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1 Powered by Annual Report July 2017

2 Contents Introduction and Methodology Audit fees Top auditors by fees received Top auditors by number of Top auditors by income audited Longevity of audit relationships 1

3 Audit spotlight report The headline finding of the past two Charity Audit Spotlight reports was that the growth in audit fees was slowing down. This report identifies that fees for the top 5,000 UK charities have increased by 4.4% ending a four-year run of decreasing fee growth. However, it is not doom and gloom as this report identifies that the majority of charities (85%) saw no change or a decrease in fees paid. There are 893 audit firms advising the UK s largest charities so competition is strong in the charity audit market. What this report also addresses, which remains surprising, is the number of organisations which stay with their current auditor and have done so for many years. It is possible that many organisations could lower their fees paid and get similar or better levels of service if they were to examine other firms providing the same services. It is good practice for charities to review their advisers and we hope that this report can be used as an aid in that process, for instance, figure 5 lists the top 50 firms and the average fee charged to charities which fall in defined total income bands. Other findings in this report include: n Audit fees cost the UK s largest charities 69.4m n 27% of charities have never changed auditor over the last decade. Would they get a better deal if they shopped about? n There are nearly 330 changes in audit provider on an annual basis (328 charities changed auditor in the latest year) n Crowe Clark Whitehill once again top the fee tables earning 5.7m in fees giving the firm a 8.2% market share n The firms with the most are haysmacintyre with 263 followed by Crowe Clark Whitehill with 240 and RSM with 236 n The largest charity to change auditor was the Wellcome Trust which paid a fee of 300k to Deloitte when it ly paid 200k to PwC n Last year we reported that haysmacintyre made the most client gains and the firm has done it again gaining 30 new worth audit fees of 449k Methodology Charity Financials records the names of all the advisers employed to provide services to the top 5,000 charities. These include auditors, investment managers, banks and legal advisers, as well as any others mentioned within charities annual financial statements. As far as auditors are concerned, it is the firm that conducted the audit and signed off the audit report that is recorded in the Charity Financials database. By recording the names of the advisers listed by each charity every year, we have identified when changes take place, the length of time relationships exist for, and how often charities make such changes. Background to the top 5,000 charities To be included in the Charity Financials top 5,000 charities, an organisation must have either an annual income that is greater than 1.468m, annual expenditure greater than 1.482m, or total funds/net assets greater than 3.429m. Only one of these three criteria needs to be met. Some organisations are excluded despite having charitable status, namely academies, independent schools, universities and housing associations. Those included in the top 5,000 are a varied group, both in terms of size and activity. Some focus on local services while others are involved in complex international projects. Some exist simply to provide funding to other organisations. One thing they all have in common is that they are required to be externally audited. The complexity of their operations will dictate the level of involvement required by the auditor, which in turn will be reflected in the fee charged, something that should be taken into consideration when viewing the tables included in this report. 2

4 Audit fees Slowdown in annual fee growth reverses Figure 1 shows that audit fees have increased by nearly 10m over the last five years growing from 60.1m to 69.4m. Previously we had reported that, whilst increasing year on year, the rate of fee growth was slowing and in the last report we recorded that growth had slowed for a fourth consecutive year. This time we see that there was a 4.4% growth, the highest level of growth over a five-year period. However, for the majority fees have remained the same or even decreased. In terms of the actual amounts, the top 5,000 charities paid out 69.4m in fees, compared to 66.5m the year. Figure 2 shows how many charities have increased or decreased their audit fees as well as the total audit in income bands. It shows that only 16% of the top 5,000 charities experienced an increase in audit fees, 46% saw no change, and 36% saw a decrease (with 2% either not disclosing a fee or only one year is recorded preventing a comparison to be made). Last year we recorded that 33% saw an increase, 48% stayed the same and 17% saw a decrease. This means that this year 82% either stayed the same or decreased compared to 65% last year which can only be welcome news to those charities. It can also be noticed that the percentage increase is greater for the higher income bands, meanwhile there was minimal change for the lower income bands. The greatest increase was experienced by the largest band with income greater than 80m which saw a 13.5% annual increase. The 99 organisations which belong to this band collectively saw an increase in fees of 1.1m which represents 38% of the total annual change. Figure 3 shows the range of audit fee values across each income band. It reveals that there were 32 charities that had an income greater than 80m and audit fees of more than 100,000, up from 28 reported last year. Conversely, there were 722 charities with income less than 1m and audit fees between 1k and 5k. Over half of the top 5,000 have fees less than 10k but 1,704 have fees between 10k and 30k and the remaining 386 have fees more than 30k. The most expensive audit for a charity with income under 1m was the Dutch Oak Tree Foundation which had income of just 163k Euros but had an audit fee of 40k. Meanwhile, the largest fee for a charity with an income between 1m and 3m was the 52k paid by the Assemblies of God Property Trust to PwC. The most expensive audit overall was for Save the Children International, which paid 438k to KPMG, up from 361k the year. Figure 4 details the charities with the largest audit fees. Band Figure 1: Total audit fees paid, by income band Number of organisations in band Audit fees in latest accounts Previous year Two years Three years Four years Average fee for band 0-1m 1, ,864 1m- 3m 1, ,613 3m- 10m 1, ,770 10m- 20m ,200 20m- 40m ,629 40m- 80m ,453 80m ,966 Total 5, ,170 % change on year

