Audit concerns with accounts of almost 100 large charities, regulator says

Almost 100 charities large filed accounts that were or could be materially misstated last year, the regulator has said.

Charity Commission analysis has found that last year 97 charities with combined income of around £195m filed accounts that included a formally modified audit opinion.

A formally modified audit opinion is an auditor’s statement that the accounts are, or could be, materially misstated, possibly due to gaps in the evidence that supported the accounts.

Two charities received an adverse audit opinion because their auditor concluded that the charity was not a going concern, contrary to the charity’s accounts.

The accounts of 45 charities were not compliant with the Statement of Recommended Practice, for reasons including incorrect valuation of property and investment assets, and failure to include pension scheme liabilities in accounts.

Others had not met requirements to prepare group accounts, while two charities had incorrectly valued their stock or grant commitments.

There was a lack of evidence in the accounting records of 50 other charities. Of these, six were unable prove they owned the properties or investments included in their accounts. Deficiencies in three charities’ records were so severe they undermined their entire accounts, the commission said.

The commission provided regulatory advice and guidance to 36 charities after the study, and made it clear that it expected them to take action. The regulator said it engaged further with 10 charities where the auditor had highlighted serious failings the commission was not previously aware of, and where it did not appear that the trustees were taking action to address them.

Charity Commission head of accountancy services Nigel Davies said it was 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,” Davies said. “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.”

Access the report here.