Treasury review group recommends consolidation of NHS charities' accounts

It says that NHS charities that have an NHS trust as their corporate trustee should have their assets recorded on the trust's balance sheet

HM Treasury
HM Treasury

HM Treasury has made recommendations that could lead to up to £500m of charitable assets being recorded on government balance sheets.

The final report of a Treasury review group, published earlier this month, says NHS charities in England that have an NHS trust as their corporate trustee should have their assets recorded on the balance sheets of those trusts.

Ministers must decide whether to implement the recommendations, which are part of a long-running debate over how NHS charities' accounts should be handled. The Charity Commission has argued that consolidation would be "wholly inappropriate".

The review group made its recommendations based on a new accounting standard, IAS 27, which was introduced two years ago to force companies to record all their assets and liabilities on the balance sheet. IAS 27 says a body must consolidate the accounts of any organisation of which it can appoint or dismiss the majority of the board.

The group of 15 public sector accounting experts said NHS charities that risked damage to their reputations – and particularly the loss of donations – because of the new rules should be given time to seek out independent trustees.

It recommended that the government defer the legislation by up to three more years to allow these changes, meaning the consolidation rules would first apply to accounts for the financial year ending March 2015.

There are 302 NHS charities in England, with assets worth about £2bn. Of these, 281 with combined assets of £500m have their parent NHS trust as their corporate trustee. It is possible, however, that not all of these would need to consolidate, because those with a small amount of assets would fall below a "materiality threshold".

Four members of the review group, including Ray Jones of the Charity Commission, and Keith Day, a representative of the Association of NHS Charities, published a "dissenting report", saying the review group's conclusion that consolidation was necessary was "potentially damaging" to charities.

"We regard the analysis which leads to that conclusion as potentially misleading in that it ignores or misinterprets fundamental issues," the report says. "We cannot accept that, other than for reasons of accounting purity, the imposition of a requirement to produce such consolidated accounts is justified."

The dissenting group said it recognised the benefits of a change to independent trustees "but regard its proposed use across the board as an expedient to avoid consolidation as inappropriate".

Nick Brooks, head of not-for-profit at Kingston Smith, who campaigned against the consolidation of NHS charities, said the review board's decision was "accounting cant lacking all common sense".

"This is exactly the same garbage we heard when this problem was first raised two years ago," he said. "I'm sure that in terms of accounting purism this proposal is perfectly correct, but it's a tremendous waste of time."

Brooks said he also supported a decision to appoint independent trustees for NHS charities, but that it was wrong to do so in order to satisfy accounting dogma.

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