will be maintained to hold cash attributable to restricted accounts and those designated as separate by the Committee.
- Due to the nature of its business, NLMS will normally hold substantial funds attributable to advance course fees. These funds are not part of any contingency fund, or reserves. Such amounts will be reported by the Treasurer as part of the regular budget reports. An equivalent amount must be set aside in a separate account, at not more than seven days’ notice, to enable repayment, should the need arise.
- Cash balances in relation to restricted funds must be held in a separate deposit account.
- The Treasurer is authorised to make payments on behalf of NLMS. All payments require an authorised invoice which has been checked and signed by the relevant budget manager, to certify that the goods, work, or services to which it relates have been received or carried out, and the expenditure is on an approved business purpose by NLMS. The Treasurer will examine invoices for arithmetical accuracy prior to payment and ensure that they are posted to the correct expenditure code.
- All payments will be by cheque or other instructions (including internet bank transfer) to NLMS’s bankers, or may be made on an official debit or credit card approved for NLMS business use.
- Cheques drawn on the bank account must be signed by two authorised signatories.
- Payment may also be made by internet bank transfer. While one authorised signatory may initiate such payments, in accordance with Charity Commission guidance, a second authorised signatory should approve such by indicating assent in writing (which may include email).
- A printed copy of the internet banking transaction must be kept, as well as the certified invoice.
- Access to any internet banking accounts must be directly to the banker’s website. It must not be saved as a favourite, or accessed through an e-mail link, or search engine. Passwords for internet banking may not be saved on any computer used for banking transactions or enquiries.
- Knowledge of PINS and passwords used by NLMS for internet banking, and any debit cards or credit cards, must be strictly limited to the Treasurer and any nominated card holders. They may not be otherwise disclosed unless authorised in writing by the Chairman or the Honorary Secretary.
- Regular back-up copies of the management accounts and payment records must be made and stored securely – preferably in a second location.
- Anti-virus, anti-spyware and firewall software with automatic updates must be installed on any computers on which NLMS financial transactions are processed.
- The Treasurer is authorised to maintain standing data for suppliers and staff to whom internet bank payments are made.
- Any Debit Card issued for use by NLMS will be specifically restricted in use to staff approved by the Treasurer and may also be restricted to a single transaction maximum value of £200.
- Any corporate credit card or trade card account opened by NLMS will be specifically restricted to use by the member of staff to whom it is issued, approved by the Treasurer, and may also be restricted to a single transaction maximum value of £200. The amounts due will be settled by automatic payment in full to the card provider in accordance with their timetable. Personal credit or debit cards of members of staff or trustees may be used if circumstances require it, and such spend should be reimbursed through an expense claim. Any reimbursement must be supported by full details of the transaction and the rationale for the use of the personal card.
- NLMS may establish an operational petty cash float for use by members of staff for the purpose of meeting minor expenses, with a limit of £50, or, for a bar only, £200. The Treasurer is responsible for the maintenance of the petty cash float.
- Reimbursement of expenditure through petty cash may only be made on receipt of a signed voucher, which must be retained to substantiate the payment.
- The Committee is responsible for ensuring that there is a fair and consistent policy for setting remuneration levels across NLMS as a whole. The policy must be stated in the Annual Report in accordance with the requirements of the charity SORP.
- NLMS does not employ any staff, but when engaging freelancers must meet any relevant statutory requirements.
- The Treasurer is authorised to maintain confidential payment records on NLMS’s computerised system for the purpose of paying its freelance staff. Each person engaged must have a separate confidential record on the system. Any change to a person’s pay, emoluments, or terms and conditions of engagement requires the prior authorisation of the Director.
- The Treasurer is authorised to make staff payments. Payment of fees will be made within one month of the contract being fulfilled.
- Payment records are confidential. They may only be seen by:
a. any member of staff or trustee who can demonstrate a need to know; or
b. the registered auditor.
- Any termination payments would require a clear business case and be agreed and authorised by the Committee.
- NLMS requirements for the recruitment of staff are as follows:
a. The Director has delegated authority to recruit to Music roles within the budget limits approved for the year and any previously approved staffing structure, without prior reference to the Committee
b. Any proposal to increase total staffing costs, or vary the approved remuneration structure, requires the prior approval of the Committee.
H. INCOME AND PRICING
- All NLMS fees and charges should be reviewed at least annually, and any changes to prices implemented by 1 December, unless there are significant reasons for a review within a year, for example to accommodate marked changes to inflation. Charges to be made for courses and will normally be agreed annually by the Committee, on the basis of recommendations received from the Treasurer and the Director.
- Any irrecoverable income (bad debts) in excess of £1,000 must be reported to the Committee by the Treasurer, who then has authority to write off the debt within the year. Bad debts under £1,000 may be written off by the Treasurer and reported as part of the next monitoring report to the Committee. An audit trail of all bad debt decisions must be retained.
- All NLMS income must be banked intact. Banking of cash and cheques should be undertaken promptly and, in any event, monthly. Any income held awaiting banking must be kept in a secure place, and its value must not at any time exceed the authorised insurance limit of cash and cheque holdings under NLMS’s insurance policies.
- The origin of each receipt must be recorded in NLMS’s financial records and a full audit trail of all income retained with the banking record.
- Personal cheques must not be cashed from petty cash or unbanked income, neither should payments be made to suppliers from these sources.
- When NLMS receives any significant sums of cash, the Treasurer should ensure that more than one person is present when the cash is counted in the first instance, that there is a reconciliation to some form of control, and that appropriate care is taken in the security and safety of individuals banking such cash.
- NLMS must ensure it maintains proper records of all legacy income due and expected, through the maintenance of adequate correspondence files, progress reviews and the prompt banking of income once it is received.
- NLMS must ensure that it meets Charity Commission guidance on any trading activities. The Director and the Treasurer should conduct an annual review to ensure compliance with legal requirements as part of the annual budget preparation.
- NLMS must ensure that it complies with any deadline for the claiming and recovery of Gift Aid. The Treasurer is authorised to submit Gift Aid claims.
- Petty cash floats may be issued for the management of the bar, and from time to time for facilitating events. The bar float will be reconciled on a regular basis, and income banked regularly. Event petty cash floats must be returned to the Treasurer as soon as practicable after each event and the income banked promptly.
- Income received must not be paid into the operational petty cash float but must be separately banked.
- Under Charity Commission requirements, Trustees are obliged to act with reasonable skill and care when managing investments. The Committee is responsible for the approval of an Investment Policy for the purpose of investing reserve funds in suitable investments. The policy should set out the purpose of the investments and the expected risks and returns sought. The policy should be drawn up so as to ensure diversification of investments to limit risks in respect of adverse investment performance. The Investment Policy, and investment performance, should be reviewed by the Committee at least annually.
- All investments must be in the name of New London Music Society.
- Unless the reserves are de minimis, the Trustees must appoint a suitably qualified and experienced investment specialist, authorised and regulated by the Financial Control Authority, to act as investment manager for NLMS, unless such expertise is available within the body of trustees or members of staff of NLMS.
- The Committee is responsible for determining a written agreement with any independent investment manager, to include the responsibilities of each party under the agreement, and to identify the signatories who may act on behalf of NLMS when any decisions in relation to investments managed by the independent investment manager are required. Specifically, should trustee investments need to be liquidated, instructions to NLMS’s investment managers must be given by two signatories in writing.
- NLMS may invest surplus funds on a short- or long-term basis in COIF or a suitable interest-bearing business bank account. Guidelines for the amounts to be invested in COIF, interest bearing bank accounts and trustee investments are the responsibility of the Treasurer, and should be determined in accordance with expected cash flow, levels of reserves held, levels of future course deposits, and requirements for access to funds, and reported to the Committee.
- Investments in relation to restricted funds must be kept separate from those relating to general fund balances and may not be used in NLMS business without application to and approval by the Charity Commission. Any application of investment income to restricted funds should be in accordance with the provisions of the original charitable trust founding document.
J. RESERVES AND CONTINGENCY FUND
- Accumulated surpluses and deficits should normally be placed in a General Reserve; however, the Committee, in accordance with Charity and Company law, may make provision for specific reserves for the better management of its resources.
