If you have reached this stage, hopefully you have checked whether you are actually eligible or required to have an Independent Examination. If in doubt, the Charity Commission guidance can explain all. So how do you go about finding and choosing an examiner?
- Ability
Do you need a qualified accountant?
Back when the regime of Independent Examination was introduced in the early 1990’s, your Examiner needed to be competent but not necessarily a qualified accountant in a nice suit. The retired bank manager was considered ideal. However, as with life generally, charity accounting has become more complicated and thresholds have risen. Now, if your income is over £250K then yes, your examiner must be qualified. More specifically, they must be a member of a accountancy body that is listed in the legislation.
Below that level, the Examiner can be anyone the trustees consider to have the requisite ability to do the job. So it’s up to the Trustees. Of course, even a qualified accountant might not be competent! Charity accounting is quite different and you need to be sure they know what they are doing.
- Experience
Every examiner has to start sometime and just because your examiner is new to this task does not mean they can’t do a good job. You should ask them if they are aware of the guidance from the Commission, are they familiar with the SORP? A new Examiner will need to do a lot of reading and preparation before they can take on the role. It is not just a simple matter of signing a standard report.
If you approach an experienced Examiner, or you simply contact a local accountancy firm, there is no harm in asking them for contacts from existing or previous clients.
- Independence
It’s important that the Examiner is independent of the charity. That doesn’t mean they have no connection at all. They may donate to the charity; they may even be a beneficiary to some extent. The key point is that they shouldn’t not have any involvement in the financial decision making or day to day administration. So they should not be a trustee, or connected to any trustee; they should not be employed or connected to an employee. The list could go on but the principle is clear – they should not have, or be perceived to have, any responsibility for financial decision making in charity. The guidance to examiners and trustees covers this point in more detail.
- Costs
You might be lucky, someone may volunteer to do your examination for free. If they do, you should make sure they really know what they are signing up for. An examination for even the smallest charity will take a good few hours’ work. For a large charity you are talking a lot of work over a good few weeks or even months. If the examiner is new to the role, they will also have a lot of background reading to do. If you are asking them to prepare the accounts as well, which is usually the case, that will add significantly to the task.
One of the reasons for the examination being introduced was to save charitable funds. An examination should be a lot cheaper than a full audit. Most accountants will estimate the time taken, apply an hourly rate to the tasks, consider the market, and guess a fee. They will assume that there will be more work in the first year as they get to know the systems and circumstances of the charity. My advice: ask how they work out the fee, ask around, but do NOT just go with the cheapest. By and large, you get what you pay for.
- How do you know if the examiner is any good?
Sometimes we come across charities where accounts have been prepared and examined to a poor standard. The statements are not correct, there are basic errors, the examiner’s report is not worded properly. Clearly the examiner is not suitably skilled. Sometime, even after pointing this out, potential clients still choose to remain with the cheap deal on the grounds that nobody cares.
It isn’t easy for a trustee to know if the accounts are correctly prepared or not. Two ideas therefore are firstly, read the commission’s guidance for trustees and secondly, spend a few minutes looking at the accounts of other charities on the commission’s website. You will soon see what good accounts look like.
You can find further information here:
Charity Commission guidance for trustees to help prepare your annual report.
Charity Commission Independent Examiners guidance for trustees.
Association of Charity Independent Examiners
John O’Brien, Chief Executive, Community Accounting Plus
www.caplus.org.uk