Proposals to raise the audit threshold from £1m to £1.5m would mean around 2,000 charities would no longer have their accounts fully audited
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DCMS opens consultation into charity reporting thresholds
Charities in the arts and culture sector could benefit from reduced administrative burdens and associated costs as government explores amending the thresholds at which they have to report financial data.
The Department for Culture, Media and Sport (DCMS) has opened a consultation into whether thresholds for the reporting of financial information by charities should rise with inflation.
There are 21 financial thresholds in charity law that either fall under registration, fundraising or reporting and accounting responsibilities, or have been inserted or amended by the Charities Act 2022 or are classified as other charity regulation thresholds.
The 10-week consultation, which opened last Thursday (3 April), asks if each of the thresholds should rise with inflation, increase partially, or stay at current rates.
The consultation explains that if the thresholds are kept at the current levels, the greatest number of charities will be kept in scope.
“Keeping the thresholds at their current level means that more charities are subject to a higher level of scrutiny and reporting requirements than intended when the thresholds were set,” the consultation says.
“This increases the administrative burden and costs for charities, which can have a particular impact on smaller charities.
“However, keeping thresholds at their current level ensures more charities provide data to the Charity Commission, keeping the sector transparent and accountable to the public, which in turn helps to maintain trust and confidence in charities.”
Potential savings
The consultation adds that raising thresholds in line with the CPIH inflation index would be “the most deregulatory option” and provide the highest potential savings to charities, as fewer would fall in the scope of regulatory requirements.
It also points out fewer charities would be subject to scrutiny and highlights that the Charity Commission may “lose useful data and oversight” of parts of the sector.
The third option, of a partial increase in thresholds, is included to acknowledge that charity income has not always kept pace with inflation. The consultation says this approach “may reduce the burden on smaller charities, while still ensuring a proportionate level of transparency, data and regulation of the sector.”
Among the specific proposals is increasing the audit threshold from annual income of £1m to annual income of £1.5m. The consultation estimates the change would result in around 2,000 charities no longer having their accounts fully audited.
Registration threshold
Another proposal suggests changing the registration threshold from £5,000 to £10,000. In the consultation, the government says it would prefer to keep the current registration threshold, advising that increasing to £10,000 would mean 17,000 charities would no longer need to register.
The consultation derives from a recommendation in a 2017 report by the Law Commission which said the government should periodically review all thresholds in the Charities Act 2011.
DCMS says it is particularly interested in hearing from charities and industry experts. The consultation will run until 12 June.
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