Cabinet Office consults on raising the audit threshold for charity accounts

The government says the proposal to raise the threshold from £500,000 to £1m a year would result in about 3,800 charities becoming exempt from the requirement for a full audit

Charity accounts
Charity accounts

The government has launched a consultation on raising the audit threshold for charity accounts from £500,000 to £1m a year.

The Cabinet Office consultation, published today, relates to the rules for charities in England and Wales. It says that the proposed changes would result in an estimated 3,800 charities becoming exempt from the requirement for a full audit.

It estimates that the proposed changes would save £2,250 per exempted charity per year, or a total across all the charities of about £8.7m a year.

Under existing law, a charity must have its accounts scrutinised independently by an auditor on the Register of Statutory Auditors if it has an annual income of more than £500,000, or assets worth more than £3.26m combined with an income of more than £250,000.

The paper proposes that these thresholds be changed to cover charities that have annual incomes of more than £1m, or assets worth more than £3.26m with annual incomes of more than £500,000.

It is also proposing that the audit threshold for parent charities in group structures be increased from £500,000 to £1m a year to ensure there is no discrepancy between the threshold for the accounts of parent charities and subsidiaries.

The Cabinet Office paper asks whether it could extend the list of professional accountancy membership bodies that can carry out independent examinations for charities with incomes of more than £250,000.

In his review of the Charities Act 2006, the Conservative peer Lord Hodgson of Astley Abbotts recommended that a charity should be subject to compulsory audit only if its income was more than £1m a year, with no asset threshold.

The consultation says that the government partially accepts this recommendation but is aware that the £3.26m asset threshold is shared by companies under company law and is wary of creating a discrepancy.

Caron Bradshaw, chief executive of the Charity Finance Group, said that raising the audit threshold appeared appealing at first glance and her organisation supported measures that would lighten the regulatory burden on charities.

But she said a balance should be struck between that burden and the need to maintain stakeholders’ trust and confidence in charities.

The Cabinet Office said it planned to publish a summary of responses in early 2015, with any changes coming into force on 6 April.

The deadline for responses to the consultation is 5pm on 27 January.

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