Читать книгу The Church Treasurer's Handbook - Robert Leach - Страница 7
Оглавление3. Banking
Introduction
Strictly speaking, a church does not need a bank account at all but could keep all its funds in ready cash. This is not recommended because of the security risk and lack of reliable documentation. However, it can be useful for a church to keep a small amount of ‘petty cash’ available, as explained above.
A church will normally have at least two bank accounts:
a current account for day-to-day expenditure
a deposit account where funds not immediately needed can earn interest.
There are other reasons why it may be convenient to have more than one bank account:
a separate account to receive pledged gifts can considerably simplify the procedure and also help protect the confidentiality of the donors (see Pledged Giving)
a separate account should be used when making charitable payments, particularly to overseas countries, to prevent fraud (see below)
a second bank account is always useful should you get into problems with your first bank and be unable to use that account while the problem is being solved.
It is not necessary to have a bank account for every fund. Funds can be distinguished in the records. For example, a deposit account containing £10,000 may represent a building maintenance fund of £4,000, a roof repair fund of £5,000 and an organ fund of £1,000.
Bank services
The functions you need from a bank are to:
look after your funds
provide cash when needed (such as floats for a fete)
provide a cheque book
provide monthly statements.
Banks can offer other services, such as:
safe custody of documents
placing spare funds on money market
buying shares and some other investments
lending money.
Increasingly banks are offering Internet services, where you can look at your account at any time of the day or night using a computer. There are some banks which use only the Internet.
Choosing a bank
The only bank which seems to be interested in providing banking services for churches is the Reliance Bank, owned by the Salvation Army.
A bank account, like an insurance policy, is a financial product. Your attitude to choosing a bank should be the same as choosing the supplier of any other product. Some guidance on this is given below. It is a curiosity that a church may go to great lengths to check out the terms and credibility of a supplier of a photocopier or window, but give little or no consideration on which bank to use.
For this book, the author did his own form of a Which? report by writing to the press offices of twenty-one banks asking them a few questions and requesting literature. The banks were:
Abbey National (now Santander)
Alliance & Leicester (now Santander)
Allied Irish Bank
Bank of Ireland
Bank of Scotland
Barclays Bank
Clydesdale Bank
Co-operative Bank
First Direct
Girobank
Halifax (HBOS)
HFC Bank
HSBC
Lloyds TSB
NatWest
Reliance Bank
Royal Bank of Scotland
Standard Chartered
Virgin One
Woolwich (now part of Barclays)
Yorkshire Bank
Alone among these twenty-one banks, Reliance replied within one week and answered all my questions. The other twenty banks had not replied within one month, apart from Barclays, whose commercial department returned my letter with a covering note saying they could not answer my question because I had not quoted my account number! They had obviously not even bothered to read the letter. When the twenty banks were chased up by telephone calls, a few apathetic responses were eventually generated, though not one bank could be bothered to post a single piece of literature. Even the Co-operative Bank was not. After a process akin to pulling teeth with tweezers, four banks provided a few details, though none provided all the details requested.
This point about UK banks is emphasized because a business which does not look after you before you are a customer will certainly not look after you when you are. If a bank is unhelpful to an author, you can be sure it will be unhelpful to his readers.
Reliance Bank advises that it welcomes accounts from churches, and already has 900 as customers. It develops a tariff for each customer based on current banking activity. For a new church, it will consider six months’ free banking. It follows the ethical policies of the Salvation Army. The bank offers cheque book and paying-in books, facilities for standing orders and direct debits, regular statements, Internet banking, savings accounts, telegraphic transfers by BACS and CHAPS, and foreign currency services.
Mandate
The mandate is your instructions to the bank of who may sign cheques and give other instructions to the bank. This is a decision to be made by the local church authorities, subject to any restrictions imposed by the bank. Keep the mandate simple. Suggested arrangements are to have no more than three signatories – perhaps the treasurer, the minister and a senior officer who lives near the treasurer or is readily accessible to the treasurer; and to have a limit of perhaps £250 below which only one signature is needed, and above which two out of three signatures are needed.
Churches and other organizations can often get into great difficulties over bank mandates, particularly when officers change.
