This section does not detail all areas of parish finances but instead highlights key issues and recommends sources of guidance, further information and assistance.
Issues with Parish finances or accounts
The Parish Finance Officer is available to assist parishes with any issues. Please ensure that your Archdeacon is advised also.
The Parish Treasurer
Parish Treasurers are elected or appointed at the first meeting of a Parochial Church Council (‘PCC’) following the annual parochial church meeting (‘APCM’). They are not elected at the APCM. This means that the PCC Treasurer is an officer of the PCC and not an officer of the Parish. The Treasurer reports to the PCC.
Treasurers should ensure that:
- Accounts are made up regularly, at least monthly;
- Bank statements are received and reconciled regularly;
- Cash is counted in the vestry by two people;
- Cash is banked regularly as money habitually left in a church safe more than a week may not be insured;
- Regular financial statements should be given to the PCC.
The Parish Finance Officer hosts Treasurer training days at various times during the year. Attendance on one of these days is recommended for all new treasurers or for anyone contemplating the Treasurer’s role or those “holding the fort” during a vacancy. New treasurers, even with a finance background, are unlikely to be well versed in the foibles of the Church of England and charity regulations. Additional training days can also be run on request for a Deanery. There is no fee payable for these training and/or support days.
The Parish Finance Officer also runs a series of Annual Accounts workshops in February to assist treasurers in preparing statutory accounts for annual parish meetings. The Parish Finance Officer is also available to come to parishes to work alongside the parish Treasurer if required. This service is provided free of charge.
It is a legal duty of the PCC to ensure that adequate accounting records are kept. Accounting records are not prescribed. If you are in doubt about the suitability of your records, the Parish Finance Officer at the Diocesan Office can help.
There is a cashbook in the form of a loose leaf A3 sheet (landscape) recommended by the Church of England. One side of this sheet is used for receipts and the other for payments. This form of cashbook is available as an Excel file or, from the Diocesan Print Unit printed on A3 paper. Multi column analysis books also serve this purpose well and are available from any stationer.
Most parishes are now using computer systems for accounting records. It is essential to ensure that regular copies of your data are made (backups) and taken off-site. Ensure that data on backups can be restored easily on another computer. Failure to do this increases the risk that records may be lost irretrievably in a computer failure, burglary, fire or flood etc.
If your PCC uses a computer for accounting records, we recommend that the PCC purchases both the computer and the software as this ensures that the data remains their property and avoids complications when officers change.
The Parish Finance Officer also has a copy of the Data Development Suite of software programmes written specifically for use by churches. Whilst we have experience of and can offer limited support on Data Developments software, we are aware that there is a vast range of other programmes available, but we are not in a position to evaluate or endorse the use of any software the PCC considers suitable.
Alternatively, a cashbook in Excel workbook format is available from the Parish Finance Officer free of charge. This workbook has 15 tabs or worksheets, one worksheet per month, an annual summary page, a PCC report page and an annual accounts page. As the data is entered month by month the reports at the end of the workbook are automatically updated. This file requires a computer with the Microsoft Excel programme. Basic Excel skills are required to use this workbook.
Accounting records must be kept for the current year and six preceding years. A copy of the annual report and financial statements should be kept permanently. Storage of records is the PCC’s responsibility and not the individual officers. We recommend that before records are destroyed they should be examined for documents which may be of use in future, e.g. invoices for work to the church building. These could be stored in a buildings file instead. National Church of England guidance can be found here.
The Cost of Parish Ministry
The Diocesan budget is allocated to Deaneries through the Deanery Share Scheme. In outline, Deaneries bear the cost of parish ministry based on the number of posts in the Deanery and may be required to make a contribution towards central costs. Deaneries allocate their share to parishes through parish share. Details of the Diocesan budget and the Deanery share scheme are available from the Parish Finance Officer or the Chief Accountant. Guidance is also available on the suggested methods for allocating Deanery share to parishes.
Around November or December the PCC should be presented with a financial plan (a budget) for the following financial year. Financial reports to the PCC should be referenced to this budget. The budget assists in identifying financial problems early enough for remedial action to be instigated. Preparing and report on parish budgets is included in PCC Treasurer Training days, and guidance is available from the Parish Finance Officer.
Annual Financial Statements (‘Accounts’)
The parish financial years are prescribed under the Church representation rules as beginning on 1st January and ending on 31st December. Under the same legislation the Annual Parochial Church Meetings must be held no later than the 30th April following the year end. Examined or audited accounts must be presented to the Annual Parochial Church Meeting. The definitive guidelines are to be found in the book “The Charities Act and the PCC” 2011 edition which is available from the Diocesan Bookshop and from the Church of England national web site:
Format of accounts
Under existing legislation, there are two formats for annual financial statements. Parishes must produce either:
- A Receipts and Payments account with a list of assets, an Annual Report and an Independent Examiners certificate; or
- Full accrual accounts: A Statement of Financial Activities (SOFA), Balance Sheet, full supporting notes, an Independent Examiners/Auditors certificate and an Annual Report.
