A School Fund may have various sources of income, among which may be: - Pupils fund-raising activities, e.g. sponsored events.

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1 SECTION P - SCHOOL FUNDS P.1 General P.1.1 P.1.2 Most educational establishments have monies made available to them from sources other than the County Council. Such funds are generally referred to as School Funds or Voluntary Funds. They often provide schools with a substantial additional source of finance. Although such funds are not public monies, parents and other benefactors are entitled to expect that the same standard of stewardship be applied to such funds as is applied to public monies managed by the school. A School Fund may have various sources of income, among which may be: - Donations from pupils/parents Pupils fund-raising activities, e.g. sponsored events. Other organised fund-raising activities e.g. fetes, sales, concerts, etc. Sponsorship or donations from local commercial and professional firms. Sale of school uniform and school sports outfits. Tuck-shop. P.1.3 The Director of Education requires that: - These funds should be adequately maintained with satisfactory records kept of all income received and all expenditure incurred. Regardless of whether the funds are registered as a charity the provisions of the Charities Act 1993 relating to the production of annual statements of accounts, report of activities and independent examination should be adhered to. P.2 Accounting Records P.2.1 P.2.2 P.2.3 All transactions relating to the School Fund should be recorded in a cashbook. Unless the number of items is very small, these should be kept on a computerised accounts system. Notes of guidance relating to the records to be kept are set out in Appendix A to this Section. A number of schools in West Sussex are now using a computer package known as School Fund Manager. The system provides a simple and effective way of managing School Funds. A brief outline of the facilities provided by the package is outlined in Appendix B to this Section.

2 Schools wishing to have more details of the package should contact the Schools Computer Administration Service (SCAS) Tel P.3 Bank Account P.3.1 P.3.2 The School Fund must be administered either through a bank account, a Giro Account or a building society account. The account should be entitled "... School Fund Account". It should not be held in an individual s name. This bank or building society account will not be an official West Sussex County Council Bank Account and it is therefore a matter for the headteacher and governing body to decide at what bank the account is maintained. If facilities offered via the Internet are used schools should be mindful that adequate security arrangements are put in place. It is a requirement that there should be two or more signatories to the account and that cheques should be signed by at least two of those signatories. Any charges made by the bank must be borne by the School Fund. P.4 Annual Statement of Accounts P.4.1 P.4.2 P.4.3 The format of the annual statement of accounts will comprise a statement of financial activities and a statement of assets and liabilities. The Charities Act sets out the basis for the statement of financial activities depending upon various thresholds of gross income and expenditure. If gross income and expenditure is 250,000 or more, the statement of financial activities must be based upon accruals accounting principles. Below this level, in the main, a receipts and payments basis can be used. An example of a Receipts and Payments Account is set out at Appendix A to this Section. The statement of assets and liabilities will be a list of the assets of the School Fund. In most cases probably the only assets will be the bank and deposit accounts. P.5 Report of Activities P.5.1 The governing body should produce each year a report which states: Name of School Fund and address of school. Specifies the financial year in respect of which the report has been prepared. Name of Governors and date of appointment.

3 Objectives of the School Fund. Activities and achievements during the year in relation to the objectives. P.6 Independent examination or audit P.6.1 The governing body is responsible for ensuring each year that the accounts are subject to outside scrutiny. Whether an auditor or an independent examiner undertakes this scrutiny will depend upon the value of gross income and expenditure. Where gross income exceeds 250,000 an auditor must be appointed. P.6.2 An independent examiner is described in the Charities Act as: - independent person who is reasonably believed by the trustees (Governors) to have the requisite ability and practical experience to carry out a competent examination of the accounts. The term independent examiner does not exclude an accountant or, indeed, a registered auditor, but recognises that the scrutiny is less onerous than a full audit. P.6.3 P.6.4 For an examiner to be independent the individual must have no connection with the school, which might appear to be prejudicial to an impartial examination of the accounts. The examiner should neither be a Governor, a person who is involved with the administration or management of the School Fund nor a close relative or business partner of any person in the previous categories. The independent examiner should produce a report to the governing body which: States name and address and name of School Fund. Is signed and specifies any relevant professional qualifications. Is dated and specifies the financial year in respect of which the accounts have been prepared. States if any matters have come to the examiner s attention that materially affect the accounts. An example of an examiner s statement is set out as Appendix C to this Section. P.6.5 P.6.6 A copy of the examiner s statement should be presented to a meeting of the governing body as soon as possible after the end of the year. If the fund is registered as a charity a copy of the annual report and accounts, together with an annual return form must be sent to the Charities Commission within 10 months of the year-end. The governing body should be drawn up a letter of engagement

