ACCA calls for increase to audit threshold for Scottish charities

ACCA has called for the Scottish government to increase the threshold at which charities have to complete an audit, to “relieve time and cost pressure on hard-pressed charities”.

The news comes in response to a Scottish government consultation that sought views on the need for a review of charity regulation, including whether the current audit threshold needs to be raised.

The association, whose members provide audit and accounting services to charities across Scotland, has revealed that smaller charities pay “proportionately” more for an audit compared with larger charities. 

These findings came on top of feedback from ACCA members across Scotland that some charities were struggling to find an audit supplier.

A decline in audit firm numbers, combined with the complexity of audit and the lower threshold bracket for charity audits in Scotland compared to England and Wales, can result in higher fees, ACCA says, and makes it harder for smaller charities to find an auditor.

Publicly available data analysed by ACCA experts, covering a sample of around 50 charities, showed that for those with a turnover under £1m who were subject to audit, the cost of the fee as a percentage of their annual income was on average 0.8%. This is compared to 0.4% for charities with an income over £1m.

Currently, charities with an annual income over £500k are required to complete an audit in Scotland, while the threshold is £1m in England and Wales. The income threshold has not been updated since the 2005 legislation was introduced in Scotland.

Susan Love, strategic engagement lead for Scotland at ACCA, said: “While the public rightly expects high standards of governance and transparency, we have an opportunity to relieve some cost pressure from those charities currently subject to the rigour of the audit process.

“While these charities would still be subject to external scrutiny of their accounts via the Independent Examination process, a larger pool of professionally qualified accountants can provide this service, in comparison to an audit, where processes can take a lengthy period of time and specialist talent is required.”

She added: “Better and more up-to-date regulations will not only ease the burden on small grassroots charities, but it will ensure that their hard-earned fundraising will continue to go to the causes that need it most.”

Kirsten Hogg, head of policy and research at the Scottish Council for Voluntary Organisations, said: “We welcome ACCA’s support for a review to better understand these issues, and to develop sensible solutions that work for both charities and the accountancy industry, while ensuring that charities continue to meet appropriately high standards of governance and regulation.”