Southampton Voluntary Services
Voluntary Action Centre, Kingsland Square, St. Mary Street, Southampton, Hants, SO14 1NW
Phone: 023 8022 8291 Fax: 023 8022 2929 Website:
Good Practice Guide
Basic Financial Controls for Small Community Groups
No matter how new or how small your community or voluntary group is, one of the first things to get right is managing any funds held on behalf of the group. Good practice in this area protects the people involved on the committee, the reputation of the group and the interests of the people it benefits.
You will need to be financially accountable to your members and any funders or donors. Accountability means being able to demonstrate that all transactions are recorded, all payments are authorised, all necessary financial information is available, and nothing goes astray. For all of this you will need to have effective financial controls in place. This doesn’t need to be overly difficult or complex but it does need to be clear and consistently followed by everyone involved.
Proper recording of transactions and reporting of these to the whole committee provides assurance both to the group and the individual(s) who handle money on behalf of the group and helps avoid any potential misunderstandings or accusations of maladministration.
The following points are recommended good practice for new and existing small community groups. Please use them as a guide to help improve the financial management of your group.
The Treasurer
The group should nominate an appropriate person as its Treasurer to take responsibility for recording and managing all money. However, the whole management committee is responsible for the money of the group, not just the Treasurer. It is recommended that the Treasurer should be competent in, or take part in training, on book keeping and financial management. The rest of the management committee would also benefit from training in financial awareness and management.
Financial records
The group must keep a proper record of its money, and must have
- A cash book (or similar computerised system) to write down all items coming in and going out – the cash book must be kept up to date
- A petty cash book
- A file for receipts and invoices
Finance records should normally be kept securely for 7 years and a proper handover of relevant accounts and records should be made each time the Treasurer or committee changes over.
Financial year
The group must agree on their financial year running from ______(month) to ______(month). You can chose when your financial year starts and finishes to suit your activities, however the UK financial year runs from April to March. Most groups adopt either 1st April to 31st March or 1st Jan to 31st Dec financial years.
Annual accounts
The group should put together a summary of the year’s incomings and outgoings within 2 months of the end of the financial year. This should be presented to the whole committee for discussion and adoption and be signed by the Treasurer or Chair. The accounts should also be checked by an independent person if your annual income is more than £10,000. The summary must be presented to the group’s annual general meeting.
Budgets
The group should plan a budget at the start of the financial year to cover the anticipated costs of work planned for the coming year. This should show how much you think it will cost to run your activities and how much money is needed. If you do not have sufficient funds to cover anticipated costs you will either need to have a realistic fundraising plan or reduce work to affordable levels. When new activities not previously included in the annual budget are considered a budget specific to that should be prepared and considered in the light of the overall budget for the year to see if it is affordable.
As part of your budget you might wish to set aside a small sum towards having or building up a reserve which could cover unforeseen contingencies or be set aside for planned larger items of expenditure in later years.
Regular reporting to the committee
The Treasurer must give reports to the management committee – usually at every meeting and preferably in writing. This will include a summary of the money coming in and going out since the previous meeting. This is essential because the whole management committee has responsibility for the groups’ money, not just the Treasurer.
Bank account
The group must open a bank or building society account in the name of the group. The account must have a cheque book. The group will ask the bank to send them regular bank statements. The statements will be used to check what money has gone in and out of the bank. The Treasurer should make the bank statements available at committee meetings for other members to be able to check them against the reports given.
Signing cheques
Any money to be spent must be approved by the management committee beforehand in line with the agreed budget.
Two people, out of a pool of three or four, must sign each cheque; the two signatories on a cheque should not be related or living in the same household.
The pool of people must be agreed at a management committee meeting and must go in person to the bank with a copy of the relevant committee minutes at which they were appointed and the completed bank mandate together with proof of identity in order to become authorised signatories. Banks are increasingly rigorous in their requirements of voluntary groups and charities due to money laundering and other regulations.
No one must sign a cheque that is payable to them or to someone who is related to them or living in the same household. No one should ever sign a blank cheque (that is, a cheque on which the payee or amounts have not been completed). This is to protect the signatories and the charity in case of fraud.
All cheque stubs/records must be filled in with the date, who it is payable to and the amount. If the group is issued with a “debit card” all withdrawals and transactions should be closely monitored and must be approved by the management committee beforehand.
Money coming in
All money the group receives must be written in the cash book and paid promptly into the groups bank account. Money coming in must not be put in the petty cash tin nor used as petty cash to offset expenditure. It is very important to keep an up to date record of all the money coming in, to balance the books at the end of the year. Cash received should normally be counted and signed for by 2 people. Numbered receipts should be issued for money received where possible.
Money going out
The management committee must properly agree all money going out. Every payment must have paper evidence to support it eg an invoice or receipt. The group must write on the invoice the cheque number, date of the cheque, the amount and who signed the cheque. For operational purposes a committee might agree that a sum up to an agreed amount can be spent on its behalf provided it is within an agreed budget ( eg up to £50 ). Similarly it might agree that the treasurer or secretary can hold a small petty cash float ( eg £30 ) to purchase stationary or stamps or meeting refreshments etc on its behalf provide receipts are provided to cover this when the float is topped up.
Petty cash
Cash should only be paid in exchange for a receipt (no exceptions) and all items must be for the group’s work. A recommended maximum of £30 will be held in the petty cash tin, but if it runs low it can be topped back up to £30 as often as you need subject to receipts for expenditure incurred being submitted. The group will write a cheque payable to ‘cash’ to top the petty cash up to £30. Petty cash must be kept in a safe place with agreed people only able to access it.
Petty cash vouchers and book
The group will fill in petty cash vouchers for each payment out of petty cash. The voucher will include the date, the amount, what it was for and who it was paid out to. The person getting the money and the person giving the money out must both sign the voucher. These must be different people. The person claiming the money must have a receipt and this should be attached to the voucher and filed. The date, amount and what it was for must also be written in the petty cash book.
Expenses
It is good practice to reimburse volunteers legitimately incurred expenses so that people are not out of pocket or deterred from becoming involved if they are on low income.
Money can only be claimed for out of pocket expenses such as:
- Travel expenses with a bus or train ticket
- Car mileage (using standard rates or a reasonable rate set by the management committee). HMRC tax free sum is currently 45p/mile
The management committee may decide to pay money for other out of pocket expenses e.g. carers or child care. This must be agreed at a management committee meeting. No member of the group can be paid for their time.
Sources of Assistance
- SVS can provide useful help and assistance to local voluntary organisations on all aspects of governance and management. Tel 02380228291 or contact us on
- Charity Commission guidance is available on
- The Charity Finance Group supports charity finance professionals and has useful info on their website
- National Council of Voluntary Organisations also has useful on line resources ww.ncvo.org.uk
Disclaimer SVS does not represent or guarantee that the information on this briefing is accurate, complete or up to date. SVS does not accept liability for any loss, damage or inconvenience due to the use of; or the inability to use any information contained in this briefing. Visitors who use this briefing and rely on any information do so at their own risk.
Last Updated 29.8.14 ja
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