Practising certificate Q&A: charities

Question

I have been asked to undertake an independent examination report (IER) of a charity. Do I need a practising certificate (PC)?

Answer

It depends on the charity's gross income for the financial year:

1. If it is £250,000 or lower - You do not require a PC if you undertake this work gratuitously or for no more than a token non-monetary reward or benefit. You should clarify your role in writing with the charity, explaining that your role does not require a PC and that you do not have professional indemnity insurance (PII).

    

2. If it is more than £250,000 - You require a PC (and also PII that meets the minimum requirements of the ICAEW's PII regulations), even if you undertake the work gratuitously or for a token non-monetary reward or benefit.

The Charity Commission guidance says that the examiner needs to:

• have the right skills;
• be independent (see Charity Commission guidance, section 3); and
• have the necessary knowledge and experience (see Charity Commission guidance, appendix 5)

If the gross income of the charity exceeds £250,000, then only persons who are members of one of the listed bodies in the Charities Act 2011 can undertake the examination.

The role of the examiner requires them to have an understanding of what accounts are, what they are intended to do, and some analytical skills. If new to charity accounting, the examiner should undertake the necessary reading or learning needed to understand charity accounts. It is also necessary for the examiner to read and understand the directions and guidance for independent examination issued by the Commission (see Charity Commission guidance, section 3).

Appendix 5 of the Charity Commission guidance explains that for accruals accounts the examiner should have a good understanding of accountancy principles, accounting standards and knowledge of the applicable Statement of Recommended Practice (SORP).

Question

I have been asked to be a treasurer of a charity. I will be performing the bookkeeping duties and preparing the year end accounts. I will not be charging a fee for this work. Do I need a PC?

Answer

You do not require a PC; you are undertaking this role gratuitously.

Note, that if you charge a fee for the work, bookkeeping falls within the definition of accountancy services (see Annex 1 of the ICAEW statement) and therefore you will need a PC.

Question

I provide an array of accountancy services to charities for free (excluding undertaking the Independent Examination for the charity). For example: the preparation of quarterly management accounts, annual trading and cash flow forecasts, advice and help on applying for grant funding and how to spend funding. Do I need a PC?

Answer

You do not require a PC; you are undertaking this role gratuitously.

Note, that if you charge a fee for the work, the examples provided fall within the definition of accountancy services (see Annex 1 of the ICAEW statement) and therefore you need a PC.

Question

I am an employee in a public practice. In my spare time outside of my employment, I provide accountancy services to a charity including bookkeeping and payroll services. I do not charge a fee for this work, but I receive a bottle of wine at Christmas from the charity.

Answer

On the basis that the bottle of wine is reasonably priced, you do not require a PC as you are undertaking this role without charging a fee and receive a token non-monetary reward. You should clarify your role in writing with the charity, explaining that your role does not require a PC and that you do not have professional indemnity insurance (PII).

Note: the definition of a ‘token non-monetary reward or benefit’ is a judgemental area. An ICAEW member should refer to the ICAEW Code of Ethics and consider whether any threats to the fundamental principles are reduced to an acceptable level (ie, a level at which a professional accountant using the reasonable and informed third party test would likely conclude that the accountant complies with the fundamental principles).