Cabinet Office Third Sector

Changes to the accounting, reporting and scrutiny framework for charities

The Charities Act 2006 and Companies Act 2006 make a number of changes to the accounting, reporting and scrutiny framework for charities, for financial years beginning on or after 1 April 2008.

The key changes include:

• applying charity law audit and independent examination arrangements to small charitable companies;
• a new legal framework for the preparation and audit of group accounts under the Charities Act;
• clearer whistle-blowing duties and protection for auditors and examiners;
• focusing the trustees' annual report on the activities and achievements of the charity in the context of furthering its charitable purposes for the public benefit; and
• updated accounts requirements for investment fund charities.

The changes will generally apply to financial years of charities beginning on or after 1 April 2008, although in some cases charities will be able to choose to make use of certain provisions sooner.

In 2007 the Office of the Third Sector and the Charity Commission consulted publicly on changes to the audit, accounting and reporting rules for charities. The consultation documents can be found here.

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.  We had 86 responses to the consultation, and are very grateful to those who provided their views and comments, which have helped improve the Order and Regulations.  The Impact Assessments that accompany the Charities (Accounts and Reports) Regulations 2008, and Charities Act 2006 (Charitable Companies Audit and Group Accounts Provisions) Order 2008 contains a summary of the consultation feedback.

Further guidance on the changes is available from the Charity Commission website[external website].

These changes have been implemented by:

• A Commencement Order under the Companies Act 2006 (to disapply the special company law accounts scrutiny provisions to small charitable companies):
  The Companies Act 2006 (Commencement No. 6, Saving and Commencement Nos. 3 and 5 (Amendment)) Order 2008 [external website] 
• An order under section 77 of the Charities Act 2006 which amend the Charities Act 1993 to apply charity law audit and independent examination arrangements to small charitable companies, and to apply charity law group accounts provisions to charitable company headed groups that are not required to prepare group accounts as a matter of company law:
  The Charities Act 2006 (Charitable Companies Audit and Group Accounts Provisions) Order 2008 SI 2008 / 527 [external website]
  Explanatory Memorandum and Impact Assessment [external website, PDF, 68KB]
• New Regulations providing for the form and content of charities’ accounts and annual reports, including group accounting and reporting:
  The Charities (Accounts and Reports) Regulations 2008 SI 2008/629 [external website]
  Explanatory Memorandum and Impact Assessment [external website, PDF, 238KB]
• A commencement Order under the Charities Act 2006 which has brought into force the group accounts provisions and changes to the whistle-blowing duties and protections for auditors and independent examiners.
  The Charities Act 2006 (Commencement No. 4, Transitional Provisions and Savings) Order 2008 SI 2008 / 945[external website].

In order to make the legislation more accessible to users, we have provided an informal consolidation of Part 6 of and Schedule 5A to the Charities Act 1993 to reflect the changes to be made to it on 1 April 2008 by the commencement of provisions of the Charities Act 2006, Companies Act 2006, and the Charities Act 2006 (Charitable Companies Audit and Group Accounts Provisions) Order 2008.  Changes made by the 2008 Order are underlined.

• Charities Act 1993 – informal consolidation of Part 6 and Schedule 5A [PDF, 145KB]