Charities Bill (HC Bill 257)

(7) References in this Act to an auditor have effect in relation to subsection (4)(c)
as references to the Auditor General for Wales acting under subsection (4)(c) as
an auditor.

152 Examination of accounts an option for smaller groups

(1) 5This section applies if—

(a) group accounts are prepared for a financial year of a parent charity
under section 138(2), and

(b) section 151 (audit of accounts of larger groups) does not apply in
relation to that year.

(2) 10If—

(a) this section applies in relation to a financial year of a parent charity,

(b) the aggregate gross income of the group in that year exceeds the sum
specified in section 145(1), and

(c) subsection (6) or (7) (NHS charity: group accounts) does not apply in
15relation to it,

the group accounts for that year must, at the election of the charity trustees of
the parent charity, be examined by an independent examiner (as defined in
section 145(1)(a)) or audited by a person within section 144(2)(a) or (b).

(3) Subsection (2) is subject to—

(a) 20subsection (4), and

(b) any order under section 153(1).

(4) If subsection (2) applies to the group accounts for a year and the aggregate
gross income of the group in that year exceeds the sum specified in section
145(3), a person qualifies as an independent examiner for the purposes of
25subsection (2) if (and only if) the person is independent and meets the
requirements of section 145(3)(a) or (b).

(5) The Commission may—

(a) give guidance to charity trustees of a parent charity in connection with
the selection of a person for appointment as an independent examiner;

(b) 30give such directions as it thinks appropriate with respect to the carrying
out of an examination in pursuance of subsection (2);

and any such guidance or directions may either be of general application or
apply to a particular charity only.

(6) If—

(a) 35this section applies in relation to a financial year of a parent charity, and

(b) section 149 (audit or examination of English NHS charity accounts) also
applies in relation to that year,

the group accounts for that year must at the election of the Audit Commission
be audited by a person appointed by the Audit Commission or examined by a
40person so appointed.

Subsections (4) to (6) of section 149 apply for the purposes of this subsection as
they apply for the purposes of section 149(3).

(7) If—

(a) this section applies in relation to a financial year of a parent charity, and

(b) 45section 150 (audit or examination of Welsh NHS charity accounts) also
applies in relation to that year,

the group accounts for that year must, at the election of the Auditor General for
Wales, be audited or examined by the Auditor General for Wales.

References in this Act to an auditor or an examiner have effect in relation to this
subsection as references to the Auditor General for Wales acting under this
5subsection as an auditor or examiner.

(8) If the group accounts for a financial year of a parent charity are to be examined
or audited in accordance with subsection (2), section 145(1) applies in relation
to the parent charity’s own accounts for that year (whether or not it would
otherwise so apply).

(9) 10Nothing in subsection (6) or (7) affects the operation of section 149(3) to (6) or
(as the case may be) section 150(3) in relation to the parent charity’s own
accounts for the financial year in question.

153 Commission’s powers to order audit of group accounts

(1) The Commission may by order require the group accounts of a parent charity
15for a financial year to be audited by a person within section 144(2)(a) or (b) if it
appears to the Commission that—

(a) section 151(4)(a), or (as the case may be) section 152(2), has not been
complied with in relation to that year within 10 months from the end of
that year, or

(b) 20although section 151(4)(a) does not apply to that year, it would
nevertheless be desirable for the group accounts for that year to be
audited by a person within section 144(2)(a) or (b).

But this subsection does not apply if section 149 or 150 (audit or examination
of NHS charity accounts) applies in relation to the parent charity for that year.

(2) 25If the Commission makes an order under subsection (1) with respect to group
accounts, the auditor must be a person appointed by the Commission unless—

(a) the order is made by virtue of subsection (1)(b), and

(b) the charity trustees of the parent charity themselves appoint an auditor
in accordance with the order.

(3) 30The expenses of any audit carried out by an auditor appointed by the
Commission under subsection (2), including the auditor’s remuneration, are
recoverable by the Commission—

(a) from the charity trustees of the parent charity, who are personally
liable, jointly and severally, for those expenses, or

(b) 35to the extent that it appears to the Commission not to be practical to
seek recovery of those expenses in accordance with paragraph (a), from
the funds of the parent charity.

