Page 1 About CCLA CCLA is the leading manager of charity assets in the UK. We offer segregated and...
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Transcript of Page 1 About CCLA CCLA is the leading manager of charity assets in the UK. We offer segregated and...
Page 2
About CCLA
• CCLA is the leading manager of charity assets in the UK.
• We offer segregated and pooled investment services.
• We allocate all our resources to the needs of the sector.
• We are owned by our clients.
Page 3
Agenda
• Our responsibilities as trustees
• Understanding management information
– For planning and monitoring activities (budgets, management accounts)
– For assessing financial strength (the balance sheet)
• External financial reporting
• Questions at any time!
Page 4
Trustee Act 2000
Duty of Care:
To exercise such care and skill as is reasonable in the circumstances, having particular regard to any special knowledge or experience they have or hold themselves out as having, or because of their business or profession, would reasonably be expected to have.
In other words:
• We do not have to be experts in everything
• Generally sufficient to act reasonably and in good faith
• Do homework – and ask questions. Collective responsibility!
• Do not leave brain at home …
Page 6
Snapshot – action - snapshot
Which report? Image Content
Balance sheet (31 March 200X)
SnapshotAssets, liabilities and reserves last year
BudgetsManagement accountsReceipts & payments/SoFA
Motion(Plus) Incoming resources 1 Apr 200X – 31 March 200Y
Motion(Minus) Resources expended 1 Apr 200X – 31 March 200Y
Balance sheet (31 March 200Y)
SnapshotAssets, liabilities and reserves this year
Period covered could be monthly or quarterly (or any other interval), not just a full year.
Page 7
Key concepts (1) – reserves
Free reserves• Resources we have or can make available after commitments and
planned expenditure
Equal to:• Total assets (physical and financial), less
– Liabilities– Assets we can’t sell (eg permanent endowment)– Restricted funds (committed to donor-defined purpose)– Designated funds (operational fixed assets, spending
commitments)
How much to hold in reserves?• Important policy decision for trustees
Page 8
Budgets – typical basic format
This year’s budget
Last year’s result
Change in £
Up/(Down)
Change as %
Up/(Down)
Income £ £ £/(£) %/(%)
Detail
Expenditure £ £ £/(£) %/(%)
Detail
Surplus/deficit (income minus expenditure)
£/(£) £/(£) £/(£) %/(%)
• What are we aiming to achieve?
• Where will the money come from?
Page 9
Management accounts – typical basic format
Year to date
Comparison with budget year to date
Comparison with this point last
year
Forecast for full year
Comparison with full year
budget
Income £ £, % £, % £ %
Detail
Expenditure £ £, % £, % £ %
Detail
Surplus/deficit (income minus exp)
£ £, % £, % £ %
• Are things working out as we planned?
• Will also look at restricted vs unrestricted funds, if applicable
Page 10
Management accounts – example (still simplified!)Year to
dateComparison with budget year to date
Comparison with this point last
year
Forecast for full year
Comparison with full year
budget
Income £ %/(%) %/(%) £ %/(%)
Fundraising
Services
Investments
Expenditure £ %/(%) %/(%) £ %/(%)
Fundraising
Services
Investments
Page 11
Typical key ratios : financial ratios
• Fundraising expenditure as % of funds raised
• ‘Overhead’ expenditure as % of total expenditure
• Percentage of income coming from different sources
• Unrestricted income as % of total income
• Percentage of expenditure applied to different costs
Page 12
Other possible ratios and key performance indicators (KPIs)
• Average size of regular donation• Cost of recruiting a new committed donor• Donor retention rates• Legacy pledge conversions• Gift Aid uptake• Success of seasonal campaigns vs previous years
Page 15
Reading budgets and management accounts
• We are looking for change and variance
– Budgets: are our plans achievable?
– Management accounts: are we achieving our plans?
• Look for ‘big picture’ figures first
– Key ratios and percentages
• Income is harder to manage than expenditure
• Restricted vs unrestricted funds
– Are we applying funds for the intended purpose?
– Are we subsidising activities supported by restricted funding?
Page 16
Key concepts (2) - accruals
• Many organisations need to match activities with related income and expenditure
• They do not always happen at the same time
• So we ‘accrue’ (bring forward) or ‘defer’ (put back) recognition of income or expenditure, to account for them in the same report
• Examples:
– Fundraising event held just after period end
– Depreciation on fixed assets
– Utilities bill received after period end
Page 17
Balance sheet – basic format
This year Last year
Fixed assetsOffice equipment, investments etc
£ £
Current assetsCash, Gift Aid claims etc
£ £
LiabilitiesCreditors, accrued costs etc
(£) (£)
Net assets £ £
Restricted funds £ £
Unrestricted fundsDesignated funds, free reserves
£ £
Total funds £ £
Page 18
Reserves policy – guidance
• Policy should cover:
– the reasons why the charity needs reserves;
– what level (or range) of reserves the trustees believe the charity needs;
– what steps the charity is going to take to establish or maintain reserves at the agreed level (or range); and
– arrangements for monitoring and reviewing the policy
• Time spent on reserves policy should be proportionate
Page 19
Reserves policy – example 1
• Target 12 months’ running costs in free reserves, minimum of three months’ costs
• Build up the investment portfolio to provide long term security for the work of the charity.
