An accountancy firm has urged the government to double the income threshold at which charities must be audited from £1m to £2m.
In response to the Department for Culture, Media and Sport’s (DCMS) consultation on financial thresholds, which closes later this week, RSM UK said the increase would mean charities with an income between £1m and £2m could avoid the “full cost of an audit, which can be time consuming”.
The maximum threshold increase DCMS offers as an option in its consultation is to £1.5m, “in line with inflation”, with a smaller increase to £1.2m and remaining at £1m the other options.
RSM UK also called for the lower income threshold at which charity accounts must be examined by an independent examiner to be increased from £25,000 to £40,000, matching the inflationary increase option in DCMS’s consultation.
On this potential rise, RSM UK partner and head of charities Nick Sladden said: “This is still a relatively low-income level and will save the smallest charities from some regulatory burden, many of whom are being pulled into the net due to static thresholds.
“Smaller charities are already disproportionately impacted by regulatory requirements so any form of relief will be hugely welcomed, so they can focus their resources on the key needs of beneficiaries.”
Strengthened independent examinations
Sladden welcomed DCMS’s consultation, which closes on 12 June, but said it is crucial that the regulations are updated every 10 years.
He also called for independent examinations for smaller charities to be strengthened “to ensure that the external oversight of charities in this size bracket is still present and effective”.
“The ultimate goal should be ensuring proportionate levels of reporting and external scrutiny for charities,” he said.
“Streamlining the thresholds will make financial reporting a less burdensome task for charities, but it’s key this isn’t relaxed too far to maintain accountability across the sector.”
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