Almost 100 charities submitted accounts containing a warning from their auditor that the accounts could mislead the public, according to a report published by the Charity Commission.
The Charity Commission has today published an analysis of the 97 large charities’ accounts which were filed with a modified audit opinion, meaning that they could be materially misstated, for the year ending December 2016.
Some 86 of these included a qualified opinion, nine had disclaimers of opinion and in two cases auditors gave adverse opinions, which means the auditor disagreed with the charity’s claim that it is a going concern.
The combined income of the 97 charities was £195m.
For 50 charities, including the nine with a disclaimer of opinion, there was a lack of evidence to support the figures in the accounts. Reasons included auditors not being present at year-end stock count, uncertainties over loan amounts due and not keeping accurate records of donations.
Charities with incomes over £1m must get their annual accounts audited. In May 2017 a requirement for auditors to report when they have given a modified audit opinion as soon as possible came into force.
‘It is worrying’
The Commission said its findings were “worrying” and said it was important that charity accounts did not mislead the public.
Nigel Davies, head of accountancy services at the Charity Commission, said: “We expect trustees to work with their auditors to resolve any issues to do with their accounts and so it is worrying that the accounts of 97 large charities were filed with significant inconsistencies and deficiencies or audit concerns on them. A charity’s accounts must be accurate, transparent and complete to ensure that they don’t misrepresent the charity’s financial circumstances and mislead existing and potential supporters, funders or beneficiaries.
“If a charity does receive a modified audit opinion, its trustees need to work with their auditors to resolve any outstanding issues and to ensure that internal financial controls are operating and adequate accounting records are kept. We expect trustees to take compliance with accounting requirements seriously. Trustees should also provide assurance to us and to their supporters that they are taking action to address the concerns identified by their auditors.”
Non-compliance with Sorp
In 45 cases there was “material non-compliance with the Sorp”.
Five charities failed to submit group accounts, 27 had incorrectorly valued property or investment assets, 11 did not include pension scheme liabilities. Two incorrectly valued other assets.
In 51 cases the Commission took no action. In some cases this was because it had already engaged with trustees. In others the issue was not deemed to be of “significant regulatory concern” if it related to stock count attendance or related to opening balances. In others the annual report explained the issues and action being taken, or a more recent set of accounts did not contain any issues.
The Commission provided guidance to 36 charities. In most cases it highlighted the latest Sorp and guidance to trustees.
In ten cases where the auditors report “highlighted serious failings” the Commission said it engaged further with the charity as it was concerned that trustees were not taking action.