Charity sector sees audit bill spiral by £10 million

19 June 2019 4 min. read
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Charities across the UK have been left wondering if their auditors are delivering them value for money, with the reporting that the UK’s largest third sector entities have seen an additional £10 million added to their collective accounting bill in less than four years. The news comes as many charities face periods of restructuring thanks to declining state support and falling public contributions.

The majority of consumers now expect companies to take a stand on current and broadly relevant issues such as sustainability, transparency and fair employment practices. Companies are therefore having to take ‘purpose-driven’ business more seriously than ever before, if they are to retain their customers. While businesses feel a lot more comfortable simply talking about purpose-led work and continuing with their standard business practices tied to profits and growth, however, walking the walk has proven significantly more difficult.

The professional services industry is by no means exempt from this. On the one hand, auditing and advisory firms have for a long time sought to publicise their pro bono projects, helping out non-profits free of charge with services which might ordinarily cost thousands of pounds. This is partially because it pays for large companies to create corporate social responsibility policies in an age of constant public scrutiny, while employees often enjoy the projects as a change of pace and subject, while the firm can take a degree of credit for helping to improve the lives of others.

Charity sector sees audit bill spiral by £10 million

On the other hand, however, startling new figures from third-sector financial services firm Charity Financials suggest that UK charities are being held over a barrel by their accounting firms. According to the most recent figures, the UK’s largest charities paid audit fees of £72.3 million in 2017-18 – a rise of more than £10.2 million in just four years – something which might be seen as slightly conflicting with the kinder, gentler image the professional services sector has deployed in their CSR campaigns.

According to the Charity Audit Spotlight 2019 report, produced by Charity Financials earlier in June, a stunning 33% of the UK’s top 5,000 charity organisations were hit by an increase in fees. At the same time, just 44% saw no change, while 19% saw a decrease. The rest either did not disclose the fee they paid or have only reported it for one year. According to the research, the most expensive audit for a charity with an income below £1 million was a sizable £36,000, paid by the Prudential Staff Charitable Trust to KPMG.

The rising fees will undoubtedly have contributed to the 344 auditor changes in the sector during 2017-18; 43% of charities, however, have not changed auditor within the last decade. There are 797 firms which advise the UK’s top charities, so even though there is strong competition in the sector, charities seem reluctant to shop around. The study found that the largest charity to switch auditors in the year was Nuffield Health, paying a fee of £300,000 to Deloitte to take on its auditing portfolio from Grant Thornton.

The news comes amid a harsh environment for the third sector, and many charities are now faced with a period of difficult restructuring to simply keep their doors open – while some have even sacrificed keystone services to the private sector in the pursuit of remaining solvent. Recently, disability charity Scope – which refocused its support efforts amid a downturn in donations – sold its regulated and day services provision wing to private sector firm Salutem Healthcare, which will now run the services for profit. The transaction impacted services at 51 locations in England and Wales, but ultimately generated £23 million for Scope, safeguarding its other aspects.