Mind the knowledge gap on small charity boards

A recent inquiry from a small charity to an audit partner highlights a growing concern within the sector: a fundamental lack of awareness regarding statutory reporting obligations. The charity in question, with an income of around £90,000, sought an audit simply because an affiliate requested it. The trustees had no real understanding of what an audit involved, nor whether a full statutory audit was genuinely required or if a more limited assurance engagement would suffice. However, the enquiry highlighted deeper governance and reporting issues when a review revealed that the charity had submitted late accounts for four consecutive years, filed a largely blank annual return, and had never undergone an independent examination despite being well over the statutory threshold.

This scenario is not an isolated incident but represents a wider challenge for the thousands of small charities that make up much of the sector.

According to the charity register in March 2026, the vast majority of registered charities are small. Approximately 75% of all charities have an income of less than £100,000, yet they collectively account for only 2.2% of the sector's total income. Smaller charities are the lifeblood of the sector – they are often embedded into their communities, allowing them to build trust and respond to emerging local needs more quickly than larger organisations could. Despite their small financial footprint, these charities will (like their larger counterparts) face regulatory scrutiny if they fail to meet their reporting requirements. For the 2023 reporting cycle, while over 101,000 charities successfully filed their returns, approximately 7,265 charities failed to meet their submission requirements by the end of 2024.

The Charity Commission’s requirements are tiered based on size and legal structure, and returns must be submitted using the regulator’s My Charity Commission Account online portal.

Trustees will need to check which bracket their charity falls into, which depends on the annual income of the charity legal form of the charity (Charitable Incorporated Organisations, known as CIOs, have more stringent requirements). Even the smallest charities (with income below £10,000) must report on their income and expenditure.

• Income up to £10,000: charities should complete the income and expenditure sections of the annual return.
• Income over £10,000: all registered charities – and all CIOs regardless of income – must prepare and file a full annual return – answering a list of questions.
• Income over £25,000: at this level, statutory requirements for external scrutiny, such as an independent examination, begin to apply. This threshold will increase to £40,000 later in the year (expected to come into force in autumn 2026 – click here for more information).
• Income over £1 million (or lower thresholds where gross assets exceed £3.26 million and income exceeds £250,000): a full statutory audit is required. This threshold will increase to £1.5 million later in the year (or lower thresholds where gross assets exceed £5 million and income exceeds £500,000) – click here for more information.

Please read the Charity Commission’s guidance to ensure you understand all elements of your charity’s filing and external scrutiny requirement.

As seen in the case of the charity with £90,000 in income, failing to understand these tiers leads to significant non-compliance. While a full statutory audit may be a disproportionate compliance burden for a charity of that size, the failure to obtain any form of independent assurance is a breach of duty.

The Charity Commission takes a firm stance on persistent non-compliance. A statutory class inquiry specifically targets "double defaulter" charities, i.e. those that have failed to file their annual documents for two or more years in the last five.

The Commission regards the failure to submit these documents as misconduct and/or mismanagement in the administration of a charity. In some instances, this neglect can even be considered a criminal offence. During the period between April 2024 and March 2025, the Commission's inquiry into double defaulters tracked dozens of charities, resulting in over £47 million of charitable income finally being accounted for through enforcement actions. For some organisations, the inquiry even revealed serious regulatory concerns, leading to separate investigations into financial mismanagement and conflicts of interest.

For accountants and trustees, the message is clear: compliance is not optional, and ignorance of the rules is not a valid defence. Trustees have a legal obligation to ensure their registered details are up to date and that all annual documents are filed on time.

Beyond avoiding legal repercussions, timely and accurate reporting is essential for public trust and confidence. Providing transparent financial information helps donors, beneficiaries, and funders understand a charity's work and ensures the organisation remains operationally sustainable. For the large portion of charities currently reporting expenditure that exceeds their income, clear financial reporting is more critical than ever to demonstrate financial resilience.

For more information, and to understand requirements in Scotland and Northern Ireland, ICAEW members can access our helpsheets for each jurisdiction, and the charity regulators provide detailed guidance for all charity trustees online.

England and Wales

• Helpsheet: Charities – financial reporting and scrutiny (England and Wales)
• Charity Commission for England and Wales

Scotland

• Helpsheet: Charities – financial reporting and scrutiny (Scotland)
• Office of the Scottish Charity Regulator (OSCR)

Northern Ireland

• Helpsheet: Charities – financial reporting and scrutiny (Northern Ireland)
• The Charity Commission for Northern Ireland (CCNI)