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Can a charity fill out the Independent examination checklist itself?

Finance

Joan Smith Administrator at Jubilee Campaign Posted 11 months ago

The accountancy firm who prepare our end of year accounts and independent examination sent me the examiner's checklist and asked if i want to just fill it out and return it instead of meeting with the examiner. Is that even legal?

I didn't think it was a choice and I thought the checklist was just a guide to help the examiner carry out their detailed task of examining us. Or is it perfectly ok to do it this way?

I suppose they just ask me the questions anyway so it amounts to the same thing but it feels a bit odd to me. Surely the examiner has to at least meet somebody and make sure they understand the question the he's asking.

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Stuart Davis Staff PANEL

Consultant at Stuart Davis Group 11 months ago

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Well, I think you need to get a new independent examiner.

It isn't illegal for the independent examiner to do this - their legal role is to approve the accounts. But the checklist is a guide for every possible charity situation, and quite a bit will probably not apply to you. The skill of the IE should be to take the checklist and make it fit the nuances of your charity.

At best, therefore, this is extremely lazy behaviour. If you are paying them, then what exactly are you getting for your money?

At worst though, this suggests there will be a lack of understanding of your charity, and therefore I would suspect the quality of their work.

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Joan Smith Staff PANEL

Administrator at Jubilee Campaign 11 months ago

Stuart Davis Thanks for confirming that Stuart. I suspected as much but wasn't sure. Yes we are paying them - I shall insist on a meeting and also consider our accountancy options next year.

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Peter Lyster Staff PANEL

Volunteer; Trustee; Chair of the Board at For hire 11 months ago

Thank you for asking this question, Joan, as this is not an area that I was particularly familiar with. I thought it would be useful to look up what the Charity Commission says about this and the attached link may be of help to anyone else interested in independent examination.

What struck me about this is that this should not be a perfunctory function: how well do you know your independent examiner and how closely do you monitor their work? This should surely be the subject for the board to consider from time-to-time, as well as when choosing to appoint or reappoint an IE.

It is worth evaluating what the trustees expect from such an arrangement. If you are not paying sufficient to justify your IE actually meeting you, then maybe your organisation is at fault. However, if you are paying for a meeting and a certain amount of evaluation (and a proper report at the end), then that is what you should expect.

Thank you again for asking this question; I do now consider myself better informed!

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Joan Smith Staff PANEL

Administrator at Jubilee Campaign 11 months ago

Peter Lyster Thanks for your comments Peter and for the helpful link. You raise a good point about it being the charities responsibility to hire and monitor the independent examiner. I am really glad this forum is here - its such a good sounding board.

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Brian Seaton Staff PANEL

Lead Trustee at Small Charity Support 11 months ago

This request came in as I was in the middle of responding to another charity's trustees about "rip-off accountant" issues. I very much agree with most of Stuart's comments (below).

Unfortunately (and unlike Peter, below) this is an area with which I am all too familiar. The number of small charities which have come to Small Charity Support over the last decade with annual accounts "issues" created by accountants which were AT BEST being "lazy" or "lacking in understanding" and at worst being dishonest or complicit in "disreputable accounting" (having to choose my words carefully here 🙁! ) is more than I would wish to talk about. And, even more unfortunately, in a good number of those cases the charity trustees - trusting in their accountant/examiner because they felt they didn't have sufficient financial skills themselves - didn't even realise that their financial reports and accounts were not up to Charity Commission standards.

The Charity Commission's most recent review (in 2019 ) of the quality of charity accounts found that around 50% of small charity accounts failed to meet its benchmark standards, even when many of them had been prepared and/or examined by qualified professional accountants. After that the Commission stopped monitoring the quality of annual accounts (or, at least, stopped published its reviews). I've long wondered why it should have decided to do that given that ensuring the reliability of charity accounts is one of the essential prerequisites for promoting public trust in charities.

A key issue, not recognised nearly as widely as it should be, is that the standard professional training/qualification for accountants does NOT include any specific elements of financial accounting and reporting for charities. Hence, it is common for many "high street" accountants to simply assume that charity accounts are just like any other organisation's accounts.

For those reasons the Small Charity Support website has long had a more detailed guidance leaflet on "Choosing an Independent Examiner or Financial Advisor" (https://www.smallcharitysupport.uk/index.php/managingthemoney - scroll about half-way down the page). Or the quick option is to take a look at the Association of Charity Independent Examiners (ACIE) website, https://www.acie.org.uk/ for an experienced and qualified Independent Examiner (FCIE or ACIE) in your area.

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Joan Smith Staff PANEL

Administrator at Jubilee Campaign 11 months ago

Brian Seaton Thank you Brian, for sharing all that information I am really glad I asked the question. I shall check out your links next and take it from there.

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Kate Kendall Staff PANEL

Charity Accountant at TWCH 11 months ago

Hi Joan,

If I may chip in, this is a massive red flag and as people have said here before me, this is not on.

I am familiar with the reveiw Brian mentioned below, and I have seen some "horror stories" myself. What doesn't help is that anyone can do an independent examination for charities below £250k, it doesn't have to be someone who is a member of an accountancy body. This lends itself to unsuitable examiners putting themselves out there to carry out these services - pro bono at best, at worst they are charging for it.

To be honest, I think the Charity Commission is at fault here as well, they should really monitor this far better and take action.

In any event, if I were you, I'd run a mile. Find a new examiner.

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Hirsch Sharma Staff PANEL

CEO at Boardroom Consultants 11 months ago

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Hi Joan

You are right in questioning this. At the end of the day if the IE has done the job properly then it does not matter

how it is done. Face to face meeting would be better.

Ask your accountancy firm to explain their rationale for suggesting this.

Carefully examine the checklist to ensure it covers all necessary areas.

Need to know what checks the IE actually carried out to establish the accounts had been done

properly and accurately.

Warm regards

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