For charities, financial audits are more than a regulatory obligation. They’re a chance to build trust, improve operations, and demonstrate accountability to stakeholders. Gavita has a dedicated charity audit team, Here, we explain why having an audit can be a powerful asset for your charity.
Table of Contents
Why should charities prioritise having a financial audit?
Audits provide assurance that your charity’s finances are well-managed and transparent. For trustees, donors, and funders, an audit demonstrates that your charity takes its financial responsibilities seriously. It’s also an opportunity to identify inefficiencies and strengthen internal controls.
When is an audit legally required for a charity?
In England and Wales, a charity is required to undergo an audit if:
- Its annual income exceeds £1 million
- Its income exceeds £250,000 and its gross assets exceed £3.26 million
Charities that don’t meet these thresholds, they must have an independent examination, which is less rigorous but ensures a level of compliance, if they have income of more than £25,000 and if it exceeds £250,000, they must be independently examined by a qualified accountant.
When should a charity consider an audit even if it’s not required?
Even if not legally required, an audit should be considered to reassure donors and funders about financial stewardship, prepare for significant growth or new projects, or address complex funding arrangement reporting requirements. Proactively opting for an audit showcases a commitment to robust governance and transparency.
What challenges might charities face during an audit?
Charities often encounter specific challenges, such as restricted funds, disorganised records, and compliance with charity regulations. Ensuring records are well-maintained and working with auditors who specialise in the charity sector can help navigate these complexities effectively.
How can charities prepare to have an audit?
Preparation is essential for a smooth audit process. Steps include organising financial records, reviewing compliance requirements, addressing internal control gaps, and communicating early with your auditor to ensure a smooth process.
What are the benefits of having an audit, even if it’s not required?
Choosing to have an audit offers several advantages:
- Enhanced credibility for donors and funders
- Operational insights to improve financial management
- Strategic alignment to support informed decision-making
For smaller charities, an audit can provide assurance that supports future growth and fundraising efforts.
What are common pitfalls during audits for charities?
Common challenges include incomplete records, inconsistent reporting, and limited resources within finance teams. Addressing these issues proactively ensures the audit process runs efficiently.
Why do funders and donors value audited financial statements?
Audited financial statements provide independent verification of a charity’s financial health and governance. This builds confidence among donors and funders, showing that their contributions are being used effectively and responsibly. For charities seeking grants or major donations, an audit can be a key factor in securing support.
What should you expect as an audit outcome?
The audit process concludes with a report that includes an audit opinion, actionable recommendations, and increased trust among stakeholders that the charity is meeting its financial obligations.
Final thoughts
Opting for a financial audit can offer significant advantages for charities, from building donor trust to enhancing operational efficiency. Whether your charity is legally required to have an audit or you choose to undertake one voluntarily, the process can help ensure that your organisation is well-positioned for future success.
If your charity is considering an audit, Gravita’s team of charity audit specialists is here to guide you every step of the way.
