ACCA welcomes the Scottish Government’s consultation on charity regulation in Scotland.
Many ACCA members play a role supporting charities in Scotland – whether those working in finance across the charity sector, providing accountancy and audit services, or as trustees or volunteers for local or national organisations. Charity regulation is therefore an area of significant interest and importance for our members in Scotland and across the UK.
We have previously highlighted feedback from our members to the Scottish Government that concerns exist about the current threshold requirement for audit and the impact on smaller charities. During the consultation period we held an online discussion session open to all ACCA members in Scotland, and attended by Scottish Government officials, to hear more about the consultation and enable members to share feedback. To further support our response to this consultation, we have also undertaken a limited desktop research exercise exploring a sample of publicly available information relating to audit fees paid by charities. While the data we have gathered provides initial insight of the operation of the audit services market for charities in Scotland, we would encourage further research of this kind to support deeper analysis and would be happy to support such research.
While overall difficult to identify obvious patterns across our data sample, there are indications that a number of charities are changing their auditor or independent examination provider year on year, possibly driven by a desire to access more competitive pricing. The data also demonstrates that the cost of audit has a disproportionate impact on smaller charities, with the fee representing an average of 0.8% of charity income for charities with income of less than £1M in 2023 compared with 0.4% of charity income for charities with income of more than £1M in Scotland.
On balance, and with the recommendation that further analysis of this data be undertaken by the Scottish Government, our data sample, combined with feedback from members providing audit and independent examination services to charities, suggests that increasing the current audit income threshold would be beneficial.
Please download the attachment to read our response the this consultation.