Regulations relating to audits and examinations

154 Regulations relating to audits and examinations

(1) 40The Minister may by regulations make provision—

(a) specifying one or more bodies for the purposes of section 144(2)(b);

(b) with respect to the duties of an auditor carrying out an audit of
individual or group accounts, including provision with respect to the
making by the auditor of a report on—

(i) the statement of accounts prepared for the financial year in
question under section 132(1),

(ii) the account and statement so prepared under section 133,

(iii) the accounts so prepared under section 394 of the Companies
5Act 2006 (duty to prepare individual accounts), or

(iv) group accounts so prepared under section 138(2),

as the case may be;

(c) with respect to the making of a report in respect of an examination of
individual or group accounts by the independent examiner or
10examiner who has carried out the examination;

(d) conferring on an auditor or on an independent examiner or examiner a
right of access with respect to books, documents and other records
(however kept) which relate to—

(i) the charity (if the audit or examination is of individual
15accounts), or

(ii) any member of the group (if the audit or examination is of
group accounts);

(e) entitling an auditor or an independent examiner or examiner to require
information and explanations from—

(i) 20past or present charity trustees or trustees for, or past or present
officers or employees of, the charity (if the audit or examination
is of individual accounts), or

(ii) past or present charity trustees or trustees for, or past or present
officers or employees of, any member of the group (if the audit
25or examination is of group accounts);

(f) enabling the Commission, in circumstances specified in the regulations,
to dispense with the requirements of section 144(2), 145(1), 151(4)(a) or
152(2)—

(i) in the case of a particular charity, or

(ii) 30in the case of any particular financial year of a charity.

(2) Regulations under subsection (1)(e) may in particular make, in relation to
audits or examinations of group accounts, provision corresponding or similar
to any provision made by section 499 or 500 of the Companies Act 2006 in
connection with the rights exercisable by an auditor of a company in relation
35to a subsidiary undertaking of the company.

(3) In this section—

• “audit of individual or group accounts” means an audit under—

  (a)

  section 144, 145, 146, 149 or 150 (individual accounts), or

  (b)

  section 151, 152 or 153 (group accounts);

• 40“examination of individual or group accounts” means an examination
  under—

  (a)

  section 145, 149 or 150 (individual accounts), or

  (b)

  section 152 (group accounts);

and the references in this section and section 155 to an audit or examination of
45individual accounts and to an audit or examination of group accounts are to be
read accordingly.

155 Power of Commission to direct compliance with certain regulations

If any person fails to afford an auditor or an independent examiner or examiner
any facility to which the auditor, independent examiner or examiner is entitled
by virtue of section 154(1)(d) or (e), the Commission, for securing that the
5default is made good, may by order give such directions as it thinks
appropriate—

(a) to that person,

(b) if the audit or examination is of individual accounts, to the charity
trustees for the time being of the charity concerned, or

(c) 10if the audit or examination is of group accounts, to the charity trustees
for the time being of such member of the group as the Commission
thinks appropriate.

Duty of auditors etc. to report matters to Commission

156 Duty of auditors etc. to report matters to Commission

(1) 15This section applies to a person (“P”) who—

(a) is acting as an auditor or independent examiner appointed by or in
relation to a charity under sections 144 to 146 (audit or examination of
individual accounts),

(b) is acting as an auditor or examiner appointed under section 149(2) or (3)
20(audit or examination of English NHS charity accounts), or

(c) is the Auditor General for Wales acting under section 150(2) or (3)
(audit or examination of Welsh NHS charity accounts).

(2) If, in the course of acting in the capacity mentioned in subsection (1), P becomes
aware of a matter—

(a) 25which relates to the activities or affairs of the charity or of any
connected institution or body, and

(b) which P has reasonable cause to believe is likely to be of material
significance for the purposes of the exercise by the Commission of its
functions under the provisions mentioned in subsection (3),

30P must immediately make a written report on the matter to the Commission.

