Front-loading payments helps charities and voluntary sector organisations considerably as this provides them with the working capital to be able to pay suppliers and staff on time. However, many public bodies think that they have to pay in arrears because the government accounting regulations state that payment should not be made in advance of need. However, the Treasury’s cross-cutting review of 2002 clarified that Government Accounting rules did not mean that payment in advance was not permitted.

‘Need’ is not simply determined by whether the expenditure has occurred. Smaller voluntary organisations are treated as exempt from contract regulations in this respect and may be paid in advance. Guidance to funders issued by the Treasury in May 2006 emphasises the need for a mutually agreed approach to the timing of payments.

Rules for funders – advance payments

• payment arrangements should be agreed
• they should be recorded in a funding agreement, contract or similar
• payment in advance must meet an identifiable need to spend
• it should not be novel or contentious (i.e. should not distort competition or breach procurement rules)
• it should be wholly necessary (i.e. recipient should not be large with huge bank balances)