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Thread: AMS 2016 and new rules for ECs

  1. #181
    Senior Member DonTregartha's Avatar
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    You wouldn't/shouldn't run a business at strict break even - you need to make a profit to cover the times when you make a loss.

    If you can't grasp that simple fact, never go into business.

    Similarly you shouldn't run a charitable/not-for-profit without generating reserves, however they are defined or calculated.

    Who makes up the shortfall if you can't pay? - The members, the trustees?

    For start ups and newly formed groups, there is is a case for support, but established groups should not be in this position.


    Don Tregartha
    Old Scouter
    1st Wing Scouts

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  3. #182
    Senior Member recneps's Avatar
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    Quote Originally Posted by DonTregartha View Post
    You wouldn't/shouldn't run a business at strict break even - you need to make a profit to cover the times when you make a loss.

    If you can't grasp that simple fact, never go into business.

    Similarly you shouldn't run a charitable/not-for-profit without generating reserves, however they are defined or calculated.

    Who makes up the shortfall if you can't pay? - The members, the trustees?

    For start ups and newly formed groups, there is is a case for support, but established groups should not be in this position.
    I would be uncomfortable committing to be a trustee at any charity (whether a Scout Group or otherwise) if I didn't know that it had sufficient reserves to be able to cover costs if something went wrong.

    For those with a hall - what happens if the pipes burst? Have you got enough to pay the insurance excess?
    What if a routine test finds work that needs doing, perhaps the fuse board needs replacing?

    A minibus is less of an issue (worst case it can be sold/scrapped if the group cannot afford repairs). Selling a HQ can be difficult (and the can't just be scrapped)

    As a trustee, two of the first concerns I would have would be:

    1. Do we carry adequate insurance with the correct Terms and correct cover?
    2. Do we have a good reserves policy and sufficient reserves

    The other stuff (whether we have enough tents, whether we want to repaint the railings, etc) is perhaps more interesting, but far less urgent and important.

    Districts should be supporting groups to make sure that they are running properly as charities and intervening where necessary. But alas people underestimate the importance until it is too late.

    It is not the mountain we conquer but ourselves

  4. #183
    Very Old Member BigBadBaloo's Avatar
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    Quote Originally Posted by recneps View Post
    I'm not sure why the rules about reserves should be any different for "receipts and payments" accounting, or "accrual" accounting (or any other form)
    Oh I don't disagree and any charity that doesn't have reserves and a reserve policy is, imo, a disaster waiting to happen! However it is permitted for a charity not to have a reserves policy, so long as this is stated in the trustees' annual report! (https://www.gov.uk/government/public...arity-reserves).
    Peter

    Former CSL - 2nd Bracknell


    A journey of a thousand miles must begin with a single step.¯ Lao Tzu (600 BC - 531 BC)

  5. #184
    ADC (Support) & DMM mediamanager's Avatar
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    Quote Originally Posted by BigBadBaloo View Post
    However it is permitted for a charity not to have a reserves policy, so long as this is stated in the trustees' annual report!
    Annual report ?!?!? That's a whole other thread!
    Mark Pullen
    Bradford South District (ADC (Support) & DMM)
    Trustee - 7th SV Gomersal Scout Group

    Formerly:
    Cub SA - 3rd SV Scholes Scout Group
    Hove Edge Scout Group (GSL, Trustee)
    West Yorkshire Scout County (ACC Cubs, Agent 2:007, County Secretary, County MM, Gang Show Secretary, Gang Show Media)
    Keighley District (ADC Cubs, ADC Beavers, DMM, Trustee)
    8th Keighley Scout Group (ACSL, CSL, GSL, Group Chair)

    All posts made by myself are of a personal nature.

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  7. #185
    a quiver full of barbs merryweather's Avatar
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    Quote Originally Posted by DonTregartha View Post
    Who makes up the shortfall if you can't pay? - The members, the trustees?
    the trustees are liable

    TM
    going...going...still here...just

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  9. #186
    Senior Member recneps's Avatar
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    True - although depending what it is I suspect an extra charge on the members is a likely solution.

    It is not the mountain we conquer but ourselves

  10. #187
    a quiver full of barbs merryweather's Avatar
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    Quote Originally Posted by recneps View Post
    I'm not sure why the rules about reserves should be any different for "receipts and payments" accounting, or "accrual" accounting (or any other form)
    my DC would possibly frown on me explaining such as being just a simple caretaker these sorts of things are reserved for experienced scouters only.

    what the 'eck!

    the accruals method is an accounting method that essentially measures the performance and state of (in this instance) a charity through recognition of financial events regardless of whenever cash transactions occur.