(3) The provisions are—

(a) sections 46, 47 and 50 (inquiries by Commission);

(b) sections 76 and 79 to 82 (Commission’s powers to act for protection of
charities).

(4) 35If, in the course of acting in the capacity mentioned in subsection (1), P becomes
aware of any matter—

(a) which does not appear to P to be one that P is required to report under
subsection (2), but

(b) which P has reasonable cause to believe is likely to be relevant for the
40purposes of the exercise by the Commission of any of its functions,

P may make a report on the matter to the Commission.

(5) Where the duty or power under subsection (2) or (4) has arisen in relation to P
when acting in the capacity mentioned in subsection (1), the duty or power is
not affected by P’s subsequently ceasing to act in that capacity.

(6) Where P makes a report as required or authorised by subsection (2) or (4), no
duty to which P is subject is to be regarded as contravened merely because of
any information or opinion contained in the report.

157 Meaning of “connected institution or body” in s.156(2)

(1) 5In section 156(2) “connected institution or body”, in relation to a charity,
means—

(a) an institution which is controlled by, or

(b) a body corporate in which a substantial interest is held by,

the charity or any one or more of the charity trustees acting as such.

(2) 10Sections 351 and 352 (meaning of controlled institution and substantial
interest) apply for the purposes of subsection (1).

158 Application of duty in relation to auditors etc. of group accounts

(1) Subsections (2) to (6) of section 156 (duty of auditors etc. of individual accounts
to report matters to Commission) apply in relation to a person appointed to
15audit, or report on, any group accounts under sections 151 to 153 as they apply
in relation to the person referred to in section 156 as “P”.

(2) In section 156(2)(a), as it applies in accordance with subsection (1), the
reference to the charity or any connected institution or body is to be read as a
reference to the parent charity or any of its subsidiary undertakings.

159 20Application of duty in relation to Companies Act auditors

(1) Sections 156(2) to (6) and 157 (duty of auditors etc. of individual accounts to
report matters to Commission) apply in relation to a person acting as a
Companies Act auditor of a charitable company as they apply in relation to the
person referred to in section 156 as “P”, but reading any reference to P’s acting
25in the capacity mentioned in section 156(1) as a reference to the person acting
as a Companies Act auditor.

(2) In subsection (1), “Companies Act auditor” means an auditor appointed under
Chapter 2 of Part 16 of the Companies Act 2006 (appointment of auditors).

Exempt and excepted charities

160 30Exempt charities

(1) Nothing in sections 144 to 155 (audit or examination of accounts) applies to an
exempt charity.

(2) Sections 156(2) to (6) and 157 (duty of auditors etc. of individual accounts to
report matters to Commission) apply in relation to a person appointed to audit,
35or report on, the accounts of an exempt charity which is not a company as they
apply in relation to the person referred to in section 156 as “P”, but reading—

(a) any reference to P’s acting in the capacity mentioned in section 156(1)
as a reference to the person acting as a person so appointed, and

(b) any reference to the Commission or to any of its functions as a reference
40to the charity’s principal regulator or to any of the latter’s functions as
principal regulator in relation to the charity.

(3) Nothing in section 158 (duty of auditors etc. in relation to group accounts)
applies to an exempt charity.

161 Excepted charities

(1) Nothing in sections 144 to 146 (audit or examination of individual accounts)
5applies to any charity which—

(a) falls within section 30(2)(d) (whether or not it also falls within section
30(2)(b) or (c)), and

(b) is not registered.

(2) Except in accordance with subsections (3) and (4), nothing in—

(a) 10section 154 or 155 (regulations relating to audits and examinations), or

(b) section 156 or 157 (duty of auditors etc. to report matters to
Commission),

applies to a charity mentioned in subsection (1).

(3) Sections 154 to 157 apply to a charity mentioned in subsection (1) which is
15also—

(a) an English NHS charity (as defined in section 149), or

(b) a Welsh NHS charity (as defined in section 150).

(4) Sections 156 and 157 apply in accordance with section 160(2) to a charity
mentioned in subsection (1) which is also an exempt charity.

CHAPTER 4 20Annual reports and returns and public access to accounts etc.

Annual reports etc.