5 Figure 2: Audit fee increases and decreases Total audit fees year % of fees that stayed the same Band Number of organisations in band Total audit fees % change on year % of fees that decreased % of fees that increased 0-1m 1, m- 3m 1, m- 10m 1, m- 20m m- 40m m- 80m m Total 5, Band 1k - 5k 6k - 10k 11k - 15k Figure 3: Range of audit fees 16k - 20k Number of organisations in band 21k - 26k - 25k 30k 31k - 40k 41k - 50k 50k - 100k 101k + 0-1m m- 3m m- 10m m- 20m m- 40m m- 80m m Total 1,271 1, Charity Figure 4: Largest audits, by fee size Year End Audit fee ( 000) Audit fee year ( 000) Two years ( 000) Three years ( 000) Four years ( 000) Save the Children International 31/12/ Nuffield Health 31/12/ Wellcome Trust 30/09/ Oxfam GB 31/03/ Charities Aid Foundation 30/04/ Canal & River Trust 31/03/ Royal Academy of Dance 31/07/ City and Guilds of London Institute 31/08/ Cancer Research UK 31/03/ Academies Enterprise Trust 31/08/

6 Top auditors by fees received Crowe Clark Whitehill (CCW) remains in top position Crowe Clarke Whitehill (CCW) is the top charity auditor earning 5.7m in fee income from 240 as figure 5 illustrates. The firms charity business headed by Pesh Framjee earned 1.1m more than PricewaterhouseCoopers in second position earning 4.6m in fees. BDO is in third position with 4.5m in fees. Charities should use this table to compare the fees charged by firms to charities of a similar size. The table is an over simplification based on average fee but it can be used to shortlist firms which charities may want to invite to a beauty parade. For instance, the average fee charged by CCW to charities with income less than 1m was 5.9k compared to 8.4k charged by PwC. Figure 6 shows the historic audit fee totals for each firm each year, and reveals that there has been very little change in the positioning. The only movements in the positioning of firms in the top ten is PwC moving into second position above BDO and Deloitte moving above Buzzacott. The largest movements in the table are the positions of PKF Littlejohn which last year was at 39th position but are now ranked 27th and Price Bailey which was ranked 40th and is now 30th. The top 10 firms collectively earned 39.1m in fees, up from 36.9m last year, which represents 58.1% of all top 5,000 charity audit fees. Last year the top 10 firms represented 55.8% of total fee income. Of course, those firms at the top of these rankings are not necessarily the most expensive their revenue may result from the size and number of that they audit. However, this table nevertheless gives us an idea of the main players in the audit world and who is increasing their market share. The total list of 893 auditors is available to charities upon request ( mpincher@wilmington.co.uk), while subscribers to Charity Financials already have access to this. 5

