Whistleblowing requirements in the charity sector
For good reasons the charity sector is an area subject to a considerable amount of regulation, including the requirement for auditors and independent examiners to report directly to the appropriate charity regulator should they have any matters of concern that need to be brought to the regulator’s attention.
The three UK charity regulators have issued updated guidance for auditors and independent examiners on the nature of matters that need to be brought to their attention, which takes effect from 1 May 2017. This guidance expands on that previously issued, and requires reports to be made in two new areas:
- Where concerns over a charity’s accounts have resulted in a modification to the audit report or independent examiner’s report; and
- Where there are concerns that conflicts of interest have not been appropriately managed, and/or where any related party transactions have not been fully disclosed in the accounts.
It is perhaps surprising that there wasn’t already a requirement to notify the regulator that a qualified audit or independent examiner’s report had been issued, and of course the accounts containing the report are already being filed. Now would be a good time though for charities to review their approach to managing any conflicts of interest that arise in order to prevent the possibility that they need to be reported to their regulator for poor standards of governance. This would involve ensuring that they are following the guidance for trustees on managing conflicts of interest that has been published by each of the regulators, including having an appropriate conflicts policy in place, maintaining a register of the charity’s related parties and any transactions that have arisen with them, and adequately documenting any issues that do arise in the trustee board minutes.
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