The charities regulator for England and Wales, Charity Commission, has accused some auditors of executing poor standards after a study found that only half of charity accounts are meeting the standards set by the watchdog.
Charity Commission scrutinised 296 charity accounts with various annual incomes in 2017/18 to check that they’re complying with their standards. They said that their findings were particularly concerning as they revealed that in some cases, not even basic requirements were being met. It was however found that accounts reviewed by auditors met its benchmark more regularly than independent examiners.
Only 44% of accounts submitted by qualified examiners met the benchmark, compared to only 18% of unqualified examiners. This figure was even lower among smaller charities with an income of less than £250,000 a year. Among them, just 37% were found to meet the watchdog’s minimum benchmark.
The commission said it has contacted the trustees of the 135 charities which failed the benchmark and have provided them with guidance on how to improve the quality of future accounts.
How is the benchmark set?
Charities with incomes exceeding £25,000 must arrange for either an audit or an independent examination of their accounts. Audits are compulsory for charities with incomes over £1 million, and those with incomes over £250,000 and gross assets over £3.26m.
Most other charities can opt for an independent examination, unless an audit is required for another reason, such as by the charity’s governing document.
Auditors determine whether or not a charity’s accounts are ‘true and fair’, while independent examiners undertake limited checks on certain matters.
How Charity Commission’s benchmark is applied depends on a charity’s size and legal form, with closer scrutiny applied to accruals accounts.
Up to 15 criteria apply, nine of which are compulsory for all charity accounts under review. The other six only apply to the scrutiny of charities with accruals accounts.
The Commission said audits play a key role in underpinning public confidence in charities, especially when many rely on donations from the public.
Nigel Davies, head of accountancy services at the Charity Commission, commented:
“The public care deeply about transparency in charities, and it’s vital that charities are able to provide an accurate and clear picture of their finances. It’s disappointing that so many independent examiners and auditors appear to lack the necessary understanding of the external scrutiny framework.
He continued:
“Those who are getting this right are playing an important role in upholding charities’ accountability. Clearly others are letting the profession and charities down.”
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