7 Charity Audit Spotlight Figure 5: Top 50 auditors by fees received and average fees per income band (continued on next page) Auditor Total audit fees ( 000s) Income Band Total for top m 1m - 3m Average fee ( 000s) No of Income audited Avg fee in band No. of Avg fee in band Crowe Clark Whitehill LLP 5, , PricewaterhouseCoopers LLP 4, , BDO LLP 4, , RSM 4, , Grant Thornton UK LLP 3, , KPMG LLP 3, , haysmacintyre 3, , Buzzacott LLP 2, , Deloitte LLP 2, , Kingston Smith LLP 2, , Mazars LLP 1, , Sayer Vincent 1, , National Audit Office 1, , Moore Stephens LLP 1, Saffery Champness 1, Scott-Moncrieff Ernst & Young LLP MHA MacIntyre Hudson HW Fisher & Company Cohen Arnold Smith & Williamson PKF Cooper Parry Wilkins Kennedy LLP Kreston Reeves Knox Cropper BHP Chartered Accountants PKF Littlejohn LLP Haines Watts Bishop Fleming Price Bailey Francis Clark LLP Beever and Struthers Henderson Loggie Chiene + Tait LLP PEM Jacob Cavenagh & Skeet Wylie & Bisset LLP Critchleys LLP UHY Hacker Young James Cowper Kreston Menzies LLP Moore and Smalley Larking Gowen Wenn Townsend Johnston Carmichael Lovewell Blake LLP Broomfield & Alexander Monahans Blick Rothenberg LLP Whittingham Riddell LLP No. of 6

8 Figure 5: Top 50 auditors by fees received and average fees per income band (continued) Auditor 3m - 10m 10m - 20m 20m - 40m 40m - 80m 80m+ No. of Avg fee in band No. of Avg fee in band No. of Avg fee in band No. of Avg fee in band Avg fee in band Crowe Clark Whitehill LLP PricewaterhouseCoopers LLP BDO LLP RSM Grant Thornton UK LLP KPMG LLP haysmacintyre Buzzacott LLP Deloitte LLP Kingston Smith LLP Mazars LLP Sayer Vincent National Audit Office Moore Stephens LLP Saffery Champness Scott-Moncrieff Ernst & Young LLP MHA MacIntyre Hudson HW Fisher & Company Cohen Arnold Smith & Williamson PKF Cooper Parry Wilkins Kennedy LLP Kreston Reeves Knox Cropper BHP Chartered Accountants PKF Littlejohn LLP Haines Watts Bishop Fleming Price Bailey Francis Clark LLP Beever and Struthers Henderson Loggie Chiene + Tait LLP PEM Jacob Cavenagh & Skeet Wylie & Bisset LLP Critchleys LLP UHY Hacker Young James Cowper Kreston Menzies LLP Moore and Smalley Larking Gowen Wenn Townsend Johnston Carmichael Lovewell Blake LLP Broomfield & Alexander Monahans Blick Rothenberg LLP Whittingham Riddell LLP No. of 7

9 Figure 6: Auditors fee history Auditor Latest accounts 2015/ / / /11 Value of fees ( 000) Value of fees ( 000) Value of fees ( 000) Value of fees ( 000) Value of fees ( 000) Crowe Clark Whitehill LLP 5, , , , ,986 1 PricewaterhouseCoopers LLP 4, , , , ,797 2 BDO LLP 4, , , , ,977 4 RSM 4, , , , ,370 3 Grant Thornton UK LLP 3, , , , ,857 5 KPMG LLP 3, , , , ,717 6 haysmacintyre 3, , , , ,534 7 Deloitte LLP 3, , , , ,247 9 Buzzacott LLP 2, , , , ,530 8 Kingston Smith LLP 2, , , , , Mazars LLP 1, , , , , Sayer Vincent 1, , , , , National Audit Office 1, , , , , Moore Stephens LLP 1, , , , Saffery Champness 1, , , Scott-Moncrieff Ernst & Young LLP MHA MacIntyre Hudson HW Fisher & Company Cohen Arnold Smith & Williamson PKF Cooper Parry Wilkins Kennedy LLP Kreston Reeves Knox Cropper BHP Chartered Accountants PKF Littlejohn LLP Haines Watts Bishop Fleming Price Bailey Francis Clark LLP Beever and Struthers Henderson Loggie Chiene + Tait LLP PEM Jacob Cavenagh & Skeet Wylie & Bisset LLP Critchleys LLP UHY Hacker Young James Cowper Kreston Menzies LLP Larking Gowen Moore and Smalley Wenn Townsend Johnston Carmichael Lovewell Blake LLP Broomfield & Alexander Monahans Blick Rothenberg LLP Whittingham Riddell LLP

