The impact of Kids’ Company continues to reverberate in the charity sector. Companies House is now taking action against the former directors of Kids’ Company to ban them from serving as company directors. It is also noticeable that the Charity Commission are taking a much more proactive and interventionist stance towards charities where they believe that trustees are taking insufficient care to retain adequate reserves for charities. They are also expecting auditors and independent examiners to take a more active and responsible role in helping them regulate the sector.
Compliance reviews
Details can be found here.
Although only a few charities have been selected for review this is indicative of a far more robust policing of the sector when taken in conjunction with their campaign to ensure charities file accounts on time.
Auditor responsibilities
In a separate development, the Charity Commission have indicated that they are now expecting auditors and independent examiners to make a formal report to the Charity Commission far more frequently and in particular when a qualification or emphasis of matter is included in the audit or independent examiner’s report. This is particularly the case if there are going concern issues or issues with insufficient reserves.
One of the main criticisms of the auditors in the “Kids’ Company” case was that although they had correctly identified there was an issue and referred to it in their audit report, some felt the wording was insufficiently robust and the auditors did not follow this up by contacting the Charity Commission to discuss their concerns. The new requirements are intended to avoid such issues in future.
What does this all mean for charities?
There are of course no similar reporting requirement for other not for profit entities, but the lessons of ensuring that there are adequate reserves apply equally across the sector.
For more information on the ongoing implications following the fallout from Kids Company, contact Richard Snelling by phone on 01784 497 126 or by email at rsnelling@menzies.co.uk
Find out more about Menzies Not-for-profit and charities sector advisory services.