DCMS consultation: Charities need consistency in financial thresholds

In response to the Department for Culture, Media and Sport’s (DCMS) consultation on financial thresholds in charity law and whether they should be increased in line with inflation, RSM UK says charities need consistency in financial reporting obligations, and requirements should be proportionate to the size of the charity.

Nick Sladden, Partner and Head of Charities at RSM UK, said: “We welcome the government’s commitment to review these thresholds at least every 10 years, but it’s crucial this is upheld to ensure out of date regulations are not being relied upon. An example is the Charities (Accounts and Reports) Regulations 2008 which refer to the now out of date Charities SORP 2005.

“The income threshold at which charity accounts must be examined by an independent examiner ought to be increased in line with inflation to £40,000. This is still a relatively low-income level and will save the smallest charities from some regulatory burden, many of whom are being pulled into the net due to static thresholds. Smaller charities are already disproportionately impacted by regulatory requirements so any form of relief will be hugely welcomed, so they can focus their resources on the key needs of beneficiaries.

“On the larger end of the scale, we’d suggest the threshold which account auditing requirements should apply, including the gross aggregate income of a charity group, is increased from £1m to £2m. This approach will mean charities with an income between £1m and £2m are still subject to some form of external scrutiny but would not have to face the full cost of an audit, which can be time consuming for charities. Alongside this increase in the threshold should be a strengthening of the independent examination regime to ensure that the external oversight of charities in this size bracket is still present and effective.

“The ultimate goal should be ensuring proportionate levels of reporting and external scrutiny for charities. Streamlining the thresholds will make financial reporting a less burdensome task for charities, but it’s key this isn’t relaxed too far to maintain accountability across the sector.”