Treasurers > Reporting and Accounting > Audit or Independent Examination? > Appointing an Independent Examiner

Appointing an Independent Examiner

Who could be an independent examiner?

An independent examiner is described in section 43(3)(a) of the Charities Act 1993 as 'an independent person who is reasonably believed by the trustees to have the requisite ability and practical experience to carry out a competent examination of the financial statements'.

The term 'independent examiner' does not exclude an accountant or, indeed, a registered auditor, but recognises that the scrutiny is less onerous than a full audit.

What does 'independent' mean?

For an examiner to be independent that individual must have no connection with the PCC which might appear to be prejudicial to an impartial examination of the financial statements.

The following persons will normally be considered to have a connection with the PCC that makes it inappropriate for them to be an examiner:

• a member of the PCC or any of its sub-committees (this exclusion is already included in the Church Representation Rules);
• an employee of the PCC, or a person receiving benefit or support from PCC funds by way of a gift (other than a fee received as an examiner);
• a close relative, business partner or employee of any person who falls within sub-paragraph (a) or (b) above.

An independent examiner can, however, be a member of the Church with their name on the electoral roll.

What sort of people can be appointed?

For smaller PCCs with a gross income and total expenditure of less than £10,000 and financial statements prepared on the R & P basis it may be appropriate, for example, to use anyone with basic bookkeeping skills to examine the financial statements. While the Church Accounting Regulations 2006 require an examination, the method of examination below £10,000 is not specified by the Charities Act.

For PCCs with a gross income up to £100,000 and with financial statements prepared on the R & P basis, an appropriate independent examiner would be someone more familiar with business and financial matters, but they need not be a qualified accountant.

It is recommended that PCCs with gross income between £100,000 and £250,000, or total assets in excess of £1,000,000 or who choose to prepare accruals accounts with a Statement of Financial Activities (SOFA), consider selecting a qualified accountant to carry out the independent examination.

Those who are suitably qualified to examine the financial statements of larger and more complex PCCs will also be suitable to examine the financial statements of smaller PCCs. While a qualified accountant is recommended for larger PCCs, examples of those who may be appropriate as one moves down the scale to the smaller PCCs are finance managers employed by large commercial organisations, through bank or building society managers or local authority treasurers to businessmen or schoolteachers.

How should an examiner's ability be checked?

The need to seek evidence of the ability of a prospective independent examiner will depend upon the size and complexity of the PCC's financial statements. There would normally be people in the community, such as those instanced above, who would be expected to have the necessary competence. If the prospective independent examiner is not known to the members of the PCC or if the turnover is greater than £100,000, PCCs should consider asking to see a CV, taking independent references and possibly forming a small group to interview candidates.

Difficulties can occur where the examiner has been recommended by an individual member of the PCC, who has then made the only contact with them. There have been cases where it was found that the examiner never existed!

What is appropriate 'practical experience'?

The PCC should satisfy itself that a prospective examiner has practical experience of preparing or reviewing and evaluating the financial statements of comparable organisations and can readily understand the PCC's financial statements. An examiner may have acted successfully as an independent examiner or auditor on previous occasions for other Churches or be responsible for financial decisions requiring mature judgement and relevant knowledge.

How can someone understand what is required in an examination?

The treasurer should discuss fully with the prospective examiner the work of the PCC and its expectations. Click here to find out more about the duties of an examiner. In some dioceses guidance and advice may be available centrally, or treasurers in neighbouring parishes or deanery finance officers may be in a position to assist. The duties must be followed to ensure that the requirements of the Church Accounting Regulations 2006 are met. The Charity Commission has produced guidance on independent examinations in their publication CC63. This is available on their website.

What happens when the PCC and the APCM appoint an examiner?

Particularly for larger PCCs, it would be wise for the independent examiner to reduce the chance of any misunderstanding by writing to the PCC detailing its accounting responsibilities and the examiner's statutory responsibilities. The content of the letter should be agreed with the PCC and a sample letter is available here in Word format. It may be altered and sent from the PCC to the examiner.

Only examiners of PCCs with high income levels will probably document the agreed terms of engagement in this way, but the matters set out here should be discussed and agreed with all independent examiners prior to the examination.

It can be seen that the examiner should be given sufficient time in which to complete the examination.

The PCC will need to approve a motion for the appointment of the independent examiner at the APCM. A suitable form of words is:

The PCC have elected to subject the financial statements to independent examination and therefore, having made appropriate enquiries, propose [insert the name of the examiner] as independent examiner until the next APCM.