4 detailing its accounting responsibilities and the responsibilities of the independent examiner. It may also include matters relating such as fee arrangements, proposed timetables for the examination and details of any other work to be undertaken by the examiner. The purpose of the letter is to reduce misunderstandings. P.6.7 P.6.8 P.6.9 Management Audit staff will not normally audit School Fund accounts, but they will however satisfy themselves that the fund is being operated in accordance with the requirements of the Director of Education and best financial practice. In some schools more than one fund and more than one bank account may be operated. For example, in addition to the School Fund Account, there could be a Minibus Account or School Trips Account. In such cases all the accounts will be subject to examination and must be included in the examiner s statement submitted to the governing body. A summary of the thresholds affecting the accounting and audit arrangements is set out at Appendix D to this Section. More detailed information is available from the Charity Commission in documents CC56 - The carrying out of an Independent Examination Directions and Guidance Notes. CC57 Receipts and Payments Accounts Pack: Introductory Notes. Both these documents can be accessed on the Charity Commission website - P.7 Insurance P.7.1 School Fund monies are covered by the same insurance as official county monies and are included within the limits of liability set out in Section N. P.8 Insurance School Photographs P.8.1 Money collected for school photographs on behalf of a photographer is not part of either official school money or School Fund money and consequently this money is not covered by insurance. If insurance is required for school photograph money special local arrangements will have to be made. P.9 Change of Headteacher P.9.1 A bank statement should be obtained as near as possible to the date of change and reconciled to the cashbook. The agreed balance should be recorded on the Certificate of Handover (See Section S and Appendix A).

5 P.10 VAT and School Funds P.10.1 P.10.2 A School Fund account does not come under the Local Authority s VAT registration in the way that the official account does. This means that VAT need not be accounted for on any income received into the fund but any VAT incurred on goods or services paid for from the School Fund is not recoverable. However normal VAT regulations apply and if the School Fund were to exceed the turnover level set each year in the Chancellor s annual budget ( 61,000 in 2006) then it would be obliged to separately register for VAT as would any other organisation. When calculating the taxable turnover, please note the following: Only income relating to the supply of goods or services needs to be included, donations do not represent supplies and can be ignored. It is important to distinguish between sponsorship income and donations (see Section J for more details). The full sales value should be included in the turnover figure, not just the profit element. For example, if the tuck shop is operated and has expenditure for the year of 10,000 and sales of 12,000, the total income of 12,000 would be included and not just the 2,000 profit. When the school organise trips via the School Fund account they need only include the profit element in the turnover figure. This means if they are merely recovering costs from pupils the income can be ignored. P.10.3 P.10.4 If you think that your School Fund may be liable to register for VAT or have any concerns about the VAT implications of certain activities please contact the Financial Services VAT Helpdesk for advice on The School Fund can donate funds to the school for the purchase of items thereby enabling the recovery of VAT. The ownership of the item must remain with the school. This scheme, known as the VAT Saver scheme, is explained in Section J. P.11 Income Tax and School Funds P.11.1 The County Council has had a long standing arrangement with H.M. Commissioners of Inland Revenue that school funds should be treated as having charitable status without needing to actually register as a charity provided the following paragraph was included in the constitution of the fund - "The object of the Fund is to advance the education of pupils of the school by providing and assisting in the provision of facilities at the school not normally provided by the Local Education Authority".

