Charity regulators urge auditors to report more concerns about charities

The three UK watchdogs say in a report that auditors should flag up relevant issues outside those they have a legal obligation to report on

The UK’s three charity regulators have urged auditors to report more of their concerns about charities’ finances or governance practices.

The Charity Commission, the Office of the Scottish Charity Regulator and the Charity Commission for Northern Ireland have made the call in a report that provides examples of situations in which reporting relevant matters of interest could be important.

Auditors are legally obliged to report some matters of material significance to the relevant charity regulator, and there are other relevant matters of interest that auditors have the option of reporting to the regulators if they are concerned.

But the three regulators said today that auditors needed to be more forthcoming about reporting relevant issues outside those they have a legal obligation to report.

This includes problems at charities such as insecure funding putting beneficiaries at risk, a donation that might indicate vulnerability to abuse or a lack of financial oversight by the trustees.

The regulators’ comments come after last year’s report by the Public Administration and Constitutional Affairs Committee on the collapse of Kids Company, which recommended clearer guidance on when auditors should report concerns about charity finances to the relevant regulator.

Today’s report also comes after changes made earlier this year to the matters of material significance, which saw two new subjects introduced

Nigel Davies, head of accountancy services at the Charity Commission, said: "Last year’s PACAC report on Kids Company noted that auditors have been too reticent when it comes to reporting matters of concern that would be of interest to the regulator. Through this new publication we are encouraging and enabling the profession to step up and engage with us more readily on a proactive basis."

Myles McKeown, head of compliance and enquiries at the Charity Commission for Northern Ireland, said: "With more than 200,000 registered charities operating across the UK, we as regulators cannot possibly upturn every stone, so auditors and independent examiners have an incredibly important role to play in helping us to regulate effectively."

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