Regulator resists 'group accounting' pressure from Audit Commission

Finance | Tania Mason | 29 May 2009

The Charity Commission is resisting pressure from public sector auditors to consolidate charities’ accounts into the group accounts of public bodies, where the public bodies are the corporate trustee of a charity or appoint its trustees.

The Commission is opposed to such a move because charities’ funds are held on trust and trustees must act in the sole interests of the charity. Consolidation requirements arise where a body or entity is deemed to control another.

The charity regulator agrees that group accounting makes sense for larger charities with trading subsidiaries, because all the different organisations under the charity’s ‘umbrella’ are furthering the charity’s charitable activity.

But where it becomes an issue is where a non-charitable organisation, such as the NHS, wants to include NHS charities’ accounts under their own umbrella, mixing charitable and noncharitable activity.

“If charities are consolidated into the group accounts of NHS trusts, local authorities or government departments, there is a serious concern that such charities would be perceived as controlled by those bodies,” said Commission chief executive Andrew Hind (pictured).

“This may give rise to questions about the independence of such charities from the state.”

The Commission has raised the issue with HM Treasury and the Financial Reporting Advisory Board. The Board has declined to get involved but the Charity Commission is hopeful of securing a meeting with HM Treasury and the Office of the Third Sector to find a solution.

‘Public sector auditors’ may be Audit Commission staff or private auditors appointed by it.

Who's Who: Tania Mason

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