Managing Umbrella Funds in Charitable Organisations
Managing Umbrella Funds in Charitable Organisations
The charitable sector in NZ faces ongoing funding challenges. These challenges are greater if you are a small or unregistered organisation. Umbrella funds granted and managed by approved umbrella organisations help to support and foster local communities.
The purpose of this article is to explain the use of umbrella funds, and how to ensure that your organisation is managing these funds correctly.
Some registered charities that meet specific eligibility, act as umbrella organisations for smaller organisations who are unable to secure and manage funding, as they may not meet all the criteria to apply for funding directly.
The purpose of this structure is to help smaller or unregistered organisations to access funding that they may not otherwise be able to access. This in turn helps to foster community projects and charitable activities that would otherwise not be undertaken.
What Are Umbrella Funds?
Umbrella funds are financial resources managed by a registered umbrella organisation on behalf of smaller or unregistered charitable groups. These funds enable these groups to benefit from the umbrella organisation's status and resources, making it easier to secure funding for their projects.
How does it work and who is responsible?
The unregistered organisation needs to partner with an approved umbrella organisation that agrees to work with them and support them with this funding application.
We recommend that there is some form of partnership agreement documented for the project and funding application. The umbrella organisation then applies for the funding, and acts as the agent for the unregistered organisation.
If the funding is approved, it is paid into the bank account of the umbrella organisation, and it is their duty to ensure that the funds are used for the intended purposes.
We recommend that the umbrella organisation request and obtain regular reports from the unregistered organisation to ensure that they comply with the intended purpose of the funds and complete an accountability.
Accounting for Umbrella Funds
The accounting for umbrella funds can often be seen as complex and overwhelming, and it is critical that accurate records are kept and maintained for the purposes of transparency and accountability.
- Record Keeping: Maintain detailed records of all transactions related to the umbrella funds, including receipts, invoices, and reports.
- Segregation of Funds: Keep the umbrella funds separate from the umbrella organisation's own funds to avoid any confusion or misuse.
- Regular Reporting: Provide regular financial reports to both the funding body and the unregistered group, detailing how the funds have been used.
- Compliance with Standards: Ensure that financial statements comply with the relevant accounting standards.
If the smaller organisation does not have its own bank account, then the umbrella organisation will directly pay all invoices and bills directly. If the small organisation has their own bank account, then the umbrella organisation can just transfer the funds as required and partnering organisation will pay suppliers directly.
We would recommend using tracking categories in your accounting software. You may also choose to use separate funds in advance code in your balance sheet to record the receipt of the funds and the paid expenses. This allows the umbrella organisation to see at a glance the balance held on behalf of the partnering organisation.
Umbrella funds are a valuable resource for smaller or unregistered charitable groups in New Zealand, enabling them to access funding and support their community projects. By partnering with a registered umbrella organisation, these groups can navigate the complexities of funding applications and ensure proper management and accountability of the funds received.
If you are an eligible umbrella organisation, we recommend that you review your systems and procedures to ensure that you are correctly recording, tracking and reporting upon all the Umbrella Funds you manage.
If you would like help, please contact us
Phone: 09 869 2200
Email: carolb@tael.co.nz
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