• Build up sufficient funds to support the significant capital investment needed in the Trust’s centres (currently estimated at £8 million).
Page 20
Reserves policy – example 2
• Free reserves to cover 30 per cent of budgeted expenditure
• Excluding non-cash items, gifts in kind and expenditure for which restricted funding has already been secured
• Calculated as an average over the year (seasonal fluctuations)
• Temporary increase to 40 per cent target (£850,000) for major capital work
Page 21
What we look for in the balance sheet - examples
• Compare reserves level with reserves policy
• Restricted vs. unrestricted funds
• Are we solvent?
– Enough cash and debtors (cash due in soon) to pay creditors?
• Changes in solvency indicators
– For example, big change in net current assets? Seek explanation …
Page 23
External reporting and scrutiny thresholds
Reporting format*• Gross income below £250,000 – can prepare receipts and
payments accounts• Gross income above £250,000 – must follow SORP (statement of
recommended practice, currently SORP 2005)*Accounting periods ending on or after 1 April 2009. Earlier accounting periods, threshold is £100,000.
Independent scrutiny*• Gross income up to £10,000 – no independent scrutiny required• Gross income up to £500,000 – independent examination ok• Gross income over £500,000 – full audit required
*Year end of 31 March 2009 or later
Page 24
Trustees’ annual report – R&P format
• Proforma available on Charity Commission website
• Contents:
– Reference and administration details (some optional)
– Structure, governance and management
– Objectives and activities, achievements and performance
– Brief statement on reserves policy
– Details of any funds materially in deficit
– Principal sources of funds*
– How expenditure has supported key objectives*
– Investment policy including ethical policy*
* disclosure optional
Page 25
Trustees’ annual report (TAR) – SORP
Contents include:• Vision, mission, strategic objectives• Goals
– Achievements against targets– Plans for next year
• Governance– Structure– Trustee induction and training
• Policies– Reserves– Investment
• Risk managementSome elements optional for charities below audit threshold
Page 26
Public benefit
• No longer an assumption of public benefit for advancement of religion
• Public benefit may be demonstrated through (examples only!):
– Pastoral care
– Missionary and outreach work
– Public access
– Ecumenical relationships
• Will be evidenced in, for example, ‘objectives and activities’ and ‘achievements and performance’.
• Charity Commission guidance and examples at
http://www.charity-commission.gov.uk/publicbenefit/pbreport.asp#examples
Page 27
Receipts and payments accounts – basic format
Unrestricted funds
Restricted funds
Endowment funds
Total this year
Total last year
Receipts
Analysis by receipt type £ £ £ £ £
Asset/investment sales, etc £ £ £ £ £
Total receipts £ £ £ £ £
Payments
Analysis by payment type (£) (£) (£) (£) (£)
Asset and investment purchases, etc
(£) (£) (£) (£) (£)
Total payments (£) (£) (£) (£) (£)
Net receipts/(payments) £/(£) £/(£) £/(£) £/(£) £/(£)
Cash funds last year end £ £ £ £ £
Cash funds this year end £ £ £ £ £
Page 28
Statement of financial activities – basic format
Unrestricted funds
Restricted funds
Endowment funds
Total this year
Total last year
Incoming resources
From ‘generated funds’Donations, events, trading
£ £ £ £ £
From charitable activitiesEg. project grants
£ £ £ £ £
Resources expended
Cost of generating fundsEg. fundraising, trading costs
(£) (£) (£) (£) (£)
Charitable activitiesEg. project costs, helpline
(£) (£) (£) (£) (£)
Governance costs (eg. audit) (£) (£) (£) (£) (£)
Net incoming/(outgoing) resources £/(£) £/(£) £/(£) £/(£) £/(£)
Fund balance last year £ £ £ £ £
Fund balance this year £ £ £ £ £
Page 31
Statement of assets and liabilities
Unrestricted Restricted Endowment
Cash funds £ £ £
Other monetary assetsGift Aid claims etc
£ £ £
Investment assetsCreditors, accrued costs etc
£ £ £
Assets retained for useOffice building, computers etc
£ £ £
LiabilitiesBills awaiting payment, loans
(£) (£) (£)
Page 32
Balance sheet – basic layout, as before
This year Last year
Fixed assetsOffice equipment, investments etc
£ £
Current assetsCash, Gift Aid claims etc
£ £
LiabilitiesCreditors, accrued costs etc
(£) (£)
Net assets £ £
Restricted funds £ £
Unrestricted fundsDesignated funds, free reserves
£ £
Total funds £ £
Page 35
Heather Lamont
Client Investment Director
CCLA
80 Cheapside
London
EC2V 6DZ
020 7489 6058 or 0844 561 5058
Page 36
Regulatory information and risk warnings
The services described are provided by CCLA Investment Management Limited (CCLA), a firm authorised and regulated by the Financial Services Authority. This document is issued for information purposes only and is not a solicitation to buy or sell any investment. The contents contained within this presentation are opinions and views within CCLA. Nothing in the document should be deemed to constitute the provision of financial, investment or other professional advice.