Regulators outline plans to require professional advisers to report on more matters

19 May 2016 News

The three UK charity regulators have opened a joint consultation on a revised list of “significant matters” that auditors and independent examiners must report.

Last year MPs criticised both Kids Company’s auditors and the Charity Commission for not spotting problems at the now-defunct charity.

The Charity Commission for England and Wales, the Office of the Scottish Charity Regulator and the Charity Commission for Northern Ireland have today published a consultation document outlining the proposed amendments, which includes changes to wording and introduces new matters that auditors and independent examiners could be expected to report on.

A key proposal is a change to the wording to say that auditors should report “material” instead of “significant” risks concerning issues that present a “risk to charitable funds or assets”.

New matters include that auditors should tell the regulator if trustees have not taken action or if unmanaged conflicts of interest are identified.

The matter that has been dropped was one about informing the regulator of matters of concern when they resign but which the consultation document said had been “misinterpreted, leading to auditors or examiners simply notifying the regulator when they had ceased to hold office”.

Nigel Davies, head of accountancy services at the Charity Commission, said: “With the recent debate about auditors’ reporting duties in the light of the report by the Public and Constitutional Affairs Committee on the collapse of the charity Keeping Kids Company, this consultation provides an opportunity to explore what extra areas of reporting are necessary to assist in our taking timely regulatory action and to help underpin public trust and confidence.”

Lance Anderson, head of enforcement at OSCR, said: “Since we first published the guidance both public expectations of charities and our regulatory experience in receiving reports have shown that there is a need to make changes.”

It is the first time that CCNI has joined the other regulators. Frances McCandless, chief executive, said: “With the regulatory landscape for UK charities now complete, CCNI is keen to lend its support to a harmonised framework for reporting by auditors and independent examiners of matters of material significance to  a UK charity regulator.”  

Andrew O’Brien, head of policy and engagement at Charity Finance Group, said the proposals in the consultation bring “consistency in language between reporting matters of material significance and the SORP”.

But he called on the Commission to explain how it will use the information it gets.  

He said: “However, changing the wording needs to go alongside greater clarity from the Charity Commission about the kind of issues that mark out charities as being regulatory risks. There is also a danger, given the significant cuts in the Commission’s budget, that it will not be in a position to use and act upon the information that it receives.

“It would be good for the Commission to outline how it is going to use greater reporting to support its risk-based approach to regulation, so that all stakeholders understand the value of the changes. We will engage with our members and accountancy professionals to get their views as part of this process.”

The closing date to respond to the consultation is 11 September and the regulators expect to publish new guidance by the end of the year.

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