Audit & independent Examination

CASH can carry out your independent examination from £300. See Accountancy Services.

Note that CASH has factsheets on payroll CASHFACTS Payroll: CASH’s advice & guidance and tax CASHFACTS Charity tax an introduction that will help in preparing for audit & independent examination.

There are different rules governing whether your accounts have to be externally examined and whether this can be done through an independent examination or a full audit.

An unincorporated association carrying out charitable activities  – which can be just a loose collection of individuals – doesn’t have to register with the Charity Commission until it’s annual income reaches £5,000 (at which point it has to meet the public benefit test, be exclusively charitable and conform to the regulations set out in charity law particularly the Charities Act 2011).

Charities are required to submit an annual return online to the Charity Commission if their income is above £10,000 (below £10,000 you are still required to keep up-to-date records of income and expenditure, trustees and the organisation’s contact details).

The thresholds at which charities have to have an independent examination are:

Unincorporated association and charitable companies: £25,000

Charitable incorporated organisation (CIO): required to submit accounts to the Charity Commission if the organisation has any income, and are required to have an independent examination of an income above £25,000.

Note your governing document may say you need external scrutiny even if your accounts are below the £25,000 threshold.

More detailed information is given on the Charity Commission’s website, including the thresholds at which a full audit is required.

The Charity Commission has an online tool that will tell you whether you are required to have an audit or independent examination. It will also tell you whether you need to prepare receipts and payments accounts or accruals accounts.

Note that some funders will insist that you have at least an independent examination even though the Charity Commission doesn’t require it. Some funders will require that you have a full audit. Check with them, especially statutory funders like local authorities.

Checklist

The auditor/independent examiner has to be satisfied that the money raised and spent by the organisation is within the aims and objectives of the organisation’s constitution.

Time is expensive. The more you have sorted things out, the lower the bill. The independent examiner/auditor will need the following:

  • The books of accounts fully written up, correctly analysed, totalled and crosscast for the whole year See CASHFACTS Bookkeeping
  • Bank reconciliation statements for each bank account, clearly showing how the balance shown by the cash book reconciles with that shown in the bank statement See CASHFACTS Bank reconciliation
  • Bank statements for each bank account for the whole year
  • Records of online payment services used like PayPal
  • Records relating to debit, credit, store and top-up cards
  • Bank paying-in books
  • All documents relating to bank receipts and including letters from funders who pay by credit transfers
  • Cheque book stubs
  • Invoices/vouchers to support all banks payments in cheque number order
  • The Petty Cash Analysis book fully written up, correctly analysed, totalled and crosscast See CASHFACTS Accounting for cash
  • Written confirmation that, at the end of the year, the amount of cash in the box agrees with the balance of cash in hand shown in the Petty Cash Analysis book
  • All the Petty Cash vouchers and receipts filled in date order
  • Payroll monthly records as required by Her Majesty’s Revenue & Customs (HMRC): what you pay employees and the deductions you make; reports and payments you make to HMRC; employee leave and sickness absences; tax code notices; taxable expenses or benefits; automatic enrolment in workplace pension scheme and records of payment; salary sacrifice records; Payroll Giving Scheme documents, including the agency contract and employee authorisation forms See CASHFACTS Payroll: CASH’s advice & guidance and CASHFACTS Charity tax: an introduction
  • Evidence of annual payroll tasks as required by HMRC: final payroll report of the year; updated employee payroll records; report of benefits and expenses; update of payroll software; issuing of P60s to all employees and P45s as relevant
  • For charities that are companies evidence that the annual return “confirmation statement” has been submitted to Companies House, along with annual accounts
  • Evidence that the charity is registered with HMRC for tax exemptions so that a corporation tax form isn’t needed to be completed
  • Where the organisation has income that is not except (or where HMRC have asked for a corporation tax form to be completed which they can do from time-to-to), evidence that a corporation tax form has been completed and that the tax has been paid
  • If VAT registered, copies of the VAT returns and evidence of payments or claimed.
  • Evidence of the organisation getting the maximum VAT relief and it’s being claimed (through registration if deemed appropriate, though you don’t have to register for VAT to claim back VAT See CASHFACTS Charity tax: an introduction
  • Evidence of registration to reclaim Gift Aid and that Gift Aid has been claimed
  • Evidence of claiming business rates relief on buildings
  • Details of insurance policies the organisation holds
  • Any subsidiary records for sub-committees or projects that come under the group’s umbrella
  • An up-to-date register of fixed-assets, with estimated values See CASHFACTS Fixed-asset register
  • Minutes of all the committee meetings (and AGM) held during the year
  • A copy of the constitution or other governing documents
  • A copy of the previous year’s audited or independent examined accounts
  • A list of debtors (ie. people who owed the group money at the end of the year), with the amounts owed
  • A list of creditors (ie people to whom the group owed money at the end of the year) with the amounts owed
  • The names of the Chairperson, Secretary, and Treasurer

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