Failings included incomplete reporting of “related party transactions”, which can identify conflicts of interest. In total there were 77 cases in which these were not properly disclosed, the commission said.
Of the charities with incomes between £250,000 and £1m, only 51% satisfied the external scrutiny benchmark, which gives the public assurances over charities’ accounts, while those between £25,000 and £250,000 achieved it in just 37% of cases.
Nigel Davies, head of accounting services at the Charity Commission, said: “We know from research we have carried out into public trust in charities that the public care deeply about transparency. It is therefore vital that charities are able to provide an accurate and clear picture of their finances.
“External scrutiny is an essential part of the checks and balances process that charity accounts go through and so it is disappointing that so many independent examiners and auditors appear to lack the necessary understanding of the external scrutiny framework.”
The commission said it is working closely with the Institute of Chartered Accountants for England and Wales and the Association of Chartered Certified Accountants to improve their members’ awareness.
“I hope trustees will learn from this study, in terms of the expectations around reporting, and in ensuring they select an independent examiner that knows about and understands the requirements.”