There is no objection to the treasurer being a signatory. Sometimes churches want two signatures on every cheque, which is also acceptable practice.
A treasurer should never regard any requirement for a second signature as reflecting on the treasurer’s reputation. If the church had the faintest doubt about your competence or integrity, you would not be the treasurer in the first place. All the controls are designed not to check up on you, but to:
demonstrate to the church the high standards maintained by the church in its financial arrangements
reassure the auditor or examiner (and possibly reduce the audit bill)
provide disciplines which help to prevent error.
The signature should be the person’s normal signature. Legible signatures are harder to forge than illegible squiggles and therefore provide greater security.
The mandate must be supported by a formal resolution of the church council or equivalent body formally appointing those people as signatories. The bank may require a copy of the resolution signed by the church council secretary or minister.
The signatories must then prove their identity to the bank. This is not the banks being awkward, but is a legal requirement under money laundering regulations. Signatories must attend the bank in person by appointment, taking identity such as passports or driving licences.
A church must always be alert to any change of signatories. There have been instances where churches have had problems accessing their funds because signatories have changed. A church must always be prompt in removing old signatories, and completing a new mandate to add new signatories.
Issuing cheques
A cheque must only be issued if the treasurer is satisfied that it has been properly authorized. In practice this means that the payment arises:
from a specific resolution of the church council
from a legal agreement made by the church council
within a budget allocated to a particular church officer (such as allowing the youth leader to spend £1,000 a year).
A cheque is normally completed using a cheque book provided for the purpose. This normally contains the name of the church, the account number, the sorting code, the bank’s name and address, and a cheque number. The bottom of the cheque gives, in order:
the number of the cheque (six digits)
the sorting code (six digits, expressed as three pairs)
the account number (eight digits).
These are printed in magnetic ink using a stylized typeface such as OCRA (optical character reading ‘A’) to allow cheques to be automatically read. These numbers sometimes appear with other marks. When the cheque is presented for payment, the amount is typed on in the same typeface, allowing the appropriate accounts to be cleared automatically.
The cheque must be completed by the payer, who adds:
the name of the payee (who you are paying)
the amount of the payment, in words and figures
the date of the cheque
signature.
The cheque must be completed in ink, which includes rubber stamps (not recommended, but legal) and printing from computers or other machines. Cheque books and any rubber stamps must be keep secure when not in use.
In writing out the amount in words, odd pence may be indicated numerically, such as ‘One hundred and forty-nine pounds 26 ’ for £149.26. It is advisable for lines to be drawn to fill in the spaces after the payee and amount to prevent additional figures being added.
The date is usually written in numerical form of day, month, year. Note that the USA uses the convention of month, day, year, so 1 March 2012 is 01.03.12 in the UK, but 03.01.12 in the USA.
Strictly speaking, a cheque does not need to be issued using a cheque book provided by the bank. It is legal to issue a cheque on a piece of plain paper, or using someone else’s cheque book, or even writing a cheque on an inanimate object. Cheques have been presented written on paving stones and dustbin lids, usually as a form of protest or publicity stunt. However, such practices are not recommended. There can be an increased risk of error, and there will certainly be additional bank charges.
One point cannot be made too strongly: a signatory must never sign a blank cheque. There are no exceptions to this absolute rule. Signing a few blank cheques may seem the sensible thing to do when the treasurer is going on holiday, but it is a form of fraud on the church in that the signatory is flouting the required security for issue of cheques. An auditor who discovers such a practice should report this. The church should have sufficient signatories to cover temporary absences. If necessary, an additional signatory can be created for a specific period.
Bank charges
The treasurer must always know the basis of bank charges, including the charge for paying in cash, as churches may handle considerable quantities of coins. Bank charges of £25 a month may not seem much until you realise that is £300 a year.
Bank charges become very steep for any bank if you incur an unauthorised overdraft. Interest is also charged at a high rate, often above 25%.
The bank is not obliged to pay cheques which exceed the balance in your account or an agreed overdraft. If you do exceed the limit, the bank may dishonour or ‘bounce’ your cheque. This is not only embarrassing to the church, but also incurs a charge. The charge can exceed the cheque that is dishonoured. You also pay interest at a much higher rate. Banks are usually coy about disclosing overdraft rates in sales literature, and usually only provide details in branches.
