Head of Policy, Richard Sagar, explains CFG’s response to the government’s Financial Thresholds Consultation.
On Thursday 12 June, CFG submitted our response to the government's financial thresholds consultation. This consultation was long overdue – CFG, alongside several partners, has been advocating for this review for more than two years, and it’s good to see that the government is finally taking action.
To inform our response, we sought valuable feedback charities across the sector and drew on the expertise of our Technical Accounting Forum. In April, we sent out a survey and were delighted to receive 69 responses – all of which have shaped our response.
What we learned
Our survey findings paint a clear picture of the challenges facing charities. With 89% of respondents reporting increased audit costs and only 22% finding it 'not difficult' to secure an auditor, the current thresholds are placing unsustainable burdens on smaller charities.
While the majority of those charities have struggled to find available auditors, some charities have seen audit cost increases of more than 25% in the past year. This rise is far above inflation and demonstrates why threshold reform is so critical.
Our response to government
It will come as little surprise that in our response, we have supported raising the audit threshold in line with inflation. More than two thirds (69%) of our members who responded to our survey endorsed this.
Beyond the immediate relief this would provide, we've also advocated for a more systematic approach - reviewing thresholds every 10 years, with flexibility to act sooner if inflation spikes significantly.
We are asking the government to consider introducing an Independent Examination plus, which would provide additional checks to the existing Independent Examination requirements, but less than those of full audit.
This could provide reassurance for those smaller charities above the audit threshold, but not large enough to benefit from a full audit. We have argued that if such an approach were to be taken, then one could reasonably increase the threshold for a full audit significantly above £1.5m.
Overlapping consultations
Like buses, this year’s consultations have all come along at once! It’s safe to say that we’ve been kept busy during the past two to three months. More importantly, however, we’re concerned about the fragmented approach to charity regulation reform.
This consultation should have been coordinated with the ongoing SORP consultation, which closes on 20 June (keep your eyes out for our response, which will be submitted imminently). There's a real risk of creating multiple, overlapping reporting tiers that could actually increase complexity rather than reduce it.
The government's growth mission rightly aims to provide a better regulatory landscape to help organisations thrive. For charities facing unprecedented demand for their services while grappling with rising costs and economic uncertainty, getting these thresholds right isn't just about regulatory efficiency. It’s our view that it's also about enabling charities to focus their stretched resources on delivering maximum impact for the communities and people they serve.