Posted 24/07/2018 In Advice, Blog 2018-07-242018-09-05https://www.wrightvigar.co.uk/wp-content/uploads/2017/01/wright-vigar-logo.pngWright Vigarhttps://www.wrightvigar.co.uk/wp-content/uploads/2017/01/wright-vigar-logo.png200px200px 1 0 When the Charity Law was amended in 2015, it meant that fewer charities are required to go through the audit process. The law now states that charities with an income of £1 million and over are legally required to be audited. Audits may also be undertaken if it is required by the charity’s governing document or due to a condition from a funder. However, there is still a strong argument why non-profits and social enterprises should voluntarily submit their accounts for inspection by an auditor. Finding an accountant and auditor that specialises in the not for profit sector can help identify opportunities within the charity to avoid non-compliance, which can cause damage to the charity’s reputation. The benefits of an external audit can be broken down into three areas: Assurance If you are a trustee or a stakeholder of a non-profit organisation, having an external auditor look over your accounts can give you greater confidence that the accounts are being properly managed and that your accounting system is producing reliable financial information. An external audit can also give support to the financial position of the charity and give a clear financial basis from which to make decisions. Whilst an audit can’t guarantee that fraud is not taking place within the organisation, it is an important tool in the prevention of fraud. The audit can highlight where processes and safeguards are lax and suggest positive improvements to reduce the possibility of fraud. Credibility It’s no secret that non-profit organisations and social enterprises rely heavily on the financial support of their donors. An individual’s decision to start donating or to continue to carry on supporting a charity can be based on whether they feel the charitable organisation is using their donated money wisely. Even a small reduction in the money that the charity receives can have a big impact on the delivery of services and projects. Being able to demonstrate the credible financial position of the charity and internal controls can also help in securing grants and loans. For example, if you are looking to secure a loan from a bank or other funding provider it may be a prerequisite of the loan agreement that you can present a set of audited accounts. Failure to have these readily at hand could cause delays to the processing of the loan application, causing the charity to experience short or long term financial difficulties. Financial improvements Engaging with an external auditor to work alongside a UK accountant can offer great assistance to the charity’s management team. Together the accountant and auditor should be able to find ways to improve the accounting process and make it more agile. Specifically, they should be able to suggest improvements to systems and controls that can cut time and reduce costs. By bringing onboard an auditor, who can assess the current structure of the social enterprise, they may be able to recommend changes where applicable to minimise the charity’s tax and VAT liabilities. The auditor and accountant can work together to drill down into the charity’s accounts and expose any financial issues that can be fixed. This may include cutting the cost of borrowing, reducing overhead spend on things like utilities and general supplies. Another important service that an external auditor can perform, is benchmarking your charity against another. This allows them to identify any areas that require change and to make recommendations that will assist the charity in achieving their financial goals. It’s vital that you choose a firm of accountants who have specialist knowledge of the non-profit and social enterprise sector. We’re proud to be working with over 60 charities of varying sizes, offering expert support covering governance, taxation, operational assistance and trustee’s reports and accounts. Drop us a line to see how Wright Vigar can help with charity and not-for-profit accounting. Recent PostsWhy use a specialist accountant for sole trader services in creative industries?How much should I be paying? A guide for accounting fees for small businessWelcome to Antony!