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Part 5 of 7 · Restricted fund tracker series ~5 min read

Closing a period without a deficit nobody decided on

The SORP does not forbid a restricted fund from going below zero. It allows costs to be charged to a fund in deficit where there is a realistic expectation of income to cover the shortfall, such as a decision to transfer money in from unrestricted funds. What it does not contemplate is a deficit nobody noticed, which is the only kind a spreadsheet produces.

Key takeaways

  • A deficit can be allowed with a decision behind it. Without one it is unrestricted money spent silently.
  • Test balances weekly. A deficit caught in month four is a choice; in month twelve it is a disclosure.
  • Underspend deadlines are dates, and the alert goes out while there is still time to ask.
  • Transfers between funds are trustee decisions, recorded with the minute that approved them.
  • Every line of a funder report traces to postings, allocations and documents.

Closing a grant period

A restricted grant period frozen, checked for deficit and underspend, and reportedA vertical chain inside an AWS account container, entered from a box on the left labelled Period end, meaning a grant year or a reporting quarter. Freeze the postings pins costs, allocations and rules. Fund below zero, meaning charged more than the grant provides, with a side exit reading yes: Trustee decision, a transfer recorded with its minute. Money left over, meaning unspent at the end of the grant period, with a side exit reading yes: Apply the term, whether that is repay, retain or ask the funder. Build the report sets actuals by line against the budget version. Write the trace links every line back to its documents. A note says both exits are decisions for people and both have deadlines, and the system's job is to make sure they are asked in time and the answers are written down.AWS ACCOUNTPeriod enda grant year or areporting quarterFreeze the postingscosts, allocations,rules, all pinnedFund below zero?charged more thanthe grant providesTrustee decisiona transfer, recordedwith its minuteyesMoney left over?unspent at the endof the grant periodApply the termrepay, retain, orask the funderyesBuild the reportactuals by line againstthe budget versionWrite the traceevery line back toits documentsBoth exits are decisions for people, and both have deadlines. The system's job is to make sure they are asked in time and that the answers are written down.
Fig 1. Five steps and two decisions. The same checks run weekly while the grant is live, so the exits at period end should hold no surprises.
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The deficit nobody decided on

The youth grant provided £38,500 for the year and the costs coded to it came to £53,360. Nobody decided to spend the difference. The project ran as planned, costs were coded to the youth project as they arrived, and because the accounting package reported by nominal code rather than by fund, the grant’s own position was never looked at on its own until the accounts were being drafted.

By then the £14,860 had already been paid for with unrestricted money, in the sense that the bank balance had covered it. What had not happened was a decision. The trustees had never agreed to fund a shortfall on the youth project, so there was nothing in the minutes. The accounts would need to show a transfer between funds, and the SORP expects the reasons for material transfers to be disclosed, so the first time the board discussed the overspend was when deciding how to explain it.

Tested weekly, the same deficit shows up in the month it starts, while it is small and the choices are still real ones: slow the spending, ask the funder for more, raise money for the project, or agree in advance to cover it from unrestricted funds. All four are legitimate. Only the last resembles what actually happened, and even that one is different when it is decided rather than discovered.

The underspend with a deadline

The energy advice grant was the opposite case. Of its £24,000, £14,685 had been spent when the grant period ended, leaving £9,315. The agreement said unspent money would be returned unless a change was agreed before the end of the period. The charity had a waiting list for energy advice and could well have been allowed more time. Nobody asked, because the clause was on page eleven and the end date was in nobody’s calendar.

The rules from part two turn that clause into a date and a reminder, with the projected position attached. The alert that matters is not the one on the last day. It is the one eight weeks before, while the question can still be asked.

What a funder report line rests on

The trace from a funder report line back to timesheets, payroll and the grant ruleA horizontal row of five boxes joined by arrows. A report line: the youth grant's share of the project worker, four thousand eight hundred and ninety-four pounds. The allocation: two hundred and seventy-one of one thousand five hundred and eighty-six project hours. The timesheets: weekly, signed by the worker. The payroll: gross pay, National Insurance and pension, monthly. The grant rule: staff costs eligible, version one. A note says a funder's monitoring officer picks a line and asks how it was worked out, and because every arrow is a stored link the answer is a query rather than an afternoon.FIVE STEPS FROM A REPORTED FIGURE TO ITS EVIDENCEA report lineyouth grant, workershare, £4,894The allocation271 of 1,586project hoursThe timesheetsweekly, signedby the workerThe payrollgross pay, NI andpension, monthlyThe grant rulestaff costs eligible,version 1A funder's monitoring officer picks a line and asks how it was worked out. Every arrow here is a stored link, so the answer is a query rather than an afternoon.
Fig 2. The trace from one line of the youth grant report back to the documents behind it, after the worker’s cost was re-split on hours.
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Reports are built from postings, not assembled

A funder report written in the week it is due is a spreadsheet exercise: export the ledger, filter by project, adjust for the things everybody knows are wrong, and paste the totals into the funder’s template. It produces a plausible number that cannot be reproduced a month later, because the adjustments lived in the head of whoever made them.

Built from frozen postings, the same report is a query. Actuals by budget line come from postings charged to that grant, shared costs come from allocation records with their bases, and the report is stored with the list of postings it used. If the youth grant report has to be reissued because £2,266 of staff cost was re-split, the reissue is a second version with its reason, and the first one still exists.

What a closed period holds

  • Fund position. Income, costs charged, transfers and the closing balance.
  • Transfers. Amount, direction, and the trustee minute that approved each one.
  • Underspend. The amount, the agreement’s term, and what was done about it.
  • Report. Actuals by budget line, against the rules version in force.
  • Corrections. The £2,266 re-split as a new version with its reason.
  • State. draft | frozen | reported | superseded.

Where this ends

None of this makes restricted funds simple, because the difficulty is real: seven funders, seven sets of terms, one building and one part-time finance person. What it removes is the failure where each grant is managed on its own and reconciled once a year, too late for anything to be a decision.

The next post prices it, and the one after gives the service names, the tables and the IAM. The cost is unremarkable for the same reason as elsewhere in this series: the model reads invoices and the occasional agreement, and everything to do with balances, allocations and reports is arithmetic.

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