Difficulty filing this year's accounts due to pressures on your auditors? You're not alone! Dr Clare Mills shares the risks of late submissions along with the latest 'next steps' advice from the charity regulators.
For those at the sharp end of charity audit, there are several contextual factors which are making the annual process more of a headache than usual.
So, what can you do if your audit is not going to be completed in time?
If a charity misses its filing deadlines with the Charity Commission for England and Wales (CCEW) or the Scottish Charity Regulator (OSCR) this will show on the charity register maintained by the relevant regulator.
This ‘red mark’ against your record can have serious implications for your charity’s reputation, in relation to current and future funding and finance applications, securing contracts for services or more widely with your beneficiaries and the communities you serve.
The cumulative impact of a significant number of charities missing their filing deadlines could also have a negative impact on public trust in the sector.
OSCR have told us that if a charity contacts them because their auditor has been unable to complete the audit in time, then they will look at filing deadlines on a case-by-case basis.
If you are going to miss your filing deadline with the CCEW, contact the regulator as soon as you can and explain the circumstances.
It is sensible to have a crisis plan prepared which you can activate, should your chances of filing within the time limits start to reduce.
First, gather your evidence. What do you have that shows you were prepared for your audit to take place, that you engaged positively with your auditors, that you responded to audit queries promptly? The regulator will need to understand that the delays are outside your organisation’s control.
Second, what can your auditor provide to support your case – that the delay in completing the audit in time is down to problems at their end? Some auditors will provide an email stating that they are unable to complete your audit on time due to staff shortages or other pressures.
Third, contact the relevant regulator – before your filing deadline, rather than after! Remember, your charity is required to have an audit if your annual income is £1 million or more, for England and Wales, or £500,000 plus, if registered in Scotland. Charities registered in both Scotland and England/Wales with income of £500,000 to £1 million are required to submit audited accounts to OSCR.
Remember too that the filing deadlines for the Charity Commission and Companies House are 10 months from the end of the financial year, whereas OSCR’s deadline is nine months.
For charities registered in England and Wales, it’s also vital that you are able to use the My Charity Commission Account, so make sure your logins and passwords are all working. If you have any problems with logging in, reach out to the Charity Commission
We’re in contact with the regulators and will be asking for any data held around the impact of audit on compliance with filing deadlines. The busiest periods for filing are December (OSCR) and January (CCEW), and again in the autumn.
The background
Since 2021, auditors have been required to complete additional work in relation to going concern and accounting estimates. This has meant additional staff time is now needed for the auditor to complete the work, and a corresponding increase in fees.
Auditors are making more enquiries relating to going concern, especially at the planning stage of the audit. They will be thinking about going concern not just from ‘as we are now’ but in relation to a range of scenarios, such as changes in the economy.
In relation to estimates, auditors are expected to ask more questions to understand the assumptions behind estimates and how robust those assumptions are, and what other information is being taken into account. Auditors are also spending more time looking at how possible irregularities and potential fraud would be detected: how robust are internal controls?
For audit firms, the impact of these changes is being felt in two ways. First, they may be finding they don’t have sufficient members of staff to carry out their planned work. This gives rise to two options. One is to recruit more suitably qualified staff, including from overseas which will give rise to additional costs and time to secure work visas. Second, they may decide to restrict their audit work, reducing their numbers of clients and putting in fewer tender offers.
For charities and not-for-profit organisations that need or prefer a full audit service, this has consequences. If charities do not have an audit firm under contract and go out to tender, they may well find fewer – or even no – tender submissions. For those that have an audit firm willing to do the work, costs will be rising and completion of the audit in line with compliance deadlines may become more of a challenge.
You can read more on this topic on our Knowledge Hub
'I do feel their pain' by Sam Burne-James
What to consider when running a charity audit tender process by Richard Barker