Finance: Finance bosses press for group accounts clause inCharities Bill

The Charity Finance Directors' Group is trying to amend the Charities Bill to ensure that the accounts of charities and their trading subsidiaries are treated as one.

Lord Dubs, the Labour peer and former Refugee Council director, has tabled amendments to the Bill on the group's behalf to compel charities to produce consolidated or group accounts.

CFDG thinks accounts should show all activities carried out in a charity's name.

Group accounts treat the transactions of a charity and any subsidiary companies as a single economic unit, rather than just showing 'charity-only' figures. This is required by Sorp and Companies House, but not in charities' annual returns to the Charity Commission.

The finance directors' body says this is an anomaly, and that a Charities Bill for the 21st century would be flawed if it were not changed.

Sophie Chapman, policy and campaigns officer, said: "CFDG's priority is to get the Bill on the statute book in 2005, but it also believes that modern charity law should make provision for modern accounting practices."

The umbrella body argues that 'charity-only' or 'entity' accounts give a distorted impression of the work of many charities. This is because activities and assets indirectly controlled through subsidiary companies are not listed, but merely disclosed as investments in the charity's balance sheet.

This means that a charity can 'hive down' income-generating activities to a non-charitable subsidiary that will not be subject to Charity Commission scrutiny.

The amendment, which is up for debate by a House of Lords committee this week, will only apply to unincorporated charities - incorporated charities already provide group accounts to Companies House. The provision is limited to charities and trading subsidiaries with income above £500,000 a year or assets of more than £2.8m.

Ray Jones, policy accountant at the Charity Commission, said: "Sorp provides the sector with recommended practice in this area, and the preparation of group accounts is already the norm for the sector. It is a difficult judgment for the Government. On the one hand it raises the question of whether legislation is necessary, given that preparing group accounts is already accepted practice. On the other, we also recognise that some would like to see this given legal recognition through the Bill."

KEY POINTS

- The Charity Finance Directors' Group is pushing to amend the Charities Bill so the accounts of charities and their subsidiaries are treated as one

- This is known as 'group' or 'consolidated' accounting, and is already required by Sorp and Companies House

- 'Entity' or 'charity-only' accounts do not list assets or activities that are controlled indirectly through subsidiary companies

- CFDG believes that this gives a distorted view of the work of many charities

- The suggested amendment to the Bill would apply to unincorporated charities with an income of more than £500,000 a year or assets of more than £2.8m.

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