Although most banks now use the Faster Payments process and funds are usually transferred in a few hours, the treasurer must remember that cheques may take three days to clear. Also, charges can easily put a bank account into overdraft before you are aware of the problem. Suppose you issue a £10 cheque believing that you have £40 in the account, but unknown to you the bank has just deducted £31 in bank charges. As you have only £9 in the account, the bank returns the cheque and deducts another £30. Because this puts your account in overdraft, it charges £12.50. You have been hit for £42.50 charges plus high interest of perhaps £2.50 for the few days giving a total of £45 – and you still have to pay £10 and explain why your cheque bounced.
In addition to bank charges, it is easy for a treasurer to overlook a payment when keeping a record of the balance on the account. It is also possible that a cheque which you pay in may not be honoured and so your account does not receive the funds you expect.
The moral is not to run the bank account too low – for example by transferring too much to a deposit account. Have a buffer of perhaps £250 below which you do not allow the account to fall. This provides a safety margin, and prevents unpleasant surprises. It is true that you will lose interest, but the amount is small.
There are other perhaps more acceptable methods for reducing bank charges:
use electronic banking (explained below) where the charges are often much lower, and where you can keep a closer eye on your account without having to wait for the statement to arrive
use a payment card or charge card, where the charges are usually lower than writing a cheque
keep petty cash and use that for paying small bills, such as the milkman
pay regular payments by direct debit
draw cash from a machine operated by your bank rather than cashing a cheque over the counter (though you will not be able to obtain notes and coins in the denomination you want)
pay cheques in batches rather than individually
pay as infrequently as possible, such as quarterly rather than monthly, or monthly rather than weekly
pay some of the collection into petty cash rather than into the bank
ask donors to pay you by standing order.
Internet banking
Anyone with a computer connected to the Internet can enjoy the benefits of Internet banking, namely:
lower bank charges
ready access to statements at any time of the day
an ability to leave messages and transact some business.
There are some bank accounts such as Egg which only operate on the Internet. Most ordinary cheque book accounts come with an Internet access facility, making it an Internet account. You are given a website address to log into. Typically, you are given a user identification number of eight or more digits and letters. You choose a password which should not be anything memorable or obvious, and should be changed periodically. Typically the program asks you to select key letters from your password from a list offered to you. Suppose you chose Ezekiel as your password. The computer may ask you for the second, fourth and fifth letters. So you scroll down three lists of the alphabet to select Z, K and I. If you get it wrong, it will usually allow you one more go before barring further attempts. Otherwise someone who obtained your identification number from seeing the card on your desk could try all the books in the Bible and other likely words until getting lucky.
Internet services on a bank account are usually provided free by the bank, as it considerably reduces their costs.
Payment cards
Banks usually now provide free payment cards or debit cards to customers, including business customers and churches. These are the same size as credit cards but work differently.
The payment is debited from your account when you make the payment. There is no bill to pay as with credit cards. It is vital that a strict control is kept over such cards and that the church authorities approve the treasurer having one. In effect, the treasurer is given unlimited signing power on the account.
In 2005, banks introduced chip and pin cards. Instead of signing a slip of paper, the customer enters four digits into a machine. If the PIN number is correct, the payment is authorized. For this reason, the PIN number should not be obvious, such as your date of birth. It can also be changed periodically in the bank’s cash machines. Perhaps the best mnemonic for a PIN number is to remember a four-word phrase where the number of letters in each word is the number. So ‘the forgiveness of sins’ indicates 3024 (counting a ten-lettered word as 0).
Bank statements
The bank issues a statement, usually monthly, listing all payments into and out of the account and showing a balance. Banks usually provide folders in which to keep statements. The statements should be immediately filed in the folder, with the latest statement on top.
The bank statement is needed to:
identify receipts and payments not already recorded
check that payments and receipts are in order, and question any which appear not to be
perform a bank reconciliation, explained below.
Bank statements often include items which you have not already recorded in your cash books. These items can be either payments or receipts. A church bank account will probably have many standing orders from donors. There may be regular payments from a bank account by standing order or direct debit, such as regular lease payments. Other items can include interest on the account and bank charges. All these items are usually picked up when performing the first part of the bank reconciliation.
