All voluntary/community groups must prepare year-end accounts and make them available upon request.
Since the year ending 31st March 2015, the legal requirement for external scrutiny for charitable companies and non-company charities is the same.
The current requirements for external scrutiny are as follows (for accounting periods starting before 1st April 2014 the requirements may be different) –
| Non-Company Charities and Charitable Companies | |
| Band | Requirement |
| Income under £25,000 | No external scrutiny required |
| Income between £25,000 to £250,000 | Independent Examination required |
| Income between £250,000 and £1,000,000 | Independent Examination required, Independent Examiner must be a member of an approved professional body and eligible to undertake independent examinations |
| Income over £1,000,000 | Audit by Registered Auditor required |
However it is important to remember that if one of your funder’s or your governing document requires a more stringent level of checking than is required by law, then that will override the Charity Commission or Companies House requirement.
Different Types of scrutiny
Audit
An Audit is the scrutiny of accounts by a registered auditor who must apply accounting standards in accordance with Audit Practice Note 11 produced by the Auditing Practices Board. An Audit report (if satisfactory) normally confirms that the accounts either –
- give a true and fair view (if on accruals basis)
- are properly presented (if on receipts and payments basis)
The auditor has the statutory right to have access at all times to organisation’s books, accounts and all related documentation and to request relevant information and explanations from organisation’s directors/trustees and employees.
Independent Examination
An Independent Examination – is a less onerous form of scrutiny than an audit. However it is still very thorough and independent examiners are expected to follow the guidance of the Charity Commission as laid out in the Directions and Guidance notes issued by the Commission. Examiners report on whether specific matters have come to their attention, and the Regulations set out the required contents of the examiner’s report. There is a statutory requirement on an examiner to “whistle blow” to the Charity Commission if he/she believes that one or more of the Trustees has been responsible for deliberate or reckless misconduct in administering the organisation
An independent examination gives a negative assurance that accounts have no major problems – after completing all the required inspection procedures. Specifically, the examiner declares –
- No evidence of failure to complete accounting records
- No evidence of accounts not being in accord with the records
- No evidence that accounts fail to comply with the Act
- No further information needs to be disclosed for proper understanding.
Independent Examiners
The description of an independent examiner in the Charities Act 2011 reads as follows “an independent examiner is an independent person who is reasonably believed by the charity trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts”. So what does this mean?
Independence – For an examiner to be independent he/she should have no connection with the organisation which might bias their opinion on the accounts, so trustees and employees, major funders and beneficiaries of the charity should not be considered, along with any of their close relatives.
Requisite Ability – What is meant by requisite ability? The examiner need not be a qualified accountant (although above a turnover of £250,000 it is compulsory that you use a qualified accountant); at ERVAS we advise organisations to ask if the prospective examiner is familiar with the Charity Commission booklet called ‘The carrying out of an Independent Examination’; if they look at you completely blankly, it may not be a good idea to pursue them! And secondly to particularly check out what knowledge they have of charity accounting.
Experience – Finally they need to have real hands-on experience of accounting (ideally charity accounting) and of doing independent examinations. You may want to ask them for a reference from a previous charity/voluntary organisation, in order to be satisfied that they have this, unless they are well-known to you already.
At ERVAS we can prepare your year end accounts and/or Independently Examine them for you.
Our fees are very competitive. Please contact us for a quote.
Based on the findings from the Independent Examination/accounts preparation we may issue some recommendations for improving the system. If you need help implementing these recommendations we will come out and support you.
Filing Deadlines
The filing deadlines imposed on Charitable organisations are as follows –
| Charity Commission | 10 months from the end of the accounting period for both the Annual Return and the Trustees Annual Report and Accounts. |
| Companies House | Directors Report and Annual Accounts 9 months from the end of the accounting period. Annual Return within a month of the Company registration anniversary.
The first year filing deadline is usually shorter. |
If you are required to submit a tax return and come under the charge of Corporation Tax –
| Her Majesty’s Revenue and Custom’s (HMRC) | Payment of Corporation Tax is due within 9 months of the year end.
The Corporation Tax Return is due within 12 months of the year end. |
There are penalties imposed by companies’ house and HMRC for late filing so please file within the deadlines set.