162 Charity trustees to prepare annual reports

(1) The charity trustees of a charity must prepare in respect of each financial year
of the charity an annual report containing—

(a) 25such a report by the trustees on the activities of the charity during that
year, and

(b) such other information relating to the charity or to its trustees or
officers,

as may be prescribed by regulations made by the Minister.

(2) 30Regulations under subsection (1) may in particular make provision—

(a) for any such report as is mentioned in subsection (1)(a) to be prepared
in accordance with such principles as are specified or referred to in the
regulations;

(b) enabling the Commission to dispense with any requirement prescribed
35by virtue of subsection (1)(b)—

(i) in the case of a particular charity or a particular class of
charities, or

(ii) in the case of a particular financial year of a charity or of any
class of charities.

163 Transmission of annual reports to Commission in certain cases

(1) Where a charity’s gross income in any financial year exceeds £25,000, a copy of
the annual report required to be prepared under section 162 in respect of that
year must be transmitted to the Commission by the charity trustees within—

(a) 510 months from the end of that year, or

(b) such longer period as the Commission may for any special reason allow
in the case of that report.

(2) Where a charity’s gross income in any financial year does not exceed £25,000,
a copy of the annual report required to be prepared under section 162 in respect
10of that year must, if the Commission so requests, be transmitted to it by the
charity trustees—

(a) in the case of a request made before the end of 7 months from the end
of the financial year to which the report relates, within 10 months from
the end of that year, and

(b) 15in the case of a request not so made, within 3 months from the date of
the request,

or, in either case, within such longer period as the Commission may for any
special reason allow in the case of that report.

(3) In the case of a charity which is constituted as a CIO—

(a) 20the requirement imposed by subsection (1) applies whatever the
charity’s gross income is, and

(b) subsection (2) does not apply.

164 Documents to be transmitted with annual report

(1) Subject to subsection (3), any copy of an annual report transmitted to the
25Commission under section 163 must have attached to it—

(a) a copy of the statement of accounts prepared for the financial year in
question under section 132(1), or

(b) (as the case may be) a copy of the account and statement so prepared
under section 133,

30and a copy of the relevant auditor’s or examiner’s report.

(2) In subsection (1), “the relevant auditor’s or examiner’s report” means—

(a) if the accounts of the charity for that year have been audited under
section 144, 145, 146, 149 or 150, the report made by the auditor on that
statement of accounts or (as the case may be) on that account and
35statement;

(b) if the accounts of the charity for that year have been examined under
section 145, 149 or 150, the report made by the person carrying out the
examination.

(3) Subsections (1) and (2) do not apply to a charitable company, and any copy of
40an annual report transmitted by the charity trustees of a charitable company
under section 163 must have attached to it—

(a) a copy of the company’s annual accounts prepared for the financial
year in question under Part 15 of the Companies Act 2006, and

(b) a copy of the relevant auditor’s or examiner’s report.

(4) 45In subsection (3), “the relevant auditor’s or examiner’s report” means—

(a) if the accounts of the company for that year have been audited under
Part 16 of the Companies Act 2006, the report made by the auditor on
those accounts;

(b) if the accounts of the company for that year have been audited under
5section 144, 145 or 146, the report made by the auditor on those
accounts;

(c) if the accounts of the company for that year have been examined under
section 145, the report made by the person carrying out the
examination.

165 10Preservation of annual reports etc.

(1) Any copy of an annual report transmitted to the Commission under section
163, together with the documents attached to it, is to be kept by the
Commission for such period as it thinks fit.

(2) The charity trustees of a charity must preserve for at least 6 years from the end
15of the financial year to which it relates an annual report prepared by them
under section 162(1) if they have not been required to transmit a copy of it to
the Commission.

(3) Subsection (4) applies if a charity ceases to exist within the period of 6 years
mentioned in subsection (2) as it applies to any annual report.

(4) 20The obligation to preserve the annual report in accordance with subsection (2)
must continue to be discharged by the last charity trustees of the charity, unless
the Commission consents in writing to the annual report being destroyed or
otherwise disposed of.