6 P.11.2 P.11.3 P.11.4 The arrangement enables the School Fund to qualify for exemption from income tax and under Gift Aid scheme to reclaim tax in relation to donations by individuals. To recover tax on Interest on Investments schools should obtain the necessary forms from their local tax office. If you have already obtained charitable status you may be able to get the bank to pay interest gross, thus avoiding the need to reclaim the tax. To benefit under the Gift Aid scheme schools will need firstly to register with the Financial Intermediaries and Claims Office (FICO) by sending a copy of the school fund constitution to - FICO (Title) St John s House Merton Road Bootle Merseyside L69 9BB P.11.5 Once registered schools will need to obtain a declaration from donors to the affect that they will pay tax equivalent to the amount of tax to be reclaimed. The declarations which can be made either in writing or orally, must contain: the donor s name and address the charity s name a description of the donations to which the declaration relates a declaration that the donations are to be treated as Gift Aid donations and, except in the case of a declaration given verbally: a note explaining the requirement that the donor must pay an amount of income tax or capital gains tax equal to the tax deducted from the donation(s) the date of the declaration. To look at the comprehensive information se the Customs and Revenue website: P.11.6 P.11.7 Written declarations may be pre-printed to the school s design. If verbal declarations are received the donor must be sent a written record of the declaration showing: all the details provided by the donor a note explaining the requirement that the donor must pay an amount of income tax or capital gains tax equal to the tax deducted from the donation(s) a note explaining the donor s entitlement to cancel the declaration retrospectively

7 the date on which the donor gave you the declaration the date on which you sent the written record to the donor. P.11.8 The records relating to claims for tax may be the subject of audit inspection by the FICO. These records must be retained until the later of: 31 January next but one after the end of the tax year to which your tax reclaim relates) one year after you make your reclaim, rounded to the end of the next quarter P.11.9 The records to be retained are: any written Gift Aid declaration in the case of verbal declaration, a copy of the written record sent to the donor any correspondence to or from the donor relating to the donation bank statements paying in books showing details of cheque and cash banked cashbook used to record donations.

8 SECTION P Appendix A Notes of Guidance relating to School Fund Accounting Records 1. General The School Fund Account should be operated through a bank account or a building society account. 2. Cheque Payments Payments from School Fund should be made by cheque whenever possible. The chequebook stubs then comprise a readily available record from which the main cashbook can be written up. A voucher to provide evidence of the payment for audit purposes should support each entry in the cashbook. The vouchers should bear the relevant cheque number, the date of payment and should be filed in cheque number order. 3. Cash Payments It may occasionally be necessary to make cash payments so a small Petty Cash Account may be maintained from School Fund and cash transactions entered in a petty cashbook. It is recommended that the Petty Cash Account should be operated on an imprest basis. 4. Income All monies collected should be paid into the School Fund bank account intact and should not be used to make cash payments. Receipts should be issued for all monies received whether from internal or external sources, and should indicate clearly what the money received related to, e.g. Summer Fete proceeds. The receipt books will then provide a record from which the receipt's side of the main cashbook can be compiled. 5. Main Cashbook If the School Fund accounts are kept manually, a cashbook, providing a number of analysis columns on each page, will probably be the easiest method to use. It is usual to enter receipts on the left-hand side and payments on the right. Each item of receipt or payment is entered in the total column and also in the analysis column appropriate to the receipt or payment. It is usual to place items which occur infrequently in a column headed 'Miscellaneous', this column being analysed at the end of the year as necessary.

9 It is suggested that where purchases are made for resale, e.g. School Uniform, the amounts spent on purchases are entered in the cashbook and analysed under a suitably headed column. The amounts received from sales should be entered on the receipt's side in a similar headed column. At the end of the year, or as each page of the cashbook is completed, the columns will be added. The total of the amounts in the analysis columns should equal the amount in the total column. The cashbook is finally completed by adding to the amount shown in the Total Amount Received column, the balance in hand at the beginning of the year, and to the Total Amount Paid column, the balance in hand at the end of the year. When this has been done the total of each of the columns should be the same. 6. Bank Statements Bank statements should be obtained from the bank on a monthly basis, and filed for future reference. A bank reconciliation should be prepared regularly and at least once a term (See Section H). 7. End of Year Statement (See specimen attached) If the cashbook has been kept on the lines described the statement of Receipts and Payments should not cause problems, as the figures shown in the statement are all taken from the appropriate columns in the cashbook. These notes and the Receipts and Payments Account attached, have been prepared to help those who have the task of keeping the accounts. It is impossible to exemplify all the transactions likely to occur and if difficulties occur, or greater analysis is required, you are advised to seek guidance from Management Audit Section.

