Risk. It’s not a word you’d normally associate with financial people, or at least not in a positive sense.

I recently attended a training course, offered by a company who I’d met whilst networking. I didn’t have any expectations. I guess I was open minded.

As the day enfolded, I was recognising some of the theories and explanations.

Then we played a game. A very simple game. Our group of 6 each had an envelope with flat shaped pieces in. None of the envelopes had enough to make a square individually but collectively, there were 6 squares of the same size to be made. Easy, then. Yes? Well, no, actually. No speaking or communicating in any way was allowed. You could offer one of your pieces to someone else and they could either accept it or not. No expressions allowed, either. And the game would only be over when we had all completed our squares.

I was offered a piece, took it and made my square. So did someone else. We both sat back, arms folded. Job done. Just need these other 4 to work it out now. But I was still being offered a piece. Why? I’d got my square. After a couple of minutes, I realised that my square wasn’t the right size. I needed to do something. I needed to offer one of my pieces to get one back that made a bigger, correctly sized, square. No, 2 pieces. Actually it was 3 pieces. Now I had the right square, as did 3 others. Still, though, 2 people hadn’t. One didn’t have enough pieces and one had too many. They weren’t offering any pieces up. That’s when the rest of us realised (without communicating remember), that we had to give up pieces from our completed squares to get them to move their pieces, so we could complete the game. We did, the other 2 realised and we all completed our squares. 10 minutes that took. That’s very good, we were told. One group previously, had taken 1 hour and 40 minutes!

This was a light bulb moment for me. I realised that even though you may think you’ve achieved something, it doesn’t mean you have and that sometimes, you have to give something up to help others, which ultimately benefits them and you.

Risk. Not a word you’d normally associate with financial people. Only, in this instance, you should.

The referendum is due to take place in Sept 2014 & then the face of the UK could change. But from a tax perspective it already differs.

Following the Scotland Act 2012 various changes are already due to take place on 1^st April 2015.

1. In Scotland “stamp duty” is set to be replaced by “land & buildings transaction tax” – the latter working on the excess over a given threshold, rather than the whole amount when a threshold is exceeded.
2.  Scottish landfill tax will replace UK landfill tax for disposals in Scotland.
3. Income tax will be made up partly of a Scottish variable rate, with that part going to Scotland & the rest going to the UK. The tax liability will depend on where you are domiciled – Scotland or the rest of the UK.

But what if Scotland receives the “Yes” vote & splits from the UK? In that case its taxation will not be governed by HMRC but by Revenue Scotland & there will be a completely different Scottish tax system.

Complicated? It probably will be!

Martin Pope

http://www.theaccountingfactory.co.uk

Referring to a large UK based public sector organisation running a shared service centre offering IT resources, the intention is to give an overview of financial management’s relationship with an organisation and its 3rd party suppliers.

New Activities
For new activities within the existing Service Level Agreement (SLA) framework, early involvement the financial management function in developing business cases, including consultations the client departments and project management is essential to understand requirements. This helps with the preparation of cost benefit analyses and quantifying risks. Discussions with 3rd party suppliers and project managers allow for a thorough breakdown of costs and performance, as well as payment milestones before proposals are signed off.

Performance and Control
The review and maintenance of the accounting reporting system to provide consolidated reports for existing one-off projects and service lines is needed to monitor financial performance on a monthly basis. This included monthly, year to date and annual actual activity compared to budget, as well as contract life cycle reporting. Significant variances are investigated, both internally and with the 3rd party supplier to take action.

An issue Log and risk register are maintained and discussed regularly with interested parties with reference to ownership and escalation levels.
Purchase-orders are setup in line with payment milestones involving the procurement function and budget holders. Regular meetings to review progress reports with suppliers and project management are scheduled and cash-flow forecasting is maintained to monitor cash levels ensuring cash is available to meet payment deadlines.

Advice is provided on transfer pricing by referring to the SLA framework in ascertaining unit costs for the products and services.
Processes need to be in place to integrate the financial performance of the shared service corporately to ensure effective consolidation.
Regular reports are made to the steering committees and project boards on financial performance, updating them on any outstanding issues and progress on new activities.

Growth and Development Strategies
Through regular communication with the corporate centre particularly the central finance function, information is disseminated on issues such as corporate efficiency, returns on investment (ROI) and Value-add targets which support decision-making and ensures goal congruency. This type of analysis helps identify potential joint venture opportunities both internal and external.

