I'd like to try to highlight some of the problems found in the sector in a series of well-worn idioms.
In particular, I want to focus on one of the more dispiriting aspects of auditing charity accounts - spotting that the charity's fundraising methods are likely to cause a problem, and its staff have not realised it.
Nowadays, fundraising is fraught with unforeseen problems. Often these are regulatory, where a charity faces problems with tax law or fundraising rules. It can also be reputational, or caused by fraudulent offers of support. Despite appearances, however, auditors do not enjoy being bearers of bad news, so don't shoot the messenger.
Fundraisers are rarely short of good ideas and imagination. However, as soon as sector organisations move away from tried and tested methods and relationships into uncharted territory in pursuit of new opportunities, new risks also arise.
There can be opportunities to improve the charity's VAT position, but the risks of higher levels of irrecoverable VAT seem to increase. If a charity does not recognise income as what VAT-speak calls 'trading', it is easy for even small amounts of income to trigger a requirement to register for VAT. As public sector funding moves from grants towards paying for the delivery of services, and commercial support increasingly comes with a marketing benefit for the sponsor, tax consequences can follow. An error can be costly, but early recognition of an issue can avert the problem.
Another area of risk is Gift Aid, where the regulations for documenting the gift are becoming less bureaucratic, but HM Revenue & Customs is increasingly concerned about aspects such as personal benefit to the donor. For instance, the payment of entrance fees to a sponsored race will serve to disallow Gift Aid on donations by family members. Discounts offered to subscribers can similarly put Gift Aid at risk.
As the international scope for charitable relief becomes greater, and the sums involved potentially substantial, HMRC has become concerned about the scope for abuse.
In the UK, criminals increasingly seek to divert charitable income - including fraudulent fundraising initiatives, diverting clothing collections or even abuse of the tax relief available on charity donations. It can pay to look a gift horse in the mouth.
Of course, attending courses and reading Third Sector will help raise awareness - and I wonder how often we have all come across something we don't know, and thought "there but for the grace of God" before rushing off to brief our colleagues.