Nigel Davies, head of accountancy services at the Charity Commission, said: ‘Last year’s Public Administration and Constitutional Affairs Committee report on Kids Company noted that auditors have been too reticent when it comes to reporting matters of concern that would be of interest to the regulator. Through this new publication we are encouraging and enabling the profession to step up and engage with us more readily on a proactive basis.’

The three UK bodies – the Charity Commission, the Scottish Charity Regulator (OSCR) and the Charity Commission for Northern Ireland have published guidance covering information that would be helpful for the profession to report, even though it does not meet the criteria for being materially significant. 

This is the first time the regulators have provided examples on reporting matters that are relevant but not a legal requirement to report. The publication advocates a ‘when in doubt, report it’ approach and includes examples of relevant matters which should be highlighted.

These include instances where insecure funding risks putting beneficiaries at risk. The example given is a charity established to care for vulnerable adults and children is reliant on a single contract for 90% of its income in the reporting period and the trustees are uncertain whether they will be able to secure future funding at the current level when the contract is renewed the following year.

Another area of concern covers donations that may indicate vulnerability to abuse, such as large donations made via an intermediary organisation, restricted to teaching the strict beliefs of a particular religion or requiring educational materials to be purchased from a specified overseas source. 

Auditors are also warned to look for instances of lack of financial oversight by the whole trustee body, for example where minutes show that the finances of a large charity are only considered annually during a presentation from the CEO.

Other scenarios which might also raise red flags are instances of breaches of trust where the trustees have taken no remedial action, even if the impact on the accounts is minimal, or situations where a charity seems to be overly reliant on a key individual.

Laura Anderson, head of professional advice and intelligence at OSCR said: ‘This document is a collaborative initiative between UK regulators. This joined up approach to guidance has enabled us to provide the most consistent and comprehensive insights on areas we encourage auditors to report to us, drawing on UK-wide experience across the sector.’

Myles McKeown, head of compliance and enquiries at Charity Commission for Northern Ireland said: ‘With over 200,000 registered charities operating across the UK we as regulators cannot possibly upturn every stone, and so auditors and independent examiners have an incredibly important role to play in helping us regulate effectively.’

Reporting of relevant matters of interest to UK charity regulators is here.