The Charity Commission’s key focus over the last year has been to improve public trust in Charities through transparency in both the accounts they file and the story they present.
The Commission remain concerned that charities advisers are not reporting “reportable matters” when they arise. Charity Trustees have a duty to appoint an independent examiner or auditor to review their accounts and Charity Trustees should therefore be aware of the matters of material significance and the duty placed upon their examiner or auditor to report matters to the regulator.
In summary the following matters must be reported:
- Dishonesty and fraud – matters suggesting dishonesty or fraud involving a significant loss of, or a material risk to, charitable funds or assets.
- Internal controls and governance – governance failure(s) of internal controls, including failure(s) in charity governance that resulted in, or could give rise to, a material loss or misappropriation of charitable funds, or which leads to significant charitable funds being put at major risk.
- Money laundering and criminal activity – knowledge or suspicion that the charity or charitable funds including the charity’s bank account(s) have been used for money laundering or such funds are the proceeds of serious organised crime or that the charity is a conduit for criminal activity.
- Support of terrorism – matters leading to the knowledge or suspicion that the charity, its trustees, employees or assets, have been involved in or used to support terrorism or proscribed organisations in the UK or outside of the UK, with the exception of matters related to a qualifying offence as defined by Section 3(7) of the Northern Ireland (Sentences) Act 1998.
- Risk to charity’s beneficiaries – evidence suggesting that in the way the charity carries out its work relating to the care and welfare of beneficiaries, the charity’s beneficiaries have been or were put at significant risk of abuse or mistreatment.
- Breaches of law or the charity’s trusts – single or recurring breach(es) of either a legislative requirement or of the charity’s trusts leading to material charitable funds being misapplied.
- Breach of an order or direction made by the charity regulator – evidence suggesting a deliberate or significant breach of an order or direction made by a charity regulator under statutory powers including suspending a charity trustee, prohibiting a particular transaction or activity or granting consent on particular terms involving significant charitable assets or liabilities.
- Modified audit opinion or qualified independent examiners report – on making a modified audit opinion, emphasis of matter, material uncertainty related to going concern, or issuing of a qualified independent examiner’s report identifying matters of concern to which attention is drawn, notification of the nature of the modification/qualification/emphasis of matter or concern with supporting reasons including notification of the action taken, if any, by the Trustees subsequent to that audit opinion, emphasis of matter or material uncertainty identified/independent examiner’s report.
- Conflicts of interest and related party transactions – evidence that significant conflicts of interest have not been managed appropriately by the trustees and/or related party transactions have not been fully disclosed in all the respects required by the applicable SORP, or applicable Regulations.
Where charity Trustees are aware that a reportable matter has arisen, Trustee’s should discuss the matter with their examiner or auditor and provide as much information as they are able, subject to any restrictions imposed by other legislation, so that a full picture is obtained, and a full and clear report can be made.
The Charity Commission in conjunction with OSCR (Scottish Charity Regulator) and The Charity Commission for Northern Ireland have produced guidance which can be found here.
If you have any questions please contact Deborah Austin.