Citizens Advice pledges to resolve dispute over accounting for its pensions deficit

Decision follows the departure of umbrella body's auditor, which had qualified its accounts for the previous three years because of the exclusion of pensions liability

Citizens Advice
Citizens Advice

Citizens Advice, the umbrella body for citizens advice bureaux in the UK, has pledged that a controversy over the way it accounts for its pension deficit will be resolved in time for its accounts for the year ending March 2012.

The promise follows a decision by its auditors, Baker Tilly, to step down at the charity’s annual general meeting, following several years in which the firm has qualified the charity’s accounts because of its decision not to include its pensions liability on its balance sheet.

If an auditor chooses to qualify a set of accounts, this normally means it considers that those accounts do not reflected a "true and fair view" of the charity’s finances. This can make it difficult to attract funding, as well as harming the charity’s position with its bank and creditors.

Baker Tilly has qualified the accounts of the charity for the years ending March 2008, 2009 and 2010. No agreement has yet been reached for the accounts for March 2011.

Citizens’ Advice, which has an annual turnover of £65m, says it has not included figures for its pensions liability because it is part of a multi-employer scheme, and therefore could not accurately estimate its liability.

However, Baker Tilly said in the charity’s most recent published set of accounts, for the year ending March 2010, that the charity had agreed to make fixed payments relating to its share of the shortfall and was therefore able to estimate its liability at £8,305,000, which it should include on its balance sheet.

A spokesman for Citizens Advice said the charity would find a resolution to the problem before the set of accounts for 2012 were published.

"What we’re trying to do is get to a point where we have clear rules about the treatment of liabilities," he said. "There appears to be a disagreement among accountancy professionals about this issue.

"Our auditors have taken one view; other professional advisors that we have consulted have taken another."

He said that next year the charity would change its accounting policy unless agreement could be reached with all parties, including the new auditors who will take over from Baker Tilly.

"Whatever the clear position is that emerges, that’s what we’ll follow," he said. "If necessary, we’ll change our view to fit in with our auditors.

"We haven’t at the moment thought about what the process will be for appointing new auditors."

Another auditor asked to comment on the matter said that if the reasons for qualification were limited and clearly defined, it might do little harm to the charity’s financial position.

However, he said that including the pensions liability figure could leave the charity’s balance sheet insolvent, which could leave trustees personally liable if the charity was later forced to stop trading. Some payments based on the charity’s creditworthiness, such as insurance premiums, could also rise.

Sudhir Singh, chairman of the charities and education group at Baker Tilly, said he did not want to make any further comment as the situation with Citizens Advice was covered by client confidentiality.

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