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Charity accounts getting too long and hard to understand, warn auditors

05 Dec 2018 News

Auditors have expressed concerns that charity accounts are becoming too long, making them more difficult to understand.

Speaking to Charity Finance magazine, auditors also said increased reporting requirements around topics such as serious incident reporting, whistleblowing and fundraising have been challenging for charities to comply with.

One problem is that reports have become too long, auditors said.

Jonathan Orchard, partner at Sayer Vincent, said: “Rather than aiding transparency and helping accounts to be meaningful, the key financial messages risk being lost in the volume of information.”

Gillian Donald, charities partner at Scott-Moncrieff, agreed.

She said there was a requirement to show only material items, but trustees find it challenging to identify for themselves what is material to them.

“It’s often a much lower level than the auditor’s materiality," she said. "And then they choose to show certain additional information because it helps the user’s understanding even when it’s not material.”

Increased burdens

Auditors also said that increasing regulatory burdens were an issue. 

Liz Hazell, head of Saffery Champness’ not-for-profit group, said that there have been problems with the regulators asking follow-up questions some months after a whistleblowing report has been filed.

He said: “The questions would have been more reasonable to answer at the time but certainly cannot be answered months later.

“The regulators seem to be struggling to keep up with the volumes of reporting that have been brought upon them by the updated whistleblowing guidance and the safeguarding scandals at the start of the year.”

Pesh Framjee, head of Crowe’s not-for-profit team, added: “An important question for boards is how incidents of inappropriate behaviours or unwanted culture are recorded, monitored and dealt with.

“The position in the past was that proper accountability and transparency led to unwanted publicity that should be avoided. This approach is no longer seen as appropriate and can lead to damaging consequences.”

Richard Weaver, head of charities and not-for-profit at haysmacintyre, said serious incident reporting has been a hot topic of debate.

He said: “The guidelines are left for interpretation by individual charities, and the notion of ‘if in doubt report’ has led to confusion and inconsistency in what has been reported.

“Auditors too have been advised to report where they are aware that a client has reported, but to what end? This is a duplication of effort and is not helpful for either party.”

Going concern

Meanwhile, Neal Gilmore, charities principal at HW Fisher, said that for many charities, providing sufficient evidence to support the going concern assumption has been challenging.

He said: “For some, there have been delays in receiving confirmation of renewed or additional funding.

“Smaller organisations have found that their forecasting techniques have simply not been robust enough to provide sufficient audit evidence.

"Others have established cash forecast methodology that includes income graded by probability of receipt.”

Subscribers can read the full article can be read in the 250th edition of Charity Finance, or they can read it online here.

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