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Government amends CIO framework

Governance | Tania Mason | 1 Oct 2009

Charities that opt to become a Charitable Incorporated Organisation will follow the same accounting requirements as other unincorporated charities, after most respondents to a consultation on the detail of the new legal form supported this approach.

In response to a question about whether all CIOs should have to produce accruals accounts, 75 per cent of respondents wanted a proportionate approach to accounting requirements, based on the charity’s income level.  The government agreed and said it was persuaded that CIOs should follow the same accounting requirements that apply to other unincorporated charities under charity law, but added it would keep this under review to ensure the quality of receipts and payment accounts does not damage confidence in the CIO model.

The government and Charity Commission also agreed to make several other changes to the draft form after receiving over 600 pages of submissions from 95 organisations and individuals.

Among these are a reduction in the volume of information about trustees that will be required to be made publicly available, and the elimination of criminal sanctions against trustees who fail to keep their charity’s register of trustees and members up-to-date.  Instead, the Charity Commission may be given a power to direct that the relevant register be updated.

On a question about conversion of accounts into CIOs, just over half of respondents were concerned the government’s proposals were “overly bureaucratic” and might act as a disincentive to conversion.  Others were worried about the impracticalities of only being permitted to apply for conversion in the last three months of a charitable company’s accounting year.

In response, the government accepted that while its proposed approach would ensure accounting continuity, it may not be the most effective approach and could cause difficulties for some charities.  It has agreed to look again at this part of the draft and will set out revisions later this year.

Trustees of CIOs will be subject to a higher duty of care than originally intended, after the government’s proposals for a lesser duty were cried down by the vast majority of respondents.

More than four-fifths of the respondents argued that the CIO should promote high standards of governance and administration in order to promote public confidence in the new entity, and that this should be reflected in a high duty of care.

Having considered all the responses, the government and Commission will now amend the legislation by the end of this year, but because it will then need to be approved by parliament, the new legal form will not begin to be implemented until late spring 2010.

The level of demand on Commission resources will also need to be assessed and this will inform decision about how the provisions are brought in.

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