The Charity Commission has published updated guidance for independent examiners assessing charities, which includes three new directions that must be followed.
The regulator has also published a checklist alongside the new guidance. It has published a summary of responses from the Commission’s consultation, which ran from June to September last year.
The three new directions that must be followed by examiners are:
- To check for any conflicts of interest that may prevent them from carrying out the independent examination.
- To check that related party transactions in SORP accounts are properly disclosed.
- To check whether the trustees have considered the charity’s financial circumstances when preparing the accounts, and for SORP accounts whether the trustees have made an assessment of the charity’s position as a going concern.
Nigel Davies, head of accountancy services at the Commission, said: “These new requirements and the more robust examination process will ensure that charities’ accounts are sufficiently scrutinised and that any regulatory concerns are identified as early as possible.
“It will also provide reassurance to trustees and the public that there is adequate oversight over charities’ finances.
“We’re grateful to everyone that provided feedback to us during the consultation process and the working party members who assisted us.
“The improvements that we’ve made to the guidance as a result, such as creating a new checklist for examiners, will ensure that examiners are well equipped to meet the new requirements and that there is an appropriate balance between the duties of charities and examiners, and the need for a robust independent examination process alongside high-quality, transparent charity reporting.”
The new requirements are mandatory for independent examiner reports signed and dated on or after 1 December 2017. This is to allow time for examiners to familiarise themselves with the guidance. However, early adoption is encouraged.
Charities with annual income between £25,000 and £1m are able to opt for their finances to be scrutinised by independent examination rather than a full audit.
The last major review of independent examination took place in April 2009, and since then there have been a number of developments.
These include a significant rise in the income threshold at which charities are required to undergo audit rather than independent examination, from £500,000 to £1m, which has led to independent examiners scrutinising larger and more complex organisations.
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