    The general idea is that financial events are recognised by matching receipts to payments (the so-called matching principle) at the time in which the financial transaction occurs rather than when payment is made (or received). By this method the current cash inflows and/or outflows are combined with future expected cash inflows and/or outflows to give a more accurate picture of the charity's current financial state.

    on a receipts and expenditure basis, cash transactions are recognised in the accounts as and when there is an exchange of cash.

    if i was to sell you the encyclopaedic compendium called 'tarquin's fantastic journeys through the rules of scouting, parts 1- XIII' on credit, giving you 6 months free credit and then payments of £129.72 per month for 12 months, then on a receipts and payments basis the money in my account will only be recognised when the money is paid in by you. however, by the accruals method, the cash is likely to be received in the future in my account, if not guaranteed, because the sale has been made, even though the money will not start coming into my account for 6 months. the accruals method recognises the money in the accounts at the point of the sale and is placed in the 'accounts receivable' part of the statement.

    as the accruals method is dependent on financial matters occurring in time (which may be more than the accounting year) anything that might impact on the cash flows and balances of the accounts and thus be used must be taken into account, this includes reserves.

    i should also add that i use the debt collection company Bodger & Blunt to leverage those who do not pay on time for my compendium! this is a slightly different accruals method, more a cruels method maybe.
    BTW, i'm a caretaker not an accountant.

    TM
    going...going...still here...just

  11. #188
    Senior Member Bushfella's Avatar
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    If I were running a business, I would operate receipts and payments. As a small group, even a medium sized group, I would operate receipts and expenditure.

    It is a simple matter to say, we have, to date spent £20,000 this year, our Income is £30,000, but of that additional £10,000, £5,000 is for the trip to Timbucktoo in the coming year, £1,000 is payment in advance for the summer camp, and £2,000 is for a Grant as yet unspent.

    Of course, in a running group this would be mirrored by similar circumstances at the start of the year. But it is simple to explain in the notes to the accounts.

    I had a movement of around £25,000 plus thanks to grants and fundraising. That left un-annotated would have looked very bad for any future funding, so it needs explaining. Equally, in the year that money was spent, the negative movement in funds also need to be explained in the notes.
    Ewan Scott

    It seems that there are a lot of Nawyecka Comanch around....





    Nawyecka Comanch'": "Means roundabout--man says he's going one way, means to go t'other" Ethan Edwards - The Searchers



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  12. #189
    Very Old Member BigBadBaloo's Avatar
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    Quote Originally Posted by merryweather View Post
    my DC would possibly frown on me explaining such as being just a simple caretaker these sorts of things are reserved for experienced scouters only.

    what the 'eck!

    the accruals method is an accounting method that essentially measures the performance and state of (in this instance) a charity through recognition of financial events regardless of whenever cash transactions occur.

    The general idea is that financial events are recognised by matching receipts to payments (the so-called matching principle) at the time in which the financial transaction occurs rather than when payment is made (or received). By this method the current cash inflows and/or outflows are combined with future expected cash inflows and/or outflows to give a more accurate picture of the charity's current financial state.

    on a receipts and expenditure basis, cash transactions are recognised in the accounts as and when there is an exchange of cash.

    if i was to sell you the encyclopaedic compendium called 'tarquin's fantastic journeys through the rules of scouting, parts 1- XIII' on credit, giving you 6 months free credit and then payments of £129.72 per month for 12 months, then on a receipts and payments basis the money in my account will only be recognised when the money is paid in by you. however, by the accruals method, the cash is likely to be received in the future in my account, if not guaranteed, because the sale has been made, even though the money will not start coming into my account for 6 months. the accruals method recognises the money in the accounts at the point of the sale and is placed in the 'accounts receivable' part of the statement.

    as the accruals method is dependent on financial matters occurring in time (which may be more than the accounting year) anything that might impact on the cash flows and balances of the accounts and thus be used must be taken into account, this includes reserves.

    i should also add that i use the debt collection company Bodger & Blunt to leverage those who do not pay on time for my compendium! this is a slightly different accruals method, more a cruels method maybe.
    BTW, i'm a caretaker not an accountant.

    TM
    Very well done!

    And of course, Tarquin's Encyclopaedia Emporium using the accruals method, may well have to pay tax before it has received the cash to do so!

    Complicated business this accounting lark!
    Peter

    Former CSL - 2nd Bracknell


    A journey of a thousand miles must begin with a single step.¯ Lao Tzu (600 BC - 531 BC)

  13. #190
    a quiver full of barbs merryweather's Avatar
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    Quote Originally Posted by BigBadBaloo View Post
    Very well done!

    And of course, Tarquin's Encyclopaedia Emporium using the accruals method, may well have to pay tax before it has received the cash to do so!

    Complicated business this accounting lark!
    it is, so that's why i leave it to those who know best such as my group treasurer, an ex-banker, and my domestic manager and financier.

    TM
    going...going...still here...just

  14. #191
    Senior Member roger-uk's Avatar
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    Yes its no wonder accountants are so rich
    Roger Woods
    Assistant Group Scout Leader,
    1st Sawley (All Saints) , Long Eaton

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  15. #192
    Senior Member recneps's Avatar
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    Thank you for the explanation Tarquin...

    I am aware of what Accruals accounting is - I perhaps was not clear with my point but what I meant was I can't see why explaining a reserves policy is any LESS important on receipt and payment (or the same thing under any other name) accounts.

    It is not the mountain we conquer but ourselves

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