Charity Commission plans one rule for all

The Charity Commission and the DTI are planning a radical overhaul of the accounting rules governing charitable companies in order to bring them into line with those for unincorporated charities.

Under the proposals submitted to the DTI by the Commission, charitable companies will be required to take on the same accounting rules and disclosure requirements as unincorporated charities. A consultation document outlining the proposals should be issued during the next few weeks.

Charity Commissioner John Bonds said: ‘The current arrangements for charitable companies are totally inadequate because, unlike other companies, there are no shareholders to keep a check on what’s happening.’

As part of the measures recommended, all charities will be required to comply with the Statement of Recommended Practice issued in October 1995.

At the moment, unincorporated charities are governed by the 1993 Charities Act, and must comply with the SORP. However, the SORP is not legally binding for charitable companies as it is not underpinned by company law.

The Commission also wants the principle of ‘independent examination’ to apply to charitable companies, as it does currently to unincorporated charities. Independent examination requires unincorporated charities with a gross income or total expenditure between # 10,000 and # 250,000 to have their accounts examined and reported on by an independent person.

The most controversial element of the Commission’s recommendations are its proposals to force auditors of charitable companies to take on the same whistle-blowing duties as auditors of unincorporated charities. The latter are currently obliged to report any material breaches, which are both statutory or regulatory, directly to the Commission.

Adrian Randall, director of charities at Moores Rowland, welcomed the proposals, which he claimed would create a level playing field for all charitable organisations. ‘At the moment we have two different regimes for the same body,’ he said.