a separate account should be used when making charitable payments, particularly to overseas countries, to prevent fraud (see below)
a second bank account is always useful should you get into problems with your first bank and be unable to use that account while the problem is being solved.
It is not necessary to have a bank account for every fund. Funds can be distinguished in the records. For example, a deposit account containing £10,000 may represent a building maintenance fund of £4,000, a roof repair fund of £5,000 and an organ fund of £1,000.
Bank services
The functions you need from a bank are to:
look after your funds
provide cash when needed (such as floats for a fete)
provide a cheque book
provide monthly statements.
Banks can offer other services, such as:
safe custody of documents
placing spare funds on money market
buying shares and some other investments
lending money.
Increasingly banks are offering Internet services, where you can look at your account at any time of the day or night using a computer. There are some banks which use only the Internet.
Choosing a bank
The only bank which seems to be interested in providing banking services for churches is the Reliance Bank, owned by the Salvation Army.
A bank account, like an insurance policy, is a financial product. Your attitude to choosing a bank should be the same as choosing the supplier of any other product. Some guidance on this is given below. It is a curiosity that a church may go to great lengths to check out the terms and credibility of a supplier of a photocopier or window, but give little or no consideration on which bank to use.
For this book, the author did his own form of a Which? report by writing to the press offices of twenty-one banks asking them a few questions and requesting literature. The banks were:
Abbey National (now Santander)
Alliance & Leicester (now Santander)
Allied Irish Bank
Bank of Ireland
Bank of Scotland
Barclays Bank
Clydesdale Bank
Co-operative Bank
First Direct
Girobank
Halifax (HBOS)
HFC Bank
HSBC
Lloyds TSB
NatWest
Reliance Bank
Royal Bank of Scotland
Standard Chartered
Virgin One
Woolwich (now part of Barclays)
Yorkshire Bank
Alone among these twenty-one banks, Reliance replied within one week and answered all my questions. The other twenty banks had not replied within one month, apart from Barclays, whose commercial department returned my letter with a covering note saying they could not answer my question because I had not quoted my account number! They had obviously not even bothered to read the letter. When the twenty banks were chased up by telephone calls, a few apathetic responses were eventually generated, though not one bank could be bothered to post a single piece of literature. Even the Co-operative Bank was not. After a process akin to pulling teeth with tweezers, four banks provided a few details, though none provided all the details requested.
This point about UK banks is emphasized because a business which does not look after you before you are a customer will certainly not look after you when you are. If a bank is unhelpful to an author, you can be sure it will be unhelpful to his readers.
Reliance Bank advises that it welcomes accounts from churches, and already has 900 as customers. It develops a tariff for each customer based on current banking activity. For a new church, it will consider six months’ free banking. It follows the ethical policies of the Salvation Army. The bank offers cheque book and paying-in books, facilities for standing orders and direct debits, regular statements, Internet banking, savings accounts, telegraphic transfers by BACS and CHAPS, and foreign currency services.
Mandate
The mandate is your instructions to the bank of who may sign cheques and give other instructions to the bank. This is a decision to be made by the local church authorities, subject to any restrictions imposed by the bank. Keep the mandate simple. Suggested arrangements are to have no more than three signatories – perhaps the treasurer, the minister and a senior officer who lives near the treasurer or is readily accessible to the treasurer; and to have a limit of perhaps £250 below which only one signature is needed, and above which two out of three signatures are needed.
Churches and other organizations can often get into great difficulties over bank mandates, particularly when officers change.
There is no objection to the treasurer being a signatory. Sometimes churches want two signatures on every cheque, which is also acceptable practice.
A treasurer should never regard any requirement for a second signature as reflecting on the treasurer’s reputation. If the church had the faintest doubt about your competence or integrity, you would not be the treasurer in the first place. All the controls are designed not to check up on you, but to:
demonstrate to the church the high standards maintained by the church in its financial arrangements
reassure the auditor or examiner (and possibly reduce the audit bill)
provide disciplines which help to prevent error.
The signature should be the person’s normal signature. Legible signatures are harder to forge than illegible squiggles and therefore provide greater security.
The mandate must be supported by a formal resolution of the church council or equivalent body formally appointing those people as signatories. The bank may require a copy of the resolution signed by the church council secretary or minister.
The signatories must then prove their identity to the bank. This is not the banks being awkward, but is a legal requirement under money laundering regulations. Signatories must attend the bank in person by appointment, taking identity such as passports or driving licences.
A church must always be alert to any change of signatories. There have been instances where churches have had problems accessing their funds because signatories have changed. A church must always be prompt in removing old signatories, and completing a new mandate to add new signatories.
Issuing cheques
A cheque must only be issued if the treasurer is satisfied that it has been properly authorized. In practice this means that the payment arises:
from a specific resolution of the church council
from a legal agreement made by the church council
within a budget allocated to a particular church officer (such as allowing the youth leader to spend £1,000 a year).
A cheque is normally completed using a cheque book provided for the purpose. This normally contains the name of the church, the account number, the sorting code, the bank’s name and address, and a cheque number. The bottom of the cheque gives, in order: