The document ‘Private Action, Public Benefit’ was released by the Cabinet Office strategy unit and has been widely praised throughout most areas of the charity world.
But Don Bawtree, a charity legislation expert and partner at top ten accountancy firm, BDO Stoy Hayward, pointed out that while lawyers and civil servants were included on the advisory group, accountants were not.
‘The fact is there is a whole stack of stuff here (in the proposals) that accountants are going to end up implementing,’ he said.
Bawtree said accountancy firms would now be expected to adopt roles above and beyond those they were used to. As well as dealing with traditional situations such as auditing, ‘softer’ issues like what sort of campaigning work the charities carry out, would also come under the accountants’ responsibility.
‘They are looking for the same firms that audit the numbers to then look at some of these much softer, touchier issues,’ he said.
A spokesman for the Cabinet Office strategy unit said that the changes had been well received in all quarters and that it wasn’t true that accountants had not been consulted. But when pressed on why no single accountant was on the advisory group he said: ‘It’s impossible to have every single group represented on the group. It’s not really about accountancy issues, this was an overall look at the regulation and law concerning the charities and voluntary sector.’
He went on to say that if accountants feel something has been missed or they want to point something out then they can do so through the consultation process.
But Simon Hart, a partner in the charity and education group at Baker Tilly said the proposed consultation period does not give sufficient time for accountants to do this properly. His firm will be lobbying the government’s strategy unit to extend the deadline.
‘There’s a number of things to consider, so I wonder if there’s some kind of extension that could be put forward,’ he said.
Before Baker Tilley returns to the strategy unit with recommendations and advice on the proposals, it will conduct a number of client focus groups as well as consider the document internally. This, said Hart, would not be possible within the three month period. The proposed changes to charity law will be the most significant for more than 400 years when they eventually come to pass. And some are fundamental to the way in which charities operate.
‘One of the biggest changes is that charities will now be allowed to trade, and not have to set up separate trading subsidiaries,’ said Hart.
In order to gain the tax and VAT benefits charity trading subsidiaries would pass back profits via the charity gift scheme.
Another major change proposed by the strategy unit is to remove the need for charities to have an official audit if their annual turnover is less than £1m. Previously this figure was just £250,000. The most obvious effect of this on accountants is that smaller practices may lose business on charity clients that operate within this bracket and decide to take advantage of the clause.
Although the choice will be there, Hart pointed out that the trustees of a charity will still be responsible for the accounts, so may decide to follow the audit route as a safeguard. Despite this he said that some charities would take advantage and as a result ‘some smaller firms will lose out’.
The second, slightly cynical, effect that the change could have is to open up charities to the threat of fraud. It would be easy to hide numbers in a charity account that had an annual turnover of less than #1m to avoid having to go through the official audit process.
Hart said it was a valid question, but could be over simplistic. ‘The flippant answer would be only time could tell,’ he said.
ALL CHANGE FOR CHARITIES
- Charities will be allowed to trade directly rather than have to set up subsidiaries
- Charities with an annual income of less than £1m will not have to have their accounts professionally audited. Previously the figure was £250,000
- The Charity Commission will be renamed the Charity Regulation Authority
- Threshold for compulsory registration will be raised to £10,000.