Bank reconciliation
In your cash books, you record the amount of cash the church has in its bank account. This is after all the cheques have been issued and all the payments in have been cleared.
In terms of day-to-day funds, this is a theoretical figure as there is always a time lag between issuing a cheque and when the amount is taken from the account. The cheque may have to arrive by post, the person may not pay it in immediately, and then it takes a few days to clear. Many treasurers can be surprised at how long it takes some people to pay in cheques they issue. Some cheques never get paid in. Conversely, there can be a delay, usually much shorter, before payments into the bank are added to the account. The consequence of all this is that the balance shown on the bank statement is different, and usually higher, than the equivalent figure from your cash books.
To provide a check on the accounts, it is usual to perform a bank reconciliation for each statement you receive. This reconciles the closing balance on the bank statement with the figure you have from your cash books.
This principle is best understood by a simple example. Suppose you open an account on 1 January 2012 and make the following payments and receipts.
This simple account shows us that we paid £240 into the bank, and issued four cheques which total £151.97, so we have £88.03 in the bank. However, the bank statement looks rather different:
According to the cash book, you have £88.03 in the bank at the end of the month, but the bank says that you only have £83.95. The explanation is obvious: one payment and two cheques had not cleared. The bank reconciliation simply lists these items to check that the figures agree.
Some points to remember in a bank reconciliation:
you reconcile the bank statement to your cash book, not the other way round. It is your cash book that has the ‘correct’ figure for your purposes
you check off items in the cash book against their appearance on the bank statement, usually by putting a little tick against the figures on each
items on the bank statement which do not appear in your cash book are added to your cash book as receipts or payments. You then check off the items with little ticks. These can include standing orders paid in or out, bank charges paid out, and interest paid in
at this stage every item on the bank statement should have a little tick against it. You then subtract uncleared cheques and other payments, and add uncleared receipts.
In our example above, the bank reconciliation will look like this:
Note that the correct figure for our purposes is the cash book figure of £88.03. The bank reconciliation simply shows how the different figure on the bank statement is the equivalent of that cash book figure.
The process of performing a bank reconciliation is an essential discipline in checking that your cash book is correct, that all payments and receipts in your account have been recorded, that the bank statement is correct, and what cheques have yet to be cleared.
There are a few further points to note about bank reconciliations. The method above is fine for the first month of an account or when all cheques are cleared promptly. In other cases, going back months in a cash book can be tedious and lead to errors. It is therefore usual to tick only the cash book for the current month, and the previous bank reconciliation for all previous months. The bank reconciliation for the previous month lists all uncleared items, most of which have probably cleared in the current month. The items you add or subtract in the current month’s bank reconciliation are therefore the unticked items from the current month’s cash book and last month’s bank reconciliation.
Stale cheques
If a cheque is more than six months old, it has become a stale cheque. This means that the time for paying it in has expired. If the payee does try to pay it in, the bank will reject it (or at least, the bank should do). A stale cheque is shown as an uncleared cheque in the month it becomes six months old. In the following month, the cheque is written back in your cash book. It is shown in the payments section but as a negative payment, such as by putting brackets round the numbers, and is subtracted from the total. This entry and the original must be cross-referenced by contra sign to each other.
The fact that a cheque has gone stale does not mean that you no longer owe the money and can regard this non-payment as bunce. The treasurer should try to contact the payee and usually arrange for a replacement cheque to be issued. The payee may have lost the cheque, forgotten about it, or had it stolen. Don’t issue a replacement cheque until contact has been made with the payee. It is possible that the payee has moved, died, emigrated or simply disappeared.
Sometimes an item appears on a bank statement as both ‘paid in’ and ‘paid out’. This happens if you pay in a cheque which bounces but clears on re-presentation. Another example is where the bank imposes a charge which it then agrees to refund. If the same amount appears in each column of the bank statement for the same item, you tick each of them on the bank statement. The two entries are contras, as explained above.