10 Top auditors by number of haysmacintyre and CCW overtake RSM Last year we reported that RSM had the most and that CCW and haysmacintyre were closing the gap. This year we can report that RSM have lost the top spot and have moved into third position with 236 from 244 reported last year. Haysmacintyre are now in the top spot with 263 and CCW is second with 240. BDO and Buzzacott help make up the top five as figure 7 illustrates. It should be noted that these figures can fluctuate due to charities moving in and out of the top 5,000 ranking, rather than simply because there were changes in the firms used by charities. Charity Financials users can monitor the real change in client movement by examining the gained section of each auditor s profile, which lists their newly acquired and the auditors those charities ly used. The top 10 auditors by number of worked with 1,816 charities, down from the 1,830 charities we reported for the top ten last year, which represent 36.3% of the top 5,000 sample. 9

11 Figure 7: Auditors by number of Auditor Market share % Latest accounts 2014/ / / /10 Number Number Number Number Number of of of of of haysmacintyre Crowe Clark Whitehill LLP RSM BDO LLP Buzzacott LLP Kingston Smith LLP Mazars LLP Grant Thornton UK LLP KPMG LLP PricewaterhouseCoopers LLP Sayer Vincent Moore Stephens LLP Saffery Champness Deloitte LLP Scott-Moncrieff MHA MacIntyre Hudson HW Fisher & Company Haines Watts Kreston Reeves Ernst & Young LLP Bishop Fleming Wilkins Kennedy LLP Critchleys LLP Cohen Arnold Chiene + Tait LLP BHP Chartered Accountants Knox Cropper Smith & Williamson PKF Cooper Parry Wylie & Bisset LLP National Audit Office Francis Clark LLP Henderson Loggie Beever and Struthers Price Bailey PEM UHY Hacker Young Wenn Townsend James Cowper Kreston Jacob Cavenagh & Skeet Larking Gowen PKF Littlejohn LLP BWMacfarlane Moore and Smalley Broomfield & Alexander Lovewell Blake LLP Geoghegans Tait Walker Chartered Accountants Sheen Stickland LLP Monahans

12 Figure 8 shows firms which increased their number of and the value in audit fees the increase represents. There is a caveat with this data in that we have only included charities here which had a named auditor so a comparison can be made. It therefore doesn t include new organisations which have only one financial reported year. Haysmacintyre made the greatest addition to their fee income by adding 30 which have a collective audit fee of 449k. In our Spotlight, they were top adding 19 worth 257k in fees. They are followed by Deloitte which gained 3 new worth 328k. PwC added 4 worth 214k and Grant Thornton added seven worth 201k in fees. Figure 9 shows the firms which attained the most. Again, haysmacintyre is top with 30 additions followed by KPMG with 12 and Sayer Vincent with 11. Meanwhile Figure 10 shows the largest 20 charities (by total income) to change auditor, showing the current and auditor and the fees paid. Figure 8: Firms which made the greatest fees from newly acquired Auditor New Fees from new Number of new 1 haysmacintyre Deloitte LLP PricewaterhouseCoopers LLP Grant Thornton UK LLP Kingston Smith LLP Crowe Clark Whitehill LLP RSM Price Bailey Mazars LLP Saffery Champness Figure 9: Firms by the number of attained Auditor Fees from new ( 000) Number of new 1 haysmacintyre KPMG LLP Sayer Vincent RSM Saffery Champness Kingston Smith LLP MHA MacIntyre Hudson Grant Thornton UK LLP Crowe Clark Whitehill LLP Scott-Moncrieff

13 Figure 10: The largest 20 charities to change auditor Charity Income Current auditor Previous auditor Current audit fee ( 000) Wellcome Trust Deloitte LLP PricewaterhouseCoopers LLP Ormiston Trust, The Grant Thornton UK LLP Ensors Methodist Homes PricewaterhouseCoopers LLP RSM St Mungo Community Housing Association Limited RSM Smith & Williamson United Response Crowe Clark Whitehill LLP Kingston Smith LLP Natural History Museum Kingston Smith LLP National Audit Office Imperial War Museum National Audit Office Kingston Smith LLP BBC Children in Need Ernst & Young LLP KPMG LLP NACRO Mazars LLP BDO LLP Samworth Foundation KPMG LLP Grant Thornton UK LLP 6 2 South Lanarkshire Leisure Ltd Scott-Moncrieff KPMG LLP Diabetes UK Crowe Clark Whitehill LLP Grant Thornton UK LLP London Marathon Charitable Trust Limited, The haysmacintyre Alliotts Hinxton Hall Limited Deloitte LLP PricewaterhouseCoopers LLP Human Appeal International Moore Stephens LLP Haines Watts 23 7 Milestones Trust Mazars LLP Warren & Co Benenden Hospital Trust, The KPMG LLP Crowe Clark Whitehill LLP Scottish Autism Scott-Moncrieff Cheetham & Co Healthcare Quality Improvement Partnership Kingston Smith LLP Buzzacott LLP Society of Jesus Trust of 1929 for Roman Catholic Purposes haysmacintyre Kingston Smith LLP Previous audit fee ( 000) Top auditors by income audited Income audited by PwC increases by 3.1% PwC audits the largest amount of charity income a total of 5.65bn (figure 11). This is down by 2.8% on the 5.8bn audited in the year. It has held this top ranking for the past five years, helped by large such as Cancer Research UK ( 635.2m income), the National Trust ( 522.2m) and Oxfam ( 414.7m). CCW comes second in the list with 4.85bn. Its largest include the Academies Enterprise Trust (AET, 247.1m), Oasis Charitable Trust ( 198.4m) and Sightsavers International( 198.3m). PwC has a 11.4% market share of income audited down from 12.2% we reported last year, while CCW has 9.8% up from 9.6% last year and KPMG has 8.7% compared to 8.2% last year. The top 10 firms collectively audited 69.3% of the top 5,000 charities income which is up from the 65.2% the group reported last year. 12

