Q: We produce consolidated accounts to comply with the Sorp, so why do our figures on the Charity Commission website not include our consolidated income and expenditure?
A: You are right in identifying this anomaly in the framework. Many commentators raised this as part of the consultation on the draft Charities Bill, but unfortunately it appears to have been overlooked. The Charities Act 1993 and the new Charities Bill continue to require only the figures that are accounted for in the charity's books, and are therefore out of line with UK accounting standards, the Companies Act, the Sorp, sector accounting practice, and some structures in the sector that require consolidated accounts where there is a parent-subsidiary relationship.
Consolidated accounts present a picture of the charity and its subsidiary undertakings as an economic unit, enabling accounts users to appreciate the wider aspects of a charity's work. However, the strange requirement to focus on "charity only" figures means important activities, assets and liabilities within a group structure and the trustees' control are omitted.
There is also the important issue of public confidence. Under existing and proposed legislation it would be possible to hive down significant income-generating activities into a subsidiary - which might include charitable income and expenditure.
You should continue to produce group accounts and, until the law is amended, you will also have to provide the charity-only figures. It would be simple and reduce bureaucracy if the new Charities Bill addressed this, and many of us believe it will be flawed if it fails to do so.
- Pesh Framjee, partner at Deloitte, is special adviser to the Charity Finance Directors Group. No liability arises to the author, his firm or Third Sector. Send your questions to email@example.com.