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Answer:

Reserves are the part of your unrestricted funds that are freely available to spend on your work. They should not include buildings, land and equipment, social investments or money set aside for future project commitments. In this way reserves is money that is truly available to use if needed. Reserves are kept so you can comply with your legal duties to act in the interests of your organisation and its beneficiaries, to act with reasonable care and skill, to protect and safeguard the assets of your organisation and to ensure that your organisation is accountable.

In practice this means:

  • Planning to maintain essential services for beneficiaries.
  • Covering the risk of unplanned closure.
  • Planning for the risks of unplanned closure on your beneficiaries, staff and volunteers to ensure you can meet your spending commitments and liabilities.

Trustees should decide the level of reserves your organisation needs and develop a reserves policy that sets out the level of reserves and why they are necessary. Having a reserves policy can also reassure creditors that the organisation can meet its financial commitments. Your reserves policy should consider the risks of holding reserves that are either too low (so you do not have enough to cover unplanned closure or cannot maintain essential services for beneficiaries) or too high (which may mean that funders are less likely to fund your work).

Further information can be found from:

Answer:

The Charity Commission defines a risk as ‘anything that could, if it happened, affect your charity achieving its purposes or carrying out its plans’. It notes that trustees ‘have a duty to avoid exposing your charity to undue risk’.

Risk management is the process of identifying and assessing risks and deciding how to deal with them.

The Charity Commission says this should consist of the following steps:

1. Establish a risk policy.

2. Identify risks (what could go wrong, including governance, operational, financial and external risks as well as compliance with the law and legislation).

3. Assess risks (how likely is it, and how serious would it be).

4. Evaluate what action to take (e.g. avoid it, transfer it, insure against it, accept it).

5. Review, monitor and assess periodically.

Full information from the Charity Commission can be found here: Charities and risk management (CC26) (publishing. service.gov.uk).

The Charity Governance code also talks about the importance of good risk management.

Answer:

Good risk management should not only avoid negative events but also improve decision making and enable your organisation to seize opportunities and innovate. A systematic approach to risk management can help to achieve your mission more effectively by identifying and addressing potential obstacles and uncertainties. Conversely, charities that have had poor risk management have experienced an impact on their reputation, finances and operations.

Categories of risk can include: governance, external, regulation and compliance, operational and financial. Financial risk might cover losing funding, not finding enough funding to carry out key projects, financial processes not being adequate, fraud, loss of key staff and cyber crime.

Guidance on risk management

Answer:

Annual accounts and return

All registered organisations must submit an annual report to the Charity Commission or CIC Regulator. Full details of how to do this are given here: Charity reporting and accounting: the essentials November 2016 (CC15d) - GOV.UK and here: CIC34: community interest company report - GOV.UK.

Audit and independent examination

All charitable incorporated organisations (whatever their income) and registered charities with an income greater than £25,000 must file their accounts and an annual report with the Charity Commission. The Charity Commission has a detailed guide to charity reporting and accounting.

If your annual income is less than £25,000 you do not usually need any form of examination or audit of your accounts. If your income is over £25,000 but under £1m you will need to get an independent examiner (‘IE’). If your income is over £1m (or more than £250,000 and with gross assets of more than £3.26 million) you will need your accounts to be audited.

Audit and independent examination resources

Answer:

When you start employing people then you need to have a basic understanding of employment law. ACAS is a good source of information about employment law, and they have a free telephone helpline for all employers: Contact us | Acas. You must also buy employers liability insurance, which is a legal requirement.

You will need to decide and/or determine whether the people you pay to work for your organisation are self-employed or employees. If you take on staff then you will be responsible for calculating and paying their tax and National Insurance contributions under PAYE (Pay As You Earn). You can find out more information about this here. There are penalties for dealing with tax obligations incorrectly or for paying someone ‘cash in hand’ without properly determining that they are paying their own tax and National Insurance. Many organisations therefore work with accountants and/or payroll providers to help them to manage the process of paying staff. You should always research providers and seek quotations to make sure you get a service that is suitable for your needs.

Answer:

All employers must offer a workplace pension scheme and make employer contributions. The Pensions Regulator gives information about setting one up: Choose a pension scheme | The Pensions Regulator. The government gives guidance here: Workplace pensions - what your employer can and cannot do - GOV.UK.

Answer:

There are very specific rules for charity accounting, set out in the charity SORP The Charities Statement of Recommended Practice (SORP) - GOV.UK. Unless you are a very small community group it is best to find someone who understands these rules to help you prepare your accounts. That person will also be able to advise on HMRC charity tax benefits. One example is Gift Aid, where you can claim 25p every time someone gives £1 to your charity or community amateur sports club (CASC). The Charity Commission gives more information and how to claim here: Claiming Gift Aid as a charity or CASC: Overview - GOV.UK.

Answer:
Insolvency occurs where your organisation’s liabilities are bigger than its assets or when it is unable to pay its bills when they become due. If your organisation is at risk of insolvency, it is essential to act early. The Charity Commission gives guidelines for managing difficulties responsibly: Managing a charity’s finances: planning, managing difficulties and insolvency.
Answer:

Write down the communications activities that you are going to deliver. You should add ‘key indicators’ that let you know if you are on track. For example, the organisation that runs football sessions for young people could have:

  • Strategic objective: We are friendly, accessible and inclusive.
  • Communications activities: Promote Wednesday football sessions by using short films.
  • Key indicators: The number of young people taking part in the Wednesday sessions increases to 15; you can demonstrate that the confidence of the young people has increased though your communications.
Answer:
This should include how your team will contribute to your external facing communications and who will be responsible for this. For example do you want them to take photos at events or post on social media? You might also want to set out how you will communicate decisions made by the board and management team, how you collect case studies for reports or how your team finds out about successes and celebrates project progress together. When your team are well-informed about your organisation’s goals, strategies and successes, they feel more connected and are more likely to be engaged and motivated.
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