Cabinet Office raises charity audit threshold for England and Wales
ICAS concerns remain, as the Cabinet Office presses ahead with plans to increase the charity audit threshold for England and Wales from £500,000 to £1 million.
Following public consultation, the Cabinet Office has confirmed it will go ahead with plans to increase the charity audit threshold for England and Wales from £500,000 to £1 million.
This is accompanied by an increase in the threshold for the preparation of group accounts to align with the audit requirement.
These new thresholds are to apply to accounting periods ending on or after 31 March 2015.
The ICAS Charities Committee, in its consultation response, opposed the changes.
The Committee's concerns rest on the quality of evidence provided by the Cabinet Office, which included a simplistic assessment of anticipated savings and insufficient consideration of the risks which could arise from less robust external scrutiny.
Charities are major providers of public services and therefore the increase in the audit threshold seems out of step with the changes. Similarly, the Charity Commission will receive less comfort about the quality of governance and the financial health of the charities affected.
The 4,000 charities believed to fall out of audit will be subject to independent examination. There is no requirement for an independent examiner to identify a charity's internal controls and to test their effectiveness while an auditor must do so. Therefore, we believe that increasing the audit threshold has the potential to increase the risk to charitable assets from poor governance and fraud.
|Threshold changes for charities in England and Wales|
The income threshold for audit is to increase from £500,000 to £1 million|
The accounts preparation and audit threshold for group accounts is to increase from £500,000 to £1 million.
The scope for savings may be less than anticipated by the Cabinet Office. Trustees may seek the additional comfort that an audit brings, especially if the charity doesn't employ a qualified accountant or there is a skills gap in relation to finance and accountancy on the trustee board. It is also possible that funders or lenders will make an audit a condition of funding or lending.
Group structures introduce additional risk to a charity's business model and we believe it is important that group accounts continue to be prepared and audited at the level of the current threshold so that a charity's trustees have clear sight of the group's financial position and performance. We also believe that the publication of audited group accounts for charitable groups, with income of more than £500,000, affords an appropriate level of accountability to other stakeholders which would be lost through threshold increases.
The Cabinet Office consultation response sets out the UK Government's conclusions in detail.