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What to do about underspends

by
10 July 2015

When we were fund-raising, we worked to a generous budget, but, now we have the tenders back from the builders, we realise that we will need less than we raised. How do we deal with the grants that we were awarded?

 

GRANTS from outside bodies towards a particular building project are restricted gifts in accounting or legal terms: that is, they can be spent only on the work for which the donor gave them. What you cannot do, therefore, is put the excess funds into your general funds, or even your building account.

There are several ways in which trusts pay over their grant monies. Occasional trusts simply send you a cheque in the post; some pay the grant to you only when you send a copy of an architect’s certificate to ensure that the grant-aided work is under way. Others — mainly the Heritage Lottery Fund and the Landfill Community Funds — make an initial payment and make further grant payments only on receipt of copies of invoices to show that the money has been spent on the project.

Some of these latter grants may hold on to the last payment until the Certificate of Completion has been produced by the architect, and all invoices have been paid and copied to the funder.

The careful accounting by the Heritage Lottery Fund and others as the project progresses will ensure that they never pay out to you more funds than they promised on any part of the work.

But if one element — stone replacement, say — costs less than was requested, and allocated by that funder, you may not be able to claim all of the money; you may not be able to slide into another area that cost more — at least, not unless you ask the grant-maker if they will allow this. So this “underspend” will probably never reach your account.

With either of the other ways of paying out grants, you could end up with money in your account in excess of the amount required for the works. That excess, or underspend, belongs to the grant-maker, not to the church. If you received several grants from outside funders, then they should be repaid the excess on a last-in-first-out basis. The principle is that the last grant was the one that was asked for more than was needed.

As it sounds as if your project is at the tender stage, and you have not started spending, first, ensure that you have sufficient contingency funds: that is, for things that may be worse than expected when the work was drawn up. This is not new work, or a change in specification.

Contact your main funder/s, explain the situation, and ask if it is acceptable to keep the excess in place until after work is complete, to ensure that you have enough to cover, at which point you will repay the excess.

Churches often have their backs against the wall financially, and would love to keep the money to cover other areas of financial stress, but this is undoubtedly a question of integrity. Someone looking superficially at the accounts may not realise that restricted money has been mis-spent by being moved into another account, but the PCC will know, and it is their responsibility to ensure that all funds are spent on the agreed purposes, and with complete integrity. And integrity means that you will do the right thing, even if no one else ever knows.

 

Send issues and questions to maggiedurran@virginmedia.com.

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