Despite being told in advance that their charity would be probed for the annual review, a third of charities still failed to file their accounts on time, with 37 sets of accounts submitted more than 90 days after being placed into the enquiry.

Of the accounts reviewed, a total of £42.4m of income was at stake and had not been accounted for to the general public through the Commission’s register.

The majority (72%) of the charities under review were involved in education or religious charities.

 The annual double defaulters’ report reviewed 45 charities with overdue accounts and although the majority rectified their accounting failures in 2016-17, the Commission said that 27% never failed accounts once they were under review and went into default, leaving governance and probity questions.

Following the annual investigation, nine charities have been placed into separate inquiries by the Commission, while seven submitted accounts without an appropriate external scrutiny report.

Those under investigation were hauled up for a number of failures, including being unable to verify opening balances, inadequate provisions and insufficient third-party documentation.

Two of the charities were flagged  for special attention by the Commission examiner with concerns about a fraud in one case, and in the other due to a lack of controls over cash donations received and cash payments.

In addition, of those that contained all the required documents to make up a set of accounts, 12 did not comply with the accounting framework – namely the Charity SORP [Statement of Recommended Practice] or had other issues such as financial difficulties.

The majority of charitable companies in the review who filed their accounts late to the Charity Commission, also filed late with Companies House.

Nearly a quarter of charities with late filing issues were also referred for further risk assessment and may receive further queries on certain non-accounting issues such as conflicts of interest or to establish why income figures submitted in the annual return do not agree with the submitted accounts, the Commission said.

There was no reason or excuse for late submission to the Commission other than trustees’ poor oversight as shown in the reasons given for filing accounts late, including: changes in staff; illness of staff; confusion by trustees as to when accounts should be submitted; trustees thinking that accountants were submitting the accounts; difficulty in filing online; and trustees not being aware of their duty to file accounts with the Commission.

Over £42 million of charitable income has been accounted for to the general public through the Commission's register.

Nigel Davies, head of accountancy services at the Charity Commission, said: ‘The public want and deserve to see how charities spend their money, and this inquiry underpins our commitment to ensuring trustees are transparent in their reporting. Today’s findings are a reminder that late filing or defaults can be an indicator of wider governance failings, which is why we flag them clearly on our register. We offer free reports and accounts packs for trustees and practitioners to help them comply. These are designed to assist smaller charities and we would encourage trustees who need help to make use of them.’

The trustees’ annual report and accounts are important to public trust and confidence because they set out what activities have been undertaken, the money received and spent. Charities with an income above £25,000, and all charitable incorporated organisations (CIOs) must file copies of their trustees’ annual report, accounts and external scrutiny report (audit or independent examiners’ report) with the Commission.

As part of its aim to ensure that charities comply with this requirement, the Commission undertakes a programme of work to identify and follow up on charities that have not provided the required information for two years or more.

These ‘double defaulting’ charities are given the opportunity to file these documents within a certain time period. If they do not comply with this request, they are put into a class inquiry, opened under section 46 of the Charities Act 2011.

Charity Commission Double Default Class Inquiry 2016-17 – key findings from our review of accounts submitted by double defaulting charities

Report by Sara White