10 ABC SCHOOL FUND ACCOUNT RECEIPTS AND PAYMENTS ACCOUNT - Year ended 31st March 2007 RECEIPTS PAYMENTS Donations General 575 Donations to School - Classroom Equipment 2,400 Parental Contributions 630 Use of Minibus 642 Minibus Running Costs 979 Playgroup Fees 4,382 Playgroups 4,009 Locker Deposits 152 Locker Deposit 135 Refunds School Trips 1,624 School Trips 1,656 Sales Uniform and Purchases of Uniforms 450 Tee Shirts 459 Summer Fete 1,835 Summer Fete 294 Sports Day 471 Charity Collections 710 Charity Donations 710 Christmas Plays 82 Speech Day 35 Commission Parent's Evenings 153 Photographs 82 Abbey National - Interest earned 135 Plants and Flowers for School Grounds 84 P.T.A. Insurance 58 Totals 11,308 Totals 11,434 Balances at Bank - 1st Balances at Bank April st March 2007 Barclays Bank 1,690 Barclays Bank 1,429 Portman Building Society 1,800 Portman Building Society 1,935 Totals 14,798 Totals 14,798 STATEMENT OF ASSETS AND LIABILITIES as at 31 st MARCH LIABILITIES ASSETS Net worth of the fund 3,364 Barclays Bank 1,429 Portman Building Society 1,935 Totals 3,364 Totals 3,364

11 SECTION P Appendix B School Fund Manager A brief outline of the facilities provided by the above computer package. (a) (b) (c) (d) (e) (f) (g) (h) Bank Account and Cashbook lists - instant information automatically updated Balance of Accounts automatically maintained Comprehensive range of instant searches and reports - see who paid what, when, why and how Streamlined data entry - absolute minimum of keystrokes saves time Previously entered transactions visible when adding Receipts and Payments Full amendment facilities, with audit trail Easy to follow menus Full documentation includes User Guide, Reference Manual, and Route Map (i) All this and... full Year/Period End Reports prepared, ready for audit in seconds.

12 SECTION P Appendix C Independent Examiner s Report to the Governing Body of ABC School I report on the accounts of the ABC School Fund for the year ended 31 st March 2007, which are set out on pages xx to xx. Basis of Independent examiner s report My examination was carried out in accordance with the General Directions given by the Charity Commissioners. An examination includes a review of the accounting records kept by for the School Fund and a comparison of the accounts presented with those records. It also includes consideration of any unusual items or disclosures in the accounts and seeking explanations from your Governors concerning any such matters. The procedures undertaken do not provide all the evidence that would be required in an audit and consequently I do not express an audit opinion on the view given by the accounts. Independent examiner s statement In connection with my examination, no matter has come to my attention: 1 which gives me reasonable cause to believe that in any material respect the requirements to keep accounting records and to prepare accounts which accord with the accounting records have not been met; or 2 to which, in my opinion, attention should be drawn in order to enable a proper understanding of the accounts to be reached. Name: Relevant professional qualification or body: Address: Date:

13 SECTION P Appendix D CHARITIES ACT 1993 Outline of accounting and audit requirements for a School Fund Assuming gross income and total expenditure under 250, If either gross income or total expenditure exceeds 10,000 in the year: Produce either a receipts and payments account and statement of assets and liabilities or accruals accounts (statement of financial activities, balance sheet and notes). If gross income is over 100,000 then accruals accounts are mandatory and Have these either independently examined by a suitable examiner or audited by a registered auditor and Produce a Governors annual report. If the School Fund is in this category and is registered as a charity the Governors must also send the Charity Commission a copy of the annual report and accounts and complete and submit one of their annual return forms. 2. If both gross income and total expenditure are not over 10,000 Prepare accounts on one of the two bases given above, but there is no legal requirement for scrutiny of the accounts. It is recommended best practice that the Governors arrange a scrutiny of the accounts and prepare an annual report. If the School Fund is registered as a charity the Governors do not need to send a copy to the Charity Commission, nor do they need to send them the accounts or an annual return.