Auditing might seem like something only large corporations need to worry about, but for charities, it plays an essential role in maintaining transparency, trust and financial health. Whether your charity is large or small, ensuring financial accountability is key to demonstrating your organisation’s impact and fulfilling your legal obligations. But exactly why do charities need auditing? Let’s break it down.

Auditing provides transparency and trust

Charities, by their very nature, rely heavily on public trust. Donors, grant makers and supporters need to feel confident that the money they’re contributing is being used appropriately. An audit provides an independent assessment of your charity’s financial records, helping to ensure everything is in order and that funds are being directed where they should be.

We understand that, especially in the charitable sector, transparency is paramount. We’ve all seen how quickly trust can evaporate when financial irregularities are uncovered in a charity, even if unintentional. With regular auditing, you can demonstrate that your charity operates with integrity, which strengthens relationships with donors and stakeholders alike.

Legal obligations and financial thresholds

Not every charity is required to have a full audit. However, the Charities Act 2011 sets out specific requirements for when an audit is necessary. For the 2024/25 tax year, any charity with an income over £1m or assets exceeding £3.26m with an income above £250,000 must have an audit. Even if your charity doesn’t meet these thresholds, you may still choose to have an audit for added credibility.

In addition to audits, smaller charities may be required to have an independent examination of their accounts. This still offers a level of external scrutiny but is less detailed and less expensive than a full audit.

We’re here to help you navigate these requirements and ensure you meet your legal obligations, whatever the size of your charity.

Safeguarding against errors and fraud

Mistakes can happen – even in the best-run charities. From accounting errors to mismanagement of funds, issues can arise that, if left unchecked, could lead to larger problems. An audit helps to identify these issues early on, giving you the chance to address them before they become serious.

In more severe cases fraud can occur, particularly in organisations that handle large sums of money. While no one wants to think about the possibility of fraud within a charity, it’s an unfortunate reality that needs to be considered. Auditing provides a safeguard by introducing an additional layer of scrutiny, making it harder for fraud to go unnoticed.

Improving financial management

An audit doesn’t just highlight what’s wrong – it also offers valuable insights into how your charity can improve its financial management. Auditors review your processes and systems, often making recommendations on how to streamline operations, reduce waste and enhance financial efficiency.

We’ve found that many charities come away from an audit with a much clearer understanding of their financial position and the tools they need to improve their operations. Ultimately, better financial management leads to more resources being available for the causes that matter most.

Strengthening donor confidence

One of the main benefits of auditing for charities is how it strengthens donor confidence. When donors can see that your charity’s accounts are transparent, they’re more likely to continue supporting your work. In fact, many grant-making bodies and large donors will require an audit before committing funds, as it reassures them that their money will be handled responsibly.

In an increasingly competitive charity sector, where donors have many options, the added credibility of audited accounts can significantly improve the security of funding.

Supporting long-term sustainability

It’s not just about the here and now – auditing helps to secure your charity’s long-term sustainability. By identifying financial risks early on and ensuring compliance with legal requirements, audits can protect your organisation’s future. This is particularly important for charities that rely on long-term partnerships or seek multi-year funding from grant providers.

We work with many charities to help them build a financially secure foundation, and we see time and time again how auditing strengthens their ability to plan for the future. With clear, accurate financial information, charities can make informed decisions about growth, spending and strategic direction.

When should charities consider voluntary audits?

While not every charity is legally required to have an audit, there are times when a voluntary audit can be beneficial. If your charity is going through a period of growth, dealing with complex financial transactions or seeking to build credibility with potential donors or partners, an audit can provide peace of mind.

Additionally, if your charity has experienced any financial difficulties or leadership changes, an audit can help to reassure stakeholders that the organisation is on solid financial footing.

We always recommend speaking with a professional accountant to determine whether a voluntary audit might be a good fit for your charity. It’s an investment in the future of your organisation and could save you from bigger issues down the line.

How we can help

At Nicholas Peters & Co we specialise in working with charities across the UK, providing expert audit services tailored to the unique challenges of the sector. Our team understands the financial pressures charities face and we’re here to help you meet your obligations without adding unnecessary stress.

We’ll work closely with you to ensure that your audit is smooth, thorough and beneficial to your charity’s financial health. We take pride in offering practical advice, helping you implement any necessary changes and ensuring you’re well positioned to continue doing the important work your charity does.

The bottom line

Auditing is about more than just ticking a box – it’s about maintaining trust, improving financial health and safeguarding the future of your charity. Whether you’re legally required to have an audit or are considering one voluntarily, the benefits are clear. We’re here to support your charity every step of the way, ensuring that you have the financial transparency and accountability needed to thrive.

So, why do charities need auditing? Get in touch with Nicholas Peters & Co – our team of accountants is here to help answer that question for you.