- NLMS may hold a Contingency Fund set aside from the General Reserve. Any decision as to the nature and size of the Contingency Fund and specific reserves is a matter for decision by the Committee.
- The Committee should review the Contingency Fund annually, at the time of setting the annual budget, and agree the contingencies and risks against which it is held for the forthcoming year.
- The Contingency Fund is managed in accordance with NLMS investment strategies.
- The policy for holding reserves should be stated in Annual Report, as required by the charity SORP.
K. ORDERS AND CONTRACTS FOR WORK, GOODS AND SERVICES
- This section applies equally to revenue and capital expenditure where:
a. Revenue expenditure covers those items whose cost will be met within the annual NLMS budget for the financial year in which they are purchased; and
b. Capital expenditure covers those items whose costs are spread over more than one financial year.
- An official order or letter should be issued for all work, goods and services above £500 (such as venue hire) unless a formal contract is to be prepared, or an official order would be inappropriate. Orders and contracts must be signed by the Treasurer and copies of orders must be retained.
- All staff and trustees are responsible for obtaining value for money at all times. A member of staff issuing an official order (i.e. the Director or the Administrator) must ensure as far as reasonable and practicable that the best available terms are obtained.
- There are five categories of purchasing, as follows:
a. low value spends for goods or services up to a value of £500 (NB It is not permitted to disaggregate expenditure in excess of £500 in order to circumvent these requirements)
b. proprietary items, i.e. where the purchase is for a unique good or service or for an item available only at a fixed price
c. purchasing from preferred, trusted or specialist suppliers, or legally binding requirements. These may include professional services (e.g. accountants appointed by the Committee) and venues for courses;
d. Spend on revenue items in excess of £500 not covered by 11.4(b) and (c), for which quotes are required
e. Spend on significant and substantial items, e.g. IT investment where significant financing which may be outside the normal revenue budget process is required, and/or where the Committee will need to approve both the expenditure and the process, and potentially including a specification and tender process.
- The Director and the Administrator may proceed to incur expenditure within their budgets on items under K.4 a., b. and c. A list of proprietary items and a list of preferred trusted or specialist suppliers will be maintained by the Treasurer, as appropriate.
- Purchasing for goods and services under K.4.d. will require the use of formal quotes or estimates. Formal written quotes must be obtained by the relevant budget manager from at least three suppliers. The decision as to which quote to adopt will be made by the budget manager and the Treasurer.
- If a tender process is required under 11.4.e., the Treasurer will in consultation with the budget manager prepare a shortlist of suitable firms and invite formal written tenders based on a written specification from at least three firms. The tenders must be returned in a specifically provided and marked envelope in the ordinary course of post and retained unopened by the Treasurer until the date and time prescribed for opening. On the prescribed date and at the prescribed time the tenders will be opened in the presence of at least two people and the results of the tenders formally recorded. The successful tenderer will be notified in writing.
- If a formal quote, estimate or tender process is used, NLMS is not bound to accept the lowest or any quote, estimate or tender.
- In the event of expenditure being required on significant and/or substantial items under K.4, a Trustee other than the Treasurer may not issue an official order or make any contract on behalf of NLMS.
L. STORES AND EQUIPMENT
- The member of staff in charge of each section is responsible for the care and custody of any stores and equipment in that section (e.g. printers, other office equipment, music stands, music).
- Delivery notes are required in respect of all goods received, and goods must be checked as to order quantity and quality at the time delivery is made.
- Stocks should be kept at the minimum levels consistent with operational requirements, unless, in the case of a regularly used item, a favourable bulk purchase is possible.
- The Administrator should ensure there is an accurate, up to date, Register of Assets.
- In accordance with proper accounting practice, depreciation must be calculated annually on all relevant fixed assets and the depreciation and written down value of assets thus affected recorded in the annual accounts.
- The Committee must act in accordance with its legal duties if buying and selling land, (as set out in Charity Commission guidance) and safeguard any land owned by NLMS. The Committee must also take professional advice when buying or selling land.
- Secure arrangements should be made for the safe custody of any title deeds and Land Registry Certificates of property held by NLMS.
- Following an annual risk assessment, the Administrator is responsible for all insurances and negotiating all claims on the Committee’s insurers, in consultation with the Treasurer – or, if those are the same person, the Hon. Secretary.
