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School funds and PTFAs

Recent horror stories

Most school funds (or the Governors' Discretionary Fund) and similar activities are organised through registered unincorporated charities, and a number of recent horror stories have come to light. (We are not talking here about a school's own accounts, including capitation and salaries etc).

Until recently many such charities' accounts, if turnover exceeded 10,000 per annum, were 'examined' by the LEA. Now many LEA's are realising that they do not have the expertise (or strictly speaking, even the independence) to carry out the independent examination of such a charity, and are asking such charities to make their own arrangements.

Independent examination of a charity's accounts is a specialist area, requiring specific expertise. Trustees are under a statutory duty to confirm that the person they appoint as an independent examiner has the relative independence,experience and expertise to carry out such work. Even many firms of qualified accountants would not claim to have such knowledge or expertise.

Yet, cases have come to light where parents of pupils, or teachers at a school have carried out 'independent examinations'. They are clearly not independent and such appointments are probably unlawful. Even if they were independent, they would rarely have the relevant expertise.

One of the duties of an independent examiner required by the Charity Commission is to verify that the governing document of a charity does not require an audit. If it does, the independent examiner must cease work until either a registered auditor is appointed or until the governing document is altered. Yet, cases have come to light where accounts have been filed with the Charity Commission that have been ' independently examined', where an audit is required.

An independent examiner must rigourously follow the guidelines laid down by the Charity Commission in the scope and nature of the work done, and certify the work done in very specific prescribed terms. Yet, many cases have come to light where both the work done and the certificate issued fail to meet the requirements.

Charity Commission booklet CC63 covers the requirements.(See our publications section for a link)

Accounts prepared for any charity must fully comply with the requirements of SORP 2000 (shortly the more detailed SORP 2005). Yet many cases have come to light when these requirements have not been met.

It is a basic tenet of charity law that a charity can only carry out those activities permitted by its governing document, and is prohibited from spending funds on other areas, no matter how worthwhile the causes. Unless the governing documents permit it, a school fund has no power to make donations to such worthy causes as a Tsunami appeal of Children in Need, unless it firsts obtains the lawful powers to do so. Yet many trustees have inadvertantly laid themselves open to criticism, because they have not carefully considered the position.

Many fully qualified accountants recognise that they do not have the expertise to carry out independent examinations of charities. Some are even not aware of the pitfalls. In a recently highly publicised case, a partner in a large firm of accountants has been fined 5,000 because he was not aware of some of the issues referred to above.

We are a firm who specialise in charity accounting. Our Managing Director is a Chartered Certified Accountant, a registered auditor, and a Fellow of the Association of Charity Independent Examiners. Although we are based in York, we can undertake independent examinations throughout the UK. For school funds, playgroups and similar organisations, we can do this work on a fixed fee basis, as follows :-

Gross income under 10,000 - exempt from independent examination -
a simple report 100 plus VAT

Gross Income from 10,001 to 50,000 200 plus VAT

Gross income from 50,001 to 300 plus VAT

Over 100,000 but below the audit threshold of 250,000 400 plus VAT

If you want to find out more then please contact us on 0871 288 2391 , or send us an email on


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