14 Figure 11: Top auditors by Income Audited Charity Total income audited Income audited year Income audited 2 years Income audited 3 years Income audited 4 years PricewaterhouseCoopers LLP 5, , , , , Crowe Clark Whitehill LLP 4, , , , , KPMG LLP 4, , , , , Grant Thornton UK LLP 3, , , , , BDO LLP 3, , , , , National Audit Office 3, , , , , Deloitte LLP 2, , , , , RSM 2, , , , , haysmacintyre 1, , , , , Kingston Smith LLP 1, , , , , Buzzacott LLP 1, , , , Sayer Vincent 1, Mazars LLP 1, Moore Stephens LLP Knox Cropper Saffery Champness Scott-Moncrieff Ernst & Young LLP Smith & Williamson Haines Watts Henderson Loggie MHA MacIntyre Hudson Francis Clark LLP HW Fisher & Company Beever and Struthers BHP Chartered Accountants PKF Cooper Parry Cohen Arnold Bishop Fleming Chiene + Tait LLP Wylie & Bisset LLP Menzies LLP Calcutt Matthews UHY Hacker Young Critchleys LLP Wilkins Kennedy LLP Kreston Reeves PKF Littlejohn LLP Price Bailey Broomfield & Alexander McCabe Ford Williams Johnston Carmichael Jacob Cavenagh & Skeet PEM Moore and Smalley Wales Audit Office Hardie Caldwell Business Advisers Limited Wenn Townsend Larking Gowen Lovewell Blake LLP

15 Longevity of audit relationships 41% of charities have not changed auditor in past decade Charity Financials holds data on all of the auditor changes made by the top 5,000 charities over the past fifteen years. Figure 12 shows how many charities have had either just one single auditor or multiple auditors over this period. Surprisingly, 42% of charities have stayed with the same auditor for the whole period. Among those that have changed, 36% have changed once and 18% have changed twice, while 211 charities have changed three or four times. Only 1 organisations changed 5 times. Figure 13 shows the number of years charities have remained with their current auditor. For those that have changed, they have most often done so after seven years. The Charity Financials database has recorded a total of 326 auditor changes to the top 5,000 population comparing the latest financial period and that which preceded it. Figure 12: The number of organisations that have changed auditor 4% 18% 36% 42% no change changed once changed twice changed 3 times changed 4 times changed 5 times Figure 13: Number of years with current auditor Number of charities

16 New Charity Benchmarking Reports Charity Benchmarking Reports are designed to save you time preparing your performance strategy so you can effectively compare your financial performance against your peers. Just choose up to of your peers within the top 5000 UK charities and we ll: Run comparisons on individual income streams and calculate growth rates Use costs to calculate net returns looking at yearly change and long term averages Include key financial ratios e.g. net asset cover and asset turnover Send your completed report in a simple excel format within 3 to 5 days Download a sample report For more information contact: Call: Alex McKenna alex.mckenna@wilmingtonplc.com 2017 Charity Financials a division of Wilmington Publishing & Information Ltd, part of Wilmington PLC. Wilmington Publishing & Information is a limited company registered in England & Wales. Registered office: 6-14 Underwood Street, London, N1 7JQ. Company Registration number: VAT NO.GB