Maintaining strong relationships with suppliers is an important way to keep up to date with emerging technological and social changes which can be assessed in the organisation’s business models for action. Advice can be then reported corporately through the business planning process to secure funding and rank them against competing proposals.

Conclusion
This can be applied to a variety of business models that rely on partnering to deliver its core services. It is therefore useful understand these relationships and how they impact an organisation. To evaluation the effectiveness of existing systems can be done by:

• Fact finding – Information gathering about the existing system through process documentation review, structured interviews with relevant stakeholders and other performance information currently available.
• Identifying shortcomings – An analysis of these finding is used to develop a clear picture of relationships and outputs will include process documentation, flowcharts and most importantly, a gap analysis between the existing system and aspirations of the stakeholders.
• Development and implementation of solutions – Proposals to close the gap are considered and agreed with stakeholders before implementation to meet predefined quality levels and milestones.
• Review – Periodic reviews are done at least annually to assess the effectiveness of the changes.

By John Sanni ACMA

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The Charitable Incorporated Organisation was created by the Charities Act 2006. It is similar to a company limited by guarantee (the form of organisation frequently used by charities) in that it affords the protection of limited liability and is a legal entity in its own right, but is differentiated from them in requiring only to be registered with the Charity Commission  and not also with Companies House. This avoids dual filing.

The Charities Commission is working to an implementation timetable with the Cabinet Office and applications are being accepted depending on the turnover of the organisation. However, currently a charitable company cannot convert to a CIO. However, it is hoped that legislation will enable this in the near future.

So what are the pros & cons?

Pros

The most obvious advantages are:

• Limited liability, so that normally the trustees and members will be protected from personal liability.
• Separate legal personality, so that the CIO becomes the other party to any contract.
• The CIO can have vested in it any permanent endowment held by an unincorporated charity. This can be done by a simple vesting declaration.
• The CIO’s annual return and accounts need only be filed with the Charities Commission
• Two simple model constitutions have been developed for CIOs:  (1)the foundation model, where the only voting members will also be the trustees; (2) the association model, where the charity will have a wider membership of voting members other than the trustees.The former will be akin to an incorporated charitable trust; the latter akin to a company limited by guarantee.
• The CIO must be incorporated using one of the simple forms of constitution published by the CC (or as near to those forms as circumstances allow). It should therefore be relatively inexpensive and easy to register a CIO electronically using the CC’s website. Provided there is no conflict with the constitution, it can also make its own Rules and Bye-Laws.

Cons

However, there are some important disadvantages to be borne in mind before deciding whether to opt for this structure.

• An exempt charity cannot be or become a CIO, because all CIOs must register with the CC.
• A charity with an annual income of less that £5,000 does not have to register with the CC at all, but every CIO, irrespective of its income must register (subject to the implementation plan referred to above).
• Unlike Companies House, the CC is not operating a searchable register of charges. Although a CIO can register a mortgage on land at the Land Registry, there will be no register of any debentures issued by CIOs. Banks often require such forms of security for lending to limited liability organisations, and in the absence of a register of such charges for CIOs, it remains to be seen whether they will be willing to make advances to a CIO.
• Correspondingly it is unlikely, when the conversion becomes possible, that a company limited by guarantee which is considering converting to a CIO would be allowed to do so by any bank or other lending institution to which it had issued a debenture by way of security.

Conclusions

•  If an existing charity is essentially a grant making charity, making grants from the income derived from its endowments, there is unlikely to be any major advantage in becoming a CIO.
• If any existing unincorporated charity is, however, providing services to the community – such as a school, or care home – then the CIO would be an advantageous way of securing limited liability for the charity trustees, and for the members, particularly since the form of incorporation documents is simple, and returns and accounts need be filed only with the CC.
• However, if the service providing charity is likely to need to issue debentures over its fixed and floating assets as a condition of receiving bank finance to fund its operations, the lack of any register for such instruments is likely to make the proposition unattractive to such a lender.
• The only advantage to a charitable company limited by guarantee (which has not borrowed monies against such security) in converting to a CIO (when the implementation plan permits) would be the marginal accounting and filing costs of filing returns and accounts only with the CC.

Acknowledgment: Charles Russell LLP