Blog post

How charity audits build stakeholder trust

Melvin Bailey

May 5, 2021

If you are involved in running a charity you will be only too aware of how hard the sector has been hit by the coronavirus pandemic.

Many charities have faced the competing pressures of an increase in demand for services and a shortfall in fundraising as the world adjusts. And all while introducing social distancing and other COVID-secure measures into their day-to-day operations.

The government has talked about “building back better” and this positive line is something that all sectors can embrace.

For charities, one way of doing this is to review governance – in particular, the difference between independent examination and audit.

Seeing beyond the upfront cost of the more rigorous audit and looking at the wider benefits may be the springboard to achieving the “better” that you have been seeking.

Independent audit vs independent examination

As you’ll know, all charities must produce an annual report and accounts.

If income exceeds £25,000 either a lighter touch independent examination or a more structured audit must be commissioned. In England and Wales, the audit option becomes compulsory if annual income exceeds £1 million or assets exceed £3.26 million. There are also a few other subtleties to the rules.

The independent examination studies the accounts to check they are in order. It works on the basis that the records the accounts are based on are correct and truthful. With an independent examination, accounts may be presented in a simple receipt and payments format.

An audit brings greater scrutiny and must be carried out by a qualified auditor. It looks at the accounts and underlying records to ensure things are as they should be. It aims to confirm that the accounts provide a true and fair view of your finances.

The accounts themselves are required to be presented in a more complex accruals format. As well as being more costly, audit will be more thorough and take up more staff time.

The benefits of a charity audit

More cost. More time. More effort. You may wonder why you would consider going for the more thorough audit option if you are under no obligation to.

However, there are far reaching benefits in doing so. Opting for the rigour of an audit sends out a powerful signal to all stakeholders that the charity is being run to the highest standards, standing you in good stead with fellow trustees, benefactors, volunteers, employees and donors.

With the right communication this can provide reassurance to all trustees, underpin more ambitious fundraising initiatives, help boost employee morale and aid recruitment and retention.

The audit may also uncover inefficiencies within your organisation. For instance, some outsourced functions which have not been put out for tender for many years and are being overpaid for. Or processes which have not benefited from the huge strides made in technological innovation in recent years.

While this may be uncomfortable at first, the opportunity to put issues right may free up more cash than the extra cost of an audit compared to an examination.

Find out more

Reliant on so much goodwill, charities cannot afford to have any doubt about the accuracy of their accounts. We are charity audit specialists. If you would like to explore precisely how an audit would be carried out for you and how it could make you stronger in the long run, please do get in touch.

Melvin Bailey Rogers spencer
Melvin Bailey

Melvin Bailey is a Chartered Certified Accountant and a Partner of Rogers Spencer and has been working with us since 1996. Melvin specialises in Accountancy Solutions, Audits, Charities and Housing Providers. Find out more about Melvin here.

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