Charity Commission urges all connected with charities to report any concerns.
‘When in doubt – report it’ is the advice in the Matters of Material Significance reportable to UK charity regulators guidance to trustees, auditors and independent examiners.
Earlier this year we highlighted the Charity Commission accounting monitoring review report, which found evidence of failure to meet statutory obligations that affect the charity sector. The report focused on the period from 1 May to 31 October 2017, the first six months since the updated list of reportable matters came into force, and the Charity Commission in England and Wales said the findings ‘pose significant concerns’.
It is clear that it is important for anyone involved in the charity sector – especially trustees, auditors, independent examiners, internal auditors and professional bodies – to take appropriate action.
For all audits or independent examinations for charities in England and Wales, Scotland and Northern Ireland which are conducted and/or reported after 1 May 2017 there is a statutory responsibility to report matters of material significance.
The guidance issued by the regulators includes checklists, but also warnings. The regulators are clear that the guidance applies to auditors and independent examiners of charity accounts, and that it is designed to highlight their legal responsibility to report significant matters in accordance with the applicable law. They cite the relevant laws as section 67 of the Charities Act (Northern Ireland) 2008, sections 156 and 159 of the Charities Act 2011, and section 46 of the Charities and Trustee Investment (Scotland) Act 2005.
Auditors and independent examiners have a statutory duty to report and must report any matters of material significance which they become aware of during their appointment. The guidance states that ‘these are matters which are of material significance to the Regulator in carrying out their functions. For example, the matter may be an issue which the charity regulator will consider for investigation or which could impact on the charitable status of the organisation.’
The advice contained in the guidance for internal auditors is that ‘It is currently not a legal requirement for those conducting internal audits to report matters of material significance, but the UK charity regulators consider such reporting to be helpful and best practice and, therefore, the internal auditor should familiarise themselves with the matters required to be reported to the charity regulator.’
The guidance also states that ‘Charity trustees should therefore be aware of the matters of material significance and the duty placed upon an auditor or independent examiner to report matters to the regulator.’