Finance News: Commission strikes whistleblowing deal

The Charity Commission has signed an agreement with the Chartered Institute of Public Finance and Accountancy to encourage whistleblowing on malpractice by charities.

Cipfa members who carry out independent examinations of charities will be asked to report "significant concerns" about their work or annual accounts.

If a charity is misdirecting funds or misrepresenting its activities, or if its accounts contain "material errors", examiners will be expected to blow the whistle.

Nigel Davies, deputy head of financial regulation at the Charity Commission, said: "Such instances are comparatively rare, but this was an opportunity to put in place a mechanism to share information in view of the Charities Bill's proposal to expand the scope of independent examination by raising the audit threshold."

The commission has previously bemoaned the unwillingness of auditors to blow the whistle on charity malpractice. Independent examination is not as thorough as an audit and does not have to be carried out by an auditor. After the Charities Bill becomes law, charities with an annual income below £500,000 will be able to opt for an independent examination.

Chris Harris, finance director at Action for Blind People and chairman of Cipfa's charities group, said the commission wanted accountants doing independent examinations to take their responsibilities seriously.

"There is a general duty of care, but what we have here is something more structured," he said. "The commission is raising the bar - it is making it more explicit."

The charities regulator will also report malpractice by members of Cipfa to Cipfa for appropriate action. "Any action Cipfa may or may not take, were we to make a referral, is for Cipfa to consider," said Davies.

The Charity Commission had already developed a similar protocol with the Association of Chartered Accountants of England and Wales, many of whose members audit charities, following concerns that auditors were reluctant to disclose malpractice to the regulator.

Guidance from the Auditing Practices Board in 2002 informed auditors of the "highest presumption" to report dishonesty or misuse of charity funds to the Charity Commission. But the commission says it has since received "a very limited number of reports".

The Charity Commission has said the Charities Bill will assuage concerns about auditor liability and result in greater whistleblowing.

It is currently developing "comparable protocols" with the Association of Chartered Certified Accountants and the Chartered Institute of Management Accountants.

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