One of the key requirements of the charity commission for charities is to ensure that they have their accounts kept to the required standard. For many charities this includes having an independent examination.
Here Rachel Eden, our founder and an experienced Independent Examiner shares some of the most frequently asked questions about getting the most out of your independent examination.
What is an Independent Examination?
This is often the first question that a new treasurer has for me. It is an external review of your accounts, that is simpler and – usually – less expensive than an audit.
Does my charity require an Independent Examination?
The Independent Examination Threshold is set by law and may be reviewed from time to time, so this is correct at the time of writing:
Charities with a turnover of less than £25,000 do not require an Independent Examination but may opt to have one.
If your charity has a turnover of more than £25,000 and less than £250,000 require an Independent Examination by an independent person who is competent to do it.
Charities with a turnover of between £250,000 and £1 million and assets of less than £3.26 million require an Independent Examination by an independent person who is a member of a recognised accountancy body (for example the AAT, CIMA, ICAEW).
Larger charities require an audit.
What’s the benefit of an Independent Examination?
Aside from being the law there are a number of benefits to having an Independent Examinations.
An experienced examiner may spot possible areas of fraud or organisation weakness. They may have suggestions for how you could improve your processes or practice.
The examiner can provide reassurance and confidence to the treasurer and finance team as well as acting as a sounding board.
The trustees, beneficiaries and other interested parties are given a level of assurance that the accounts have been reviewed by someone independent. Bear in mind that this is a less detailed process than a full audit so it doesn’t provide the same level of assurance. If there are serious concerns the trustees may chose to request a more rigorous review or a full audit.
You may find your examiner has good practice to share from their experience of looking at other charities – and not always just about the numbers. For example I sometimes make suggestions about how to present the annual report in a more engaging way. Your examiner may be able to share examples of other annual reports that tell their charity’s story well.
What should I look for in an Independent Examiner?
Every charity is different but as well as offering independent examinations I sometimes source an Independent Examiner for charities I work with. When I have looked my criteria is to find someone who is:
- Independent of the charity
- Has experience in charity finances
- Is local enough to be able to easily meet face to face
- Has sympathy with the aims and goals of the charity
- Can commit to doing a proper job
- Charges a reasonable fee
- Warm but professional
When should I look for an Independent Examiner?
The obvious answer is as soon as possible! However it’s certainly worth considering who will do your Independent Examination as your financial year comes to a close. If you were happy with last year’s examination check in with your examiner to see if they are able to do it. If you make this part of your year end routine, this gives you a chance to find someone new if needed.
Where might I find an Independent Examiner
There are a range of ways to find an Independent Examiner, bearing in mind the criteria above.
Ask your trustees, your volunteers and your beneficiaries if they know someone who does this.
Ask your local voluntary action organisation, they may know a good accountancy practice that has a specialism in charity finance – many of the Independent Examinations I do come from this.
Speak to other local charities, they may be happy to recommend someone
Call accountancy firms locally to see if they offer this service (you may want to check their website first)
If the reason you have a vacancy is your previous examiner has retired see if they can recommend someone to take over.
How much does an Independent Examination cost?
The cost can vary hugely from practice to practice so make sure you ask around. It will depend on factors such as how comfortable the accountant is with Independent Examinations, whether a discount is offered because you are a charity and the accountant’s view of your charity. They may look at both how much work they consider to be required and the risk involved. For example at Holy Brook for certain local charities we charge as little as £300+VAT (2020 prices) but for charities not based locally or with complex situations we might charge more.
Will you do my Indepenent Examination for free?
This is one of the most common questions I get asked.
The simple answer is no, because if I did I would have to limit the number that I do. Instead the way our practice deals with this is to offer a discounted rate for charities in the local area that fit our values. However don’t give up completely on this idea. If you are lucky enough to have a keen supporter who is competent to do the work (and independent) you may find someone who will do it pro-bono. For example Holy Brook works with a charity of the year and we would do their Independent Examination free of charge if there was a need.
If you want to know more about the support that Holy Brook offers charities and the discounts we can give to members of Reading Voluntary Action and Involve (Wokingham and Bracknell) click here for more.
If you are looking for an independent examination for your charity please feel free to drop us an email: charity@holybrook.com
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