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Auditing alternative possible for small charities, says ICAEW boss

Mark Spofforth, president, the Institute of Chartered Accountants for England and Wales
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Auditing alternative possible for small charities, says ICAEW boss2

Finance | Jonathan Last | 13 Sep 2012

An alternative to "overbearing and over-expensive" auditing of smaller charities may be implemented on the back of Lord Hodgson's review, president of the Institute of Chartered Accountants for England and Wales Mark Spofforth said yesterday.   

As part of Rathbones’ Annual Charity Symposium in London’s British Museum, Spofforth delivered a presentation that examined Lord Hodgson’s review of the Charities Act 2006 in light of any impact it could have on the regulatory framework.

He speculated that Hodgson’s recommendation to raise the audit limit for charities may result in a reduction in the number of charities from the lower end of the income scale that are required to audit their accounts.

“We may find in the future that there will be less audited sets of accounts,” Spofforth said. “There is a feeling that audit as a service may be overbearing and over-expensive for some of the smaller charities.”

He added that this was interesting in the light of changes in legislation in the corporate sector over the last couple of days, where audit limits have already gone up.

“It would be up to us – my institution in particular – to find ways of still giving the public the information they need so they can continue to trust charities,” Spofforth said.

Commission registration fee ‘probably soon’

The ICAEW president also recommended making reports more user-friendly, for “the person who wants to just dip in and dip out of a set of accounts”, and added his weight to the speculation that the Charity Commission may soon start charging charities a registration fee.

“How does the Charity Commission pay for itself?,” he asked. “Probably what we will soon see is a fee for registering charities, in just the same way Companies House does. We need to be ready for that.”

Newly-appointed Commission chair William Shawcross mentioned last week that he would “look very seriously at the suggestion” which he described as “sensible”.

Spofforth, newly appointed himself this summer, described Lord Hodgson’s Review of the Charities Act 2006 report as, on the whole, a thorough, practical and readable document.

ACIE Admin
Association of Charity Independent Examiners
14 Sep 2012

There is of course already an alternative to audit for those charities who qualify, called Independent Examination.

Further details on this form of scrutiny for charities in England & Wales can be found at the Charity Commission website: www.charity-commission.gov.uk - search for CC32 (for examiners) or CC31 (for Trustees). For charities in Scotland, go to the OSCR website: www.oscr.org.uk and look under the heading "Managing your Charity".

Anyone interested in learning more about Independent Examination is welcome to contact ACIE - the Association for Charity Independent Examiners - who will be holding a conference in Birmingham on 9 November, looking at how independent examiners can help charities improve their effectiveness, and save resources otherwise spent on "over-bearing and over-expensive" auditing - visit: www.acie.org.uk

Pauline Broomhead
CEO
The FSI
13 Sep 2012

Changing to a £25,000 threshold poses real problems:

The real issue for me is the raising of the general threshold for compulsory registration with the Charity Commission to £25,000. It poses real problems for small charities. In my experience small charities already rush towards registration and for good reason – they need to demonstrate their credibility to funders and the general public. Ok a set of accounts is one tool but the registration number itself cannot be undervalued.

Small charities which raise less than £25,000 per annum are no different from larger organizations. The work they do is just as vital, it is undertaken with the same passion, same determination, and is as relevant as larger organizations. So why should they be treated differently. Small charities are charged, charged and charged again – for membership of umbrella organizations, for membership of regulating bodies and it goes on. There could conceivably be a time when the payment for what we perceive to be the necessary infrastructure through which to operate cripples the fledgling charity before it really starts. Adding another membership or fee by regulator the Charity Commission is just adding yet another layer of expenditure to a small charity making it even more difficult for them to spend the majority of their income on their beneficiaries. I’m not of the mind that small charities should pay a series of fees to the regulators and other bodies for the right to exist.

We should not be in the business of making life easier for the Charity Commission. We should be building an environment where it is easier for charities to do their work and that is why the FSI was established to provide free support services to small charities. The government recognises that small businesses are vital to the economy and wants to send the message that Britain is a great place to do business. We need to do precisely the same thing with charity, we need to champion the sector, we need to reduce the burden that prevents a charity delivering its services and we need to promote philanthropy and trusteeship, which is a form of philanthropy to send out the message that Britain is a great place to do charity too.

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