Sometimes you may find that an item appears on the bank statement which should not. This is a rare occurrence, but it has been known for the banking system to clear items to or from the wrong account. It is also known for a crook to try to get money from your account. If you find any entry on the bank statement which you do not understand, you must contact the bank immediately. If there is evidence that the account is being fraudulently raided, the bank will have specific procedures to deal with the matter. If you have not authorized the payments, the bank is liable to refund the wrongful payments.
Sometimes you may find that an item appears on the bank statement for a different amount. For example, you may have recorded a cheque for £25.00 when the bank shows it as £35.00. Such cases are rare. If it does happen, you should first check that your cash book is correct and that you have not simply entered the wrong figure. If you are correct, for the bank reconciliation, the difference is added to or subtracted from the bank total. The matter should be raised with the bank.
Stolen or lost cheques
If a cheque book goes missing, you must report it to the bank immediately. Always assume that a missing cheque book is stolen until you find out otherwise. The bank will stop payments on the account until the matter is resolved. This can cause problems because an innocent payee can find that your cheque to him is dishonoured in the meantime. You should explain to the payee what has happened. If necessary, take the cheque back and possibly make payment in another way, such as by cash or from another bank account.
Stopped cheques
A cheque can be stopped by you at any time until payment has been made by your bank. Therefore, if you need to stop a cheque, you should do so promptly.
For reasons explained below, stopping a cheque should only be done for a good reason. You stop a cheque by telephoning the bank and confirming your instructions in writing. You should normally contact the payee immediately after telling the bank and ask them to return the cheque to you. The bank will want to know why you wish to stop a cheque. The legal term for stopping a cheque is a ‘countermand’. The law is contained in Bills of Exchange Act 1882 s.75. The bank is under a duty to check that the countermand came from the customer, and not to countermand if there is any doubt.
Legal status of cheques
A cheque is legally defined as “a bill of exchange drawn on a banker payable on demand” (Bills of Exchange Act 1882 s73). It is an instruction to your bank to pay an amount to a person (usually to their bank account) from your funds with the bank.
Cheques were first used in 1680, but became much more sophisticated during the 20th century with special forms, account names and numbers added, and optical character reading provided. Strictly speaking, there is no need to use a cheque book at all to issue a cheque. A cheque may legally be written on plain paper or indeed on any other surface. This is not recommended practice as it delays payment and can incur significant charges.
A cheque may be crossed. This may be a general crossing or a special crossing. A cheque which is not crossed is said to be an open cheque.
An open cheque is now very rare. It does not contain two parallel lines across the payee and amount. In effect it is a bearer bill with little more security than a bank note. Someone with an open cheque can walk into the bank and receive payment for the amount stated.
A crossed cheque has two parallel lines either vertical or diagonally against the writing of the payee and amount. The lines may be printed or written. This means that the cheque can only be paid into a bank account, and not cashed unless the cheque is made out to “cash”. A crossed cheque must be paid into an account in the name of the payee unless negotiated, which means that the payee has written on the back “pay [another name]” and signed it. The cheque then becomes payable to the other name.
A cheque may be specially crossed, by writing between the parallel lines either the name of a bank or a place (or both), meaning that the cheque can only be paid into an account at that bank or in that place.
In practice, today most cheques are crossed with the words “account payee” written in the crossing. From 16 June 1992 this has legal effect in meaning that the cheque can only be paid into an account with the payee’s name; the cheque cannot be negotiated.
Standing orders and direct debits
Standing orders and direct debits are means by which regular payments are automatically made by the bank to or from your account. Either method may be set up in writing, by telephone or using the Internet.
A church will usually receive regular payments by standing order from church members. It is most unlikely that a church will be allowed to receive funds by direct debit.
A church may make payments by standing order, such as if supporting a missionary, renting property or leasing equipment. It may make payments by direct debit for telephone and electricity bills.
A standing order is a regular payment of the same amount paid at regular intervals, such as on the 4th of each month, or every Friday, or on the first Monday of each quarter. A standing order may be paid into any account. If the amount of a standing order is to be changed, a new standing order must be arranged by the payer.
A direct debit is a regular payment of a variable amount. This is ideal for services where the charge varies from period to period, such as for utility bills. Because you are allowing someone else to determine how much money they take from your account, direct debits are more strictly controlled than standing orders. The main points are:
