Consultation on guidance on the external scrutiny of charity accounts (CC32) and extending this to consolidated accounts.
What’s new about the proposals?
- 3 new Directions about: examiner independence, conflicts of interest and disclosure of related party transactions, and financial sustainability and going concern; and new simpler guidance for each Direction
- extending independent examination to consolidated (group) accounts
- a new simpler format for the examiner’s report
- changes to the reporting of matters of material significance (in a separate consultation)
- new guidance on the reporting of ‘relevant matters’
- a plain English approach which makes it clearer that the guidance is expected practice not simply recommended practice
The consultation requests comments on all of these and the impact they might have on regulatory burdens on examiners and trustees.
Why are we consulting now?
We decided it was time to consult on the external scrutiny of charity accounts because of a number of recent developments including the change in the thresholds for audit and the preparation of consolidated group accounts; and the UK charity regulators’ consultation on matters of material significance that must be reported to regulators, and lastly changes in expectations of the charity sector post Keeping Kid’s Company.
At present all charities with an income over £25,000 must have some form of external scrutiny, an audit or independent examination. Charities with an income of between £25,000 and £1 million may have an independent examination and this covers over 50,000 charities of the 62,000 required to have an external scrutiny. Independent examination is intended as a more limited and lower cost form of assurance on the accounts of a charity as compared to that provided by an audit.
We would like to hear from examiners, trustees and those interested in charity accounts. The consultation closes on 30 September 2016. The changes are intended to come into effect for reporting periods ending on or after 31 March 2017.
Nigel Davies, Head of Accountancy Services at the commission, said:
"Independent examination is an important form of external assurance to trustees, to the commission and to those using charity accounts. An update to the framework is needed. We want your views on whether our proposals will improve the independent examination framework and so maintain the confidence of trustees, donors and the public in the accounts of smaller charities."
Notes to editors
- The Charity Commission is the independent regulator of charities in England and Wales. To find out more about our work, see our annual report.
- Section 145 (5) of the Charities Act 2011 provides for the commission to give directions as to the carrying out of an independent examination and give guidance to trustees concerning the appointment of an independent examiner.
- Details of how the commission reports on its regulatory work can be found on GOV.UK.