- A record of all insurances taken out by NLMS and the property and risks covered is to be kept by the Administrator. Insurance levels on all risks should be reviewed annually.
- The Treasurer must be notified of any loss, liability or damage or of any event likely to lead to a claim and manage the settlement of the claim on behalf of NLMS. Events leading to significant claims should be reported to the Committee.
- All trustees and officers of NLMS must be included in a suitable form of Directors’ and Officers’ insurance with a minimum risk exposure of £?? of individual liability and £?? of corporate liability.
O. BURSARIES AND SCHOLARSHIPS
- The Committee is responsible for the approval of a policy for bursaries and scholarships. The policy should define the purposes for which bursaries and scholarships may be awarded and state how bursaries and scholarships meet the charitable purposes of NLMS.
- The policy should further set out the priorities and projects supported through bursaries and scholarships, and the conditions and restrictions placed upon their use.
- Bursaries and scholarships may only be awarded upon the completion of a written application. Each application should be reviewed and approved by the Director and the Administrator.
- There should be an annual monitoring and review of bursaries and grants through a report to the Committee from the Treasurer.
P. EXPENSES – TRUSTEES AND STAFF
- The Committee is responsible for the approval of the policy for the payment of expenses for trustees and staff, setting out the types of expenses that are covered, and the rates of re- imbursement of each type of expense. The rates of re-imbursement should be reviewed annually by NLMS Council.
- The policy should be clear to all staff and trustees and be notified via appropriate means of communication.
- Claims must be made by invoice and supported by relevant receipts. Staff claims must be authorised by the Administrator and trustee claims may be authorised by the Director, or any trustee officer.
- Claimants must sign the invoice to declare the accuracy of their claim, and to verify that expenses have been incurred in connection with the official business of NLMS.
- In paying staff and trustee expenses, NLMS must ensure that it meets the requirement of relevant Finance Acts in respect of taxable expenses and benefits in kind and ensure that HMRC requirements are met in the provision of any relevant information or returns.
Q. RISK MANAGEMENT
- The Committee is responsible for putting in place risk management arrangements. Risk management policy statements in respect of all activities of NLMS are the responsibility of the Director and the Administrator for their respective areas of responsibility and must be reviewed annually.
- A risk assessment prepared by the Director or the Administrator, is required when considering any new activity, including risk management proposals. All risk assessments must include an estimate of the financial impact of any risk which may occur.
- Key risks, and risk management arrangements, must be stated in the Annual Report, in accordance with the charity SORP.
R. REVISION AND SUSPENSION OF FINANCIAL POLICY AND CONTROLS
- The Committee is responsible for the maintenance and review of its Financial Policy and Controls. The Treasurer and the Hon. Secretary, in consultation with the independent examiner, are responsible for making arrangements to monitor changes in legislation or proper practices, and for advising the Committee of any requirement for amendment to this document.
- The Committee may suspend any part of its Financial Policy and Controls, by agreement of a meeting of the Committee. Advanced notice must be given in accordance with the normal timetable for the notification of the agenda and reports, together with the reasons for the suspension, its proposed duration, and an assessment of the risks arising.
S. CHARITY COMMISSION GUIDANCE
- The following Charity Commission guidance has been used to assist in compiling ‘NLMS Financial Policy and Controls’. These documents can be used for further reference where required :-
• Internal Financial Controls for Charities (CC8)
• Managing a Charity’s Finances (CC12)
• Charities and Investment (CC14)
• Charity Reporting and Accounting (CC15c)
• Charity Reserves – Building Resilience (CC19)
• Managing Charity Assets and Resources (CC25)
• Charities and Risk Management (CC26)
• Trustees Trading and Tax – How Charities May Lawfully Trade (CC35)
- The above list contains the main publications used, but it is not exhaustive. A full list of Charity Commission publications and guidance can be found at https://www.gov.uk/government/organisations/charity-commission/about/publication-scheme
- This website includes links to:
• Who can run your charity’s finances?
• Protecting charities from harm – compliance toolkit
- All of the above publications are Crown copyright ©, and any use of their content in this document is hereby acknowledged.