Nearly 100 large charities' accounts caused concern for auditors, says regulator

The Charity Commission says that 97 out of about 14,000 sets of accounts filed last year included a 'modified audit opinion', showing the auditor was concerned

Almost 100 large charities filed accounts that caused concern for auditors last year, research by the Charity Commission shows.

The regulator said today that 97 of the 14,000 or so sets of charity accounts that required signing off by auditors in 2016 included a modified audit opinion, meaning that the auditor was concerned that the accounts were or could be incorrect.

In 10 of the 97 cases, auditors highlighted "serious failings" of which the commission was not previously aware of and there was no indication that the trustees were dealing with. The regulator said it had ongoing engagement with those charities, although none had yet led to the opening of a statutory inquiry.

Two charities were deemed by auditors not to have been going concerns.

None of the 97 charities, which had a combined reported annual income of about £195m, has been named by the regulator.

In 36 cases, the commission provided guidance with the expectation that the charities’ trustees should be able to address their auditors’ concerns. In the majority of these cases the charity’s accounts had not complied with the requirements of the Statement of Recommended Practice.

The commission concluded that no further action was required in the remaining 51 cases, for reasons including that the charity had since filed accounts that were not subject to auditor’s concerns, or that the regulator had already raised concerns with trustees.

The commission identified the 97 charities by conducting a search using the key words that auditors are required to use when issuing a modified audit opinion.

Charities with annual incomes of more than £1m or of more than £250,000 with gross assets of at least £3.26m must have their accounts audited.

Since 1 May, charity auditors have been required to report to the relevant regulator when they have given a modified audit opinion.

Nigel Davies, head of accountancy services at the Charity Commission, said it was worrying that the accounts of 97 large charities were filed with audit concerns.

"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," he said.

"If a charity does receive a modified audit opinion, its trustees need to work with the auditors to resolve any outstanding issues and to ensure that internal financial controls are operating and adequate accounting records are kept.

"We expect trustees to take compliance with accounting requirements seriously. Trustees should also provide assurance to us and to their supporters that they are taking action to address the concerns identified by their auditors."

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