Cabinet Office Third Sector

Audit, accounting and reporting changes to the Charities Act

The Office of the Third Sector and the Charity Commission have consulted charities on changes to the audit, accounting and reporting rules for charities.

The consultation covered several key changes to regulations which are required to implement the provisions of the Charities Act 2006 and the Companies Act 2006.

The changes will be made by an Order under the Charities Act, and by updating the Charities (Accounts and Reports) Regulations 2005.

Key changes will include:

• applying charity law audit and independent examination arrangements to small charitable companies
• a framework for the preparation and audit of group accounts under the Charities Act
• clearer whistle-blowing duties and protection for auditors and examiners
• reporting public benefit through the trustees' annual report
• updated account requirements for investment fund charities

Details of the proposed changes are outlined in the consultation paper. It is proposed that the changes would take effect in the first quarter of 2008.

Questions in consultation

Questions in the consultation included:

• Do you agree with the proposed approach to bring small charities that are companies into the scrutiny regime of the Charities Act 1993?
• Do the draft regulations set a reasonable threshold for the audit of group accounts?
• Do the regulations provide a workable framework for the preparation and audit of group accounts?
• Do you agree that it is appropriate for charities to report publicly how they meet the public benefit requirement?

The full list of questions is available in the main consultation document. A separate consultation document was prepared for the small number of investment fund charities that may be affected by these changes.

Consultation documents

• Audit, accounting and reporting changes – consultation [PDF 153KB, 42 pages]
• Investment Fund Charities changes – consultation [PDF 92KB, 22 pages]

Reference material

• Draft Charities Act (Charitable companies audit and group accounts provisions) Order 2007 [PDF 31KB, 5 pages]
• Draft charities (accounts and reports) regulations 2007  [PDF 106KB, 34 pages]
• Public Benefit Reporting extract [PDF 50KB, 6 pages]

Impact Assessments

• Investment Fund Charities changes – draft impact assessment [PDF, 61KB, 12 pages]
• Audit, accounting and reporting changes – draft impact assessment [PDF 150KB, 42 pages]

Further details

The consultation ended on 14 September 2007 and responses are currently being evaluated. We would like to thank all those who have contributed. The Office of the Third Sector will respond within three months of the consultation deadline.