UK charity sector’s audit standards don’t add up
29 August 2019 at 5:09 pm
Many UK charities are failing to provide an accurate and clear picture of their finances, with new research showing almost 50 per cent of organisations are not properly scrutinising their accounts.
The charity commission assessed 296 charities’ accounts against the regulator’s new external benchmark to see whether a minimum standard of scrutiny by auditors and independent examiners was met.
This analysis found 135 accounts (46 per cent) failed to meet the benchmark, including 77 cases of incomplete reporting of related party transactions.
Nigel Davies, the commission’s head of accountancy services, said some auditors and independent examiners were “letting the profession and charities down”.
“We know from research we have carried out into public trust in charities that the public care deeply about transparency. It is therefore vital that charities are able to provide an accurate and clear picture of their finances,” Davies said.
“External scrutiny is an essential part of the checks and balances process that charity accounts go through and so it is disappointing that so many independent examiners and auditors appear to lack the necessary understanding of the external scrutiny framework.”
Davies said the commission was working closely with the accounting profession to tackle shortcomings and raise standards, noting he was encouraged by the industry’s commitment to this.
Larger charities fared better than smaller charities when it came to proper auditing.
Only 37 per cent of charities with an income between £25,000 and £250,000 (A$45,000 to A$450,000) met the benchmark, compared to 51 per cent of charities with incomes between £250,000 and £1 million (A$1.8 million).
This proportion rose to 76 per cent for charities with incomes over £1 million.
Davies said the commission has already contacted 135 charities that failed to meet the benchmark, offering guidance to help them improve their future trustees’ reports and accounts.
“I hope trustees will learn from this study, in terms of the expectations around reporting, and in ensuring they select an independent examiner that knows about and understands the requirements,” he said.