You can find the original article on the Mitchell Charlesworth site here.
Running a charity means you’re busy making a difference, and an essential part of daily operations is maintaining your accounts. Knowing if your charity needs a full statutory audit is a key part of financial good practice and helps you to understand what your obligations are.
Understanding financial thresholds
Most charities need to submit their financial information through one of two processes:
- Independent examination: This is required if your charity’s gross annual income is between £25,000 and £1 million. This is a common requirement for most small charities.
- Statutory audit: A full audit is required if your charity’s gross income is over £1 million, or if its gross assets are more than £3.26 million and gross income is more than £250,000.
If your charity’s income is less than £25,000, it is generally exempt from needing either an audit or an independent examination, though it still has annual reporting requirements.
These figures are correct at the time of publication, official guidance can be found withThe Charity Commission for England and Wales, as set out in the Charities Act 2011
Preparing your charity accounts
If an audit is required you’ll need to prepare your accounts. This involves getting your records in order for the financial year. The type of information you need to prepare will depend on your charity’s income and structure. This may include but not limited to:
- A record of all of your income and spending.
- All relevant receipts, invoices and bank statements.
- An annual report from your trustees that outlines your charity’s activities.
Having these documents ready and well organised is the first step and makes the entire process smoother.
Steps to follow if you require an audit
- Get your paperwork ready: As we’ve outlined the first step is getting your financial records and supporting documents in order. This includes your annual accounts, bank statements, invoices and receipts.
- Find a qualified auditor: You’ll need to appoint a qualified auditor who is registered with a recognised body. It’s best to choose someone who understands the unique rules and regulations of the charity sector.
- The audit: Your auditor will work with you to review your financial records, systems and controls. They’ll ask questions and request certain documents. The goal is a collaborative effort to ensure everything is correct.
- Receive the report: Once the audit is complete, the auditor will issue a formal audit report. This document will be a key part of your annual submission to the Charity Commission for England and Wales
How to file charity returns
Once your accounts are prepared and, if required, have been externally checked, you must file your annual return with the Charity Commission for England and Wales.
Your annual return must be submitted within 10 months of the end of your financial year. For most charities, this is done online through The Charity Commission. Depending on your income, you will be required to submit:
- Your trustee annual report.
- Your accounts.
- Your independent examination or audit report.
Please note: If your charity is also a company, you will have separate filing requirements with Companies House.
Summary
Understanding the financial thresholds is key to staying compliant and knowing when you may require an audit. Following this process is an essential part of showing everyone that your charity is well managed and credible, and protects the integrity of the work you do.
How we can help at Warr & Co.
At Warr & Co we believe in supporting the vital work of the charity sector. We specialise in providing tailored audit and assurance services for charities, not-for-profits, and charitable trusts across the UK.
With a thorough understanding of the charity sector and its regulatory requirements, including the Charities Act 2011 and SORP (FRS 102), our team of chartered accountants ensures your organisation remains fully compliant and audit ready, allowing you to focus on your work.
To find out more take a look at our charity audits page or complete the form below to arrange your free, no obligation consultation with our qualified charity audit chartered accountants.
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