The Local Government & Housing Act 1989 (“the 1989 Act”) includes specific reference to the accountability of voluntary organisations to their statutory funders.
Section 37 of the 1989 Act requires organisations receiving a grant or loan of £2,000 or more from a local authority to make a statement, in writing, of the use to which the grant/loan was put within 12 months of it being made. Sub-section 3 (4) provides that the statement can be made in the annual accounts of the organisation.
This Funding Agreement requires all Funded Organisations receiving a Grant in excess of £2,000 to include a Section 37 Statement in their independently audited accounts. (Standard Conditions of Grant 12.13)
The purpose of the Section 37 Statement is to ensure that:
- the Grant was spent on the purposes for which it was awarded
- other funders can easily see the purposes for which the Grant was made
- the possibility of double-funding is reduced.
The Section 37 Statement must form part of the main body of the accounts, so that anybody who receives the accounts has access to it.
Format of the Section 37 Statement
There are no hard and fast rules as to the format and content of the statement because it depends upon such things as the proportion of a Funded Organisation’s income that the funding represents and the purpose of the Grant. For ease of reference, the Funded Organisation should have a subheading in the accounts: “Section 37 Statement”.
The minimum information it must contain is the amount of Grant received during the financial year and the purpose of the Grant as specified in the Funding Agreement. There should be a statement from the auditor confirming that the Grant was fully used for the purposes it was awarded. Where the Grant has been underspent, this should be made clear.
How this information is presented in the accounts may vary, depending on the size of the Funded Organisation and the amount of funding the Funded Organisation receives. For some organisations this would mean a simple statement to satisfy the section 37 requirement. For others, more detailed notes to the accounts may be necessary.
The following are two examples that might help identify which is the most appropriate approach for your organisation:
1. Where an organisation is almost entirely dependent upon London Councils’ funding (or it forms a very high proportion) and the Grant is for specific purposes e.g. salaries and associated running costs.
In these circumstances, the accounts themselves will show how the Grant has been spent and whether there was any underspend at the end of the year. In this instance, a simple statement containing the minimum information will suffice.
“As the Income & Expenditure Account shows, the grant of £X from the London Councils Grants Committee was expended for the purposes for which it was awarded”.
2. Where a large organisation receives a Grant for a specific purpose from London Councils.
The accounts themselves would not normally show sufficient detail about how each grant that the organisation received, often from many sources, was spent. This would be dealt with by Notes to the Accounts.
The Notes relating to London Councils’ funding should show how much Grant was received, what it was for, how it was spent and identify any underspend. In most cases, this would be most easily done by a table showing how the Grant has been used. The Section 37 Statement confirming that the Grant has been used for the purposes that it was awarded would then only need to refer back to that table.
“Grant aid of £31,000 was received in 2014/15 from London Councils for the Rough Sleepers Project. The following table illustrates what the money was awarded for and that it has been used for these purposes:
|Grant (£)||Grant Spent (£)|
|Salary of P/T Development Officer||17,000||15,900|
|Training (inc Volunteers)||4,000||4,000|
|Purchase of PC and printer||1,600||1,600|
A sum of £1,600 remained unspent at 31 March 2015”.