As the government moved last week to give the clearest sign yet that it will push ahead this year with a rise in the audit threshold, senior figures in the not-for-profit sector claimed a full audit was the only way to avoid fraud among charities.
Link: Brown wants to increase audit threshold
Gordon Brown made clear in last week’s Budget that a rise in the audit threshold, probably to £4.8m, was on the way barring catastrophe ahead of a consultation to be staged this summer.
But charities have warned that the existing threshold of £1m is too high.
Trevor James, charity partner at firm Sheen Stickland, argued charities are larger organisations than private companies with comparable income, when unpaid salaries are taken into account. He believes charities should be ‘subject to a lower threshold’ of around £250,000.
Willem de Groot, FD of missionary society New Tribes Mission, went even further and said that all charities should be subject to a full audit, regardless of their size. ‘Charities are funded by the public. The public has a right to have books checked to assure money is used for the goal and intention they gave it,’ he said.
An independent professional review – the alternative to audit for small businesses – was dismissed as ‘cheap’ by De Groot. He argued it was so easy to ‘siphon off money’ that a full audit is the ‘minimum’ to prevent fraud. ‘People unfortunately cannot be trusted with money given to them,’ said De Groot.
Bob Rose, managing partner of firm Larking Gowen, explained charity accounts are difficult to verify as auditors cannot rely on reverse value streams – the goods out, money in principle. ‘I can see the argument for a lower threshold for charities,’ he said.