166 Annual reports and group accounts

(1) 25This section applies where group accounts are prepared for a financial year of
a parent charity under section 138(2).

(2) The annual report prepared by the charity trustees of the parent charity in
respect of that year under section 162 must include—

(a) such a report by the trustees on the activities of the charity’s subsidiary
30undertakings during that year, and

(b) such other information relating to any of those undertakings,

as may be prescribed by regulations made by the Minister.

(3) Regulations under subsection (2) may in particular make provision—

(a) for any such report as is mentioned in subsection (2)(a) to be prepared
35in accordance with such principles as are specified or referred to in the
regulations;

(b) enabling the Commission to dispense with any requirement prescribed
by virtue of subsection (2)(b) in the case of—

(i) a particular subsidiary undertaking, or

(ii) 40a particular class of subsidiary undertakings.

(4) Section 163 (transmission of annual report to Commission in certain cases)
applies in relation to the annual report referred to in subsection (2) as if any
reference to the charity’s gross income in the financial year in question were a
reference to the aggregate gross income of the group in that year.

(5) When transmitted to the Commission in accordance with subsection (4), the
copy of the annual report must have attached to it both a copy of the group
accounts prepared for that year under section 138(2) and—

(a) a copy of the report made by the auditor on those accounts, or

(b) 5if those accounts have been examined under section 152, a copy of the
report made by the person carrying out the examination.

(6) The requirements in this section are in addition to those in sections 162 to 165.

167 Exempt charities

Nothing in sections 162 to 166 (annual reports etc.) applies to any exempt
10charity.

168 Excepted charities

(1) Nothing in sections 162 to 165 (annual reports etc.) applies to any charity
which—

(a) falls within section 30(2)(d) (whether or not it also falls within section
1530(2)(b) or (c)), and

(b) is not registered.

(2) Except in accordance with subsection (5), nothing in sections 162 to 165 applies
to any charity which—

(a) falls within section 30(2)(b) or (c) but does not fall within section
2030(2)(d), and

(b) is not registered.

(3) If requested to do so by the Commission, the charity trustees of any such
charity as is mentioned in subsection (2) must prepare an annual report in
respect of such financial year of the charity as is specified in the Commission’s
25request.

(4) Any report prepared under subsection (3) must contain—

(a) such a report by the charity trustees on the activities of the charity
during the year in question, and

(b) such other information relating to the charity or to its trustees or
30officers,

as may be prescribed by regulations made under section 162(1) in relation to
annual reports prepared under section 162(1).

(5) The following provisions apply in relation to any report required to be
prepared under subsection (3) as if it were an annual report required to be
35prepared under section 162(1)—

(a) section 163(1) (transmission of annual report in certain cases), with the
omission of the words preceding “a copy of the annual report”, and

(b) sections 164 (documents to be transmitted with annual report) and
165(1) (preservation of annual reports etc.).

(6) 40Subsections (7) and (8) apply where—

(a) a charity is required to prepare an annual report in respect of a financial
year by virtue of subsection (3),

(b) the charity is a parent charity at the end of the year, and

(c) group accounts are prepared for that year under section 138(2) by the
charity trustees of the charity.

(7) When transmitted to the Commission in accordance with subsection (5), the
copy of the annual report must have attached to it both a copy of the group
5accounts and—

(a) a copy of the report made by the auditor on those accounts, or

(b) if those accounts have been examined under section 152, a copy of the
report made by the person carrying out the examination.

(8) The requirement in subsection (7) is in addition to that in subsection (4).

10Annual returns

169 Annual returns by registered charities

(1) Subject to subsection (2), every registered charity must prepare in respect of
each of its financial years an annual return in such form, and containing such
information, as may be prescribed by regulations made by the Commission.

(2) 15Subsection (1) does not apply in relation to any financial year of a charity in
which the charity’s gross income does not exceed £10,000 (but this subsection
does not apply if the charity is constituted as a CIO).

(3) Any such return must be transmitted to the Commission by the date by which
the charity trustees are, by virtue of section 163(1), required to transmit to the
20Commission the annual report required to be prepared in respect of the
financial year in question