Having opted for an Independent Examination of their charity’s accounts, the trustees may find it helpful to draw up a set of questions to ask their proposed examiner to help them check that the person has the skills and experience needed. You should ask:
- all examiners to confirm that they have read and understood the Charity Commission’s Directions and guidance
- professional examiners to provide proof of membership of one of the professional bodies listed here and that they meet that body’s requirements for acting as an independent examiner. In particular, the examiner is likely to need a practising certificate or licence, although if he or she is not charging a fee to carry out the independent examination this may not be necessary. This check can be done using each body’s on-line member search tool, or directly if the body does not have this facility
- non-professional examiners to explain their skills and experience and why this makes them competent to carry out the work. For example, the examiner may work in a role that involves financial management, such as setting and managing budgets and reviewing financial reports, or that requires knowledge of accounting systems, such as maintaining financial records and internal controls
The trustees’ decision to appoint a person to act as the charity’s examiner should be in writing and recorded in the charity’s minutes. The examiner should confirm their appointment and this can be done by an exchange of emails. Professional examiners may issue a letter of engagement, setting out the terms of their appointment including their fee.
The process of finding and appointing an examiner can take time and so should not be left until the trustees’ annual report and accounts are due for filing.
All charities (whether registered with the Charity Commission or not) must prepare accounts and make them available on request. All charities must keep accounting records, and prepare annual accounts which must be made available to the public on request
Charities with a gross income of more than £25,000 in their financial year are required to have their accounts independently examined or audited
Keeping accounting records
These records – for example cash books, invoices, receipts, Gift Aid records etc must be retained for at least 6 years (or at least 3 years in the case of charitable companies); where Gift Aid payments are received records will need to be maintained for 6 years with details of any substantial donors and to identify ‘tainted charity donations’ in accordance with HMRC guidance
An independent examination is an external review of a charity’s accounts and is carried out by an independent person with the requisite ability and practical experience to carry out a competent examination
An examination involves a review of the accounting records kept by the charity, and a comparison of the accounts presented with those records. This means that all cash books, bank statements, invoices and receipts must also be made available for checking by the independent examiner
One of the most important tasks in preparing accounts for Independent Examination is Bank Reconciliation
A Bank Reconciliation is used to compare your records to those of your bank, to see if there are any differences between these two sets of records for your cash transactions. The ending balance of your version of the cash records is known as the book balance, while the bank’s version is called the bank balance. A monthly reconciliation helps you identify any unusual transactions that might be caused by accounting errors or fraud.
Our training manual “The Adventures of Mr Claw in the World of Charity Accounting” explains Bank Reconciliation and Statement production, and how to implement these procedures in to your organisation’s accounting procedures. Get your copy here
For those of you whose accounting period ended on 31st March 2015, may we gently remind you that accounts will need to be submitted to our office for examination as early as possible before your AGM date.
These accounts will also need to be filed with the Charity Commission by 31st January 2016, which might sound a long way away at the moment, but the date can creep up on you very quickly, so be ready!!!