The criterion for determining the format of accounts is gross income. Parishes with gross income of less than £250,000 may produce a receipts and payments account. Parishes with gross income in excess of £250,000 must prepare financial statements including a balance sheet and SOFA with appropriate supporting notes. “Mix and match” of the formats is not permitted.
When producing annual accounts the following points must be observed:
- All funds and activities under the PCC umbrella must be included in the parish accounts. These may include Church Halls, parish houses, Parish magazines, Choir funds, Organ funds, bookshops, youth groups etc.
- Funds must be identified by type: funds are either ‘Unrestricted’ (these can be used for any purpose), Designated (earmarked for a particular purpose), Restricted (whereby the use of funds can only be used for a particular purpose) or Endowments. Each fund must be accounted for separately and must be represented by its own assets, liabilities, income and expenditure.
- Netting off of income and expenditure is forbidden by statute. This requires that gross income and Gross expenditure must be shown not for example magazine or hall net profit/loss. This applies to all activities. (This is because the income sets the threshold for format and inspection)
- Trusts held by the Diocese as custodian for the PCC must be included in the parish accounts.
Sample formats for accounts and reports are available from the Parish Finance Officer in Excel and Word format. These can also be found in the book ‘The Charities Act 2011and the PCC’. Advice is available from the Parish Finance Officer or the Chief accountant. Other guidance is also to be found of the Church of England “Parish Resources” website: www.parishresources.org.uk
Parish accounts are reviewed by the Parish Finance Officer on a cyclical basis and parishes will be advised of any areas where reporting can be improved.
Requirement for Audit or Examination
Independent examination of PCC accounts is a statutory requirement. This regulation is there for your protection. For PCC’s there is no minimum level exception.
Parishes with income of less than £500,000 may have an independent examination of their accounts instead of a full audit. Parishes with income between £250,000 and £500,000 still have an Independent Examination, but the Examiner must hold a qualification and licence/permissions to do this work in line with Charity Commissioners guidance (CC31)
Parishes with income exceeding £500,000 must have accounts audited by a registered auditor.
The Examiner or Auditor should be appointed by the Annual Parochial Meeting. The Examiner or Auditor may not be a member of the PCC nor closely related to a PCC member. They may be a member of the congregation but must not have had any interest in the affairs of the PCC in the year being examined.
All records must be made available for examination including accounting records, bank statements, minutes of meetings, Gift Aid records, etc.
Care should be taken to ensure that the examiner has both the competence for the complexity of the parish and is independent.
Stewardship & Fundraising
All parishes are encouraged to give these matters regular consideration. The Mission and Ministry Advisers have resources available to support and guide parishes, the Parish Finance Officer is available to support the advisers in this matter. Help, advice and loan of materials is freely available. There is no charge for these services.
Parishes wishing to increase giving and their giving base through a programme should first contact their mission and ministry adviser or the Parish Finance Officer. Parishes will then be free to conduct their chosen programmes either on their own or with any assistance required from the Mission and Ministry Advisers or the Parish Finance Officer.
The Mission and Ministry Advisers can provide other extensive resources for parishes, including programmes aimed at spiritual growth and mission as well as finance. The Mission and Ministry Advisers work closely with the Parish Finance Officer and contact with either will instigate a co-ordinated response.
The Parish Finance Officer can also offer advice on making the most of Gift Aid.
Mission Opportunities Fund
Grants are available for special projects to promote mission. The process of grant making is detailed on the website pages.
Loans for development projects
The Diocese administers a parish loan scheme to assist in financing projects. The facility is available at competitive rates of interest (currently base rate plus 0.85%) with flexible repayment. Details of this scheme are available from either the Parish Finance Officer or the Chief Accountant. Applications must be supported by your Archdeacon.
Land and buildings owned by a parish are required by the Parochial Church Councils (Powers Measure) 1956 to be vested in the Diocesan Board of Finance as custodian trustee, the PCC being the managing trustee (see section F7). The same is true of securities held in permanent trusts for example money left in a will, with the income to be expended in accordance with the donor’s wishes. Many parishes also ask the Diocese to hold non trust funds for them. These trusts must be disclosed in the parish accounts.
The Diocese issues trusts statements yearly. Parishes can obtain trust statements at other times on request from the Diocesan Finance Department.
Parishes should ensure that buildings and property are insured at replacement value in the unlikely event they are totally destroyed. Insurance cover should include employers’ liability for any PCC employees and third party liability for any outing or function organised under PCC auspices. Basic cover for all these matters is included in the group insurance scheme for churches negotiated by the Diocesan Office with the Ecclesiastical Insurance Group. The scheme offers the benefits of a block insurance policy within which parishes can negotiate their individual requirements. From 2005, premiums can be paid by direct debit over 12 months on an interest free basis. Further details can be obtained from Ecclesiastical Insurance Group, Beaufort House, Brunswick Road, Gloucester GL1 1JZ, telephone 0845-777-3322 or from the Pastoral Secretary at the Diocesan Office.
Value Added Tax (‘VAT’)
Although PCC’s are exempt from income or corporation tax and can reclaim tax on Gift Aid donations, they are (like other charities) subject to VAT on the goods and services that they purchase.
PCCs may be able to obtain a zero rated or reduced standard rate of VAT on certain expenditure. This is a complex area and the PCC would be wise to check its eligibility with HM Revenue and Customs or their professional advisers before embarking on a project. PCCs should also be aware that VAT regulations are regularly revised.
Zero rating is likely to apply in the following areas:
- Construction of a new church
- Construction of a new church hall (if for community use)
- Approved alteration or extension to a listed building
- Aids for people with disabilities on church premises
- Advertising and goods for collecting donations
Fuel and power supplied to the church can be supplied at the reduced standard rate of 5%.
It is also possible to obtain a grant to cover the cost of VAT on repairs to listed places of worship. Claim forms with further details are available from the Parish Finance Officer at the Diocesan Finance Department or online from www.lpwscheme.org.uk
Charity Registration Number
All Parochial Church Councils (PCCs) are legal entities incorporated under the 1956 PCC Powers Measure. All PCCs have charitable status, but there are now two classifications dependant on the PCC’s income.:
Parishes with income below £100,000
These PCCs remain Excepted Charities [Excepted by Statutory Instrument 2002 No 1598]. This exception is only from registration with the Charity Commissioners, all charity laws and regulations still apply to these parishes. The PCC members (both elected, ex-officio and co-opted) are charitable trustees and have the rights and responsibilities that go with this position.
These parishes being excepted from registration do not have a Charity Number and must not use the Diocesan registration number. Where a charity number is required an explanation that the parish is an Excepted Charity and the Inland Revenue charity number used for your Gift Aid claims will usually be adequate.
Parishes with income exceeding £100,000
Since 2008 these parishes are now required by law to become registered charities. Parish with income greater than the threshold, must either obtain a dispensation or complete the registration process.
If a parish’s income exceptionally goes through this threshold and is typically £80,000 or less, a dispensation may be applied for to remain as an Excepted Charity.
Parishes that are required to register should consult the Parish Finance Officer to obtain copies of the Church of England guidelines and registration packs, which have been agreed by the Charities Commission. In order to register as a charity PCCs must demonstrate public benefit and should carefully consider how this is phrased. The guidelines are all available either as paper copies or emailed as Word/pdf computer files.
Employees and Charity registration
Charity Law forbids trustees of a charity becoming employees of that charity. This has come to prominence as a result of the registration process. A number of PCCs have had, in the past, elected members as employees. During the registration process some dispensations have been granted for Organists, Youth Workers, and Parish Administrators. These dispensations must be applied for separately in each case.
For all advice on Charity Registration consult the Parish Finance Officer.
A ‘friends’ organisation can play an important part in raising funds for the church, particularly where there is a church building or monument with significant architectural or historic interest. The legal status of a ‘friends’ organisation is that they must be either:
- A separate registered charity with independent accounts; or
- treated as a PCC sub committee and accounted for as a “Restricted Fund” in the parish accounts.
Guidance on how to establish a ‘friends’ organisation is available from the Mission and Ministry Advisors and Parish Finance Officer at the Diocesan office.
Employment best practice
Employment law is a complex area. Any parish considering employing staff should seek advice from the Diocesan Office (Ernest Nelson??) who can provide guidance on best practice.
When a PCC employs a worker, for example an organist or parish worker, the PCC as employer is required to deduct income tax and National Insurance contributions from each payment. These deductions must be paid over to the Inland Revenue together with employer’s National Insurance contributions. For advice contact the local tax office or the Parish Finance Officer at the Diocesan Finance Department.
The Diocese provides a payroll service to parishes for a token administration charge and recovery of payments made on behalf of parishes by direct debit. Please refer all queries to the Chief Accountant at the Diocesan Finance Department.
For more information please contact Terry Gray
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