ACCA Recommends Regular Review of Charity Audit Thresholds
The Association of Chartered Certified Accountants (ACCA) has put forward a proposal urging the UK Government to implement a systematic decennial review of financial thresholds that determine whether charities are required to undergo statutory audits. This recommendation arises from ACCA’s belief that the existing thresholds are outdated and should be updated to reflect current economic conditions and the evolving charity landscape.
Raising the Audit Threshold for Charities
In its latest submission, ACCA suggests increasing the gross annual income threshold that mandates an audit from £1 million to £1.5 million. According to the organization, this adjustment would align financial reporting requirements with the growth in operational costs and inflation over the years. The current threshold has not kept pace with economic changes, leading to an unnecessary audit burden on smaller charities.
“We believe that a higher threshold would reduce the regulatory and financial burden on smaller charities,” said ACCA’s spokesperson. “It would allow them to allocate more resources directly toward their charitable missions, rather than compliance.”
Addressing Inflation and Sector Growth
ACCA highlights that inflation and the expansion of the charity sector have significantly changed the financial landscape since the last review. Many charities now operate with larger budgets, but their core activities remain focused on delivering community benefits, not generating profits. The existing financial thresholds, if left unchanged, could hinder their ability to function efficiently.
“When thresholds remain static for too long, they cease to reflect the realities these organizations face,” ACCA stated. “A decennial review would ensure that the financial criteria governing charity audits remain relevant and fair.”
Benefits of a Decennial Review Cycle
The ACCA proposes that the UK Government introduce a structured, ten-year review cycle for all charity-related financial thresholds. This would include not only audit requirements but also other reporting obligations that depend on income and asset levels. A periodic review would introduce consistency, reduce uncertainty, and enable charities to plan their finances more effectively.
“Charities should not be left in limbo, wondering when and how the rules might change,” said the ACCA. “A predictable review schedule would bring clarity and help build trust between the sector and regulators.”
Stakeholder Support and Sector Implications
The proposal has been welcomed by various nonprofit organizations and financial experts, who view the move as a positive step toward regulatory modernization. Many charity finance officers have long advocated for threshold adjustments, arguing that the current levels force smaller nonprofits to spend disproportionately on audits, diverting funds from their core missions.
“This is a long overdue reform,” said Jane Holloway, finance director at a mid-sized UK charity. “Our annual income just tips over the £1 million mark, and the cost of audits significantly affects our service delivery capabilities. If the threshold were raised, it would make a tangible difference.”
Potential Concerns and Safeguards
Despite widespread support, some experts caution that raising audit thresholds could lead to reduced financial transparency among smaller charities. To address these concerns, ACCA recommends implementing alternative accountability measures, such as independent examinations or increased donor reporting, for those organizations no longer subject to mandatory audits.
“Transparency must remain a cornerstone of the charity sector,” ACCA emphasized. “While reducing audit burdens is important, we must also ensure that stakeholders, including donors and beneficiaries, continue to have confidence in how charities manage their finances.”
Next Steps and Government Response
ACCA is currently engaging with policy makers and sector regulators to advance its proposal. The organization has submitted its recommendations to the Charity Commission and relevant departments within the UK Government. While formal responses are pending, early indications suggest there is appetite for reform, particularly from MPs focused on civil society and regulatory efficiency.
If adopted, the proposal could lead to a broader conversation about streamlining financial regulation across the nonprofit sector. It also opens the door to similar reforms in other sectors where regulatory thresholds have remained static for years.
Conclusion
ACCA’s call for a decennial review of charity financial thresholds is a timely and strategic proposal aimed at modernizing the regulatory framework governing the UK’s nonprofit sector. By aligning audit obligations with current economic realities and introducing predictable review cycles, the move could provide much-needed relief to smaller charities while maintaining sector accountability.
As the UK Government considers these recommendations, the charity sector watches closely, hopeful that future regulatory changes will foster sustainability, transparency, and efficiency across the board.
This article is inspired by content from The Accountant. It has been rephrased for originality. Images are credited to the original source.