Download Briefing Note - Good News on Audit Requirements

Good News on Audit Requirements
Changes to the threshold for financial reporting by charities are due to come into effect on 31 March.
Charities or charity groups whose income does not exceed £1m can now avoid the cost of a full audit – a
doubling of the previous limit. The same changes added two new organisations to the list of those whose
members are qualified to be independent examiners: the Institute of Financial Accountants and the Certified
Public Accountants Association.
The threshold change needs to be read with caution. For instance, the rules for charities based in Scotland
and Northern Ireland have not changed, and individual charities may have specific requirements in their own
constitutions. For many, however, this deregulation will be welcome. It also means that requirements of the
new Statements of Recommended Practice relating to larger charities will no longer apply to charities that
are affected by this change, because the Sorp defines “large” by reference to the adult thresholds.
New draft regulations have also been issued by the Department for Business, Innovation and Skills,
reducing the accounts burden for commercial companies.
Charities are still subject to their own regimes, but this is relevant because on the back of BIS’s draft
regulations the Financial Reporting Council Exposure Draft 59, which proposed to withdraw the Financial
Reporting Standard for Smaller Entities for accounting periods on or after 1January 2016. The Frsse is the
basis for the Sorp issued for the first last year for smaller charities specifically, but under FRED 59 it would
no longer be available for reporting periods beginning on or after 1 January 2016.
Losing business rate relief has long been a concern for charities, and it was intensified by the proposals last
year to restrict it in Wales. So it is alarming that Pembrokeshire County council is now consulting on whether
or not the discretionary element (worth 20% of the total relief) should be withdrawn for charity shops run by
national charities. The consultation asks whether it should be given only to local charities, soliciting views on
what “local” means. This seems to be an on-going risk factor that charities need to monitor in their financial
plans.
Rates are just one of a series of tax reliefs that charities enjoy, but generally there are no special reliefs that
relate to employment. Charities might want to check that they are fully compliant with national minimum
wage rules after 70 employers – including one charity – that failed to pay their workers the national
minimum wage were named and shamed by the Government website.
Many of these were small organisations, but between these 70 employers they owed workers a total of
more than £157,000. A further 90 care companies are also being investigated by officers after allegations
were raised by whistleblowers. This might sound like the actions of unscrupulous pa masters, but can just
as easily result from mistakes or carelessness.
Trustees sometimes think that no one is interested in their affairs and might not take financial regulation too
seriously as a result. Here is another salutary reminder that you can never be careful. The Hull Daily Mail
reported than John Baker and his daughter Amy ran a sandwich in Hull for many years but told tax inspector
that it did not start trading until 2010. It turned out that that HM Revenue & Customs staff had being buying
lunch there since before that date. The two have been given jail sentences for tax fraud.