PracticeAccounting FirmsDo charities need aid with pensions accounting?

Do charities need aid with pensions accounting?

Charity finance group to help solve dispute over accounting for pensions deficit

WHILE SPATS between auditors and their clients are non uncommon, Baker Tilly’s resignation as Citizens Advice auditor could hint at deeper problems in the not-for-profit sector.

Citizens Advice insisted the problem of accounting for pensions deficits affects many large charities. The Charity Finance Directors Group told Accountancy Age it will consider best practice on the issue, as well as talking to members and experts.

Whether and how to report on pension deficits is an “ongoing issue”, a spokeswoman confirmed, saying the problem is the topic of much debate among CFDG members.

A spokeswoman said the difficulty “will only get worse” due to pressures on financial markets and the profound interest with which donors and stakeholders scrutinise not-for-profit accounts.

Charities are loath to report a growing deficit for fear of hurting their credit rating and sending their pension protection levy soaring, the spokeswoman added.

Citizens Advice last week defended its decision to use accounting standard FRS17 in the face of advice from Baker Tilly that it employs FRS12.

The charity’s pension pot appears more manageable under FRS17 while under FRS12, it would have to set aside more than £8m to service a growing deficit.

Citizens Advice finance director Alistair Gibbons said problems accounting for pensions affect many large charities, saying disagreement within the profession has exacerbated the problem.

“We felt that closing the scheme put Citizens Advice in a stronger position, and not balance-sheet insolvent as the [FRS12] provision would have made us. We were also concerned that a weaker balance sheet would affect our credit rating and have an adverse impact on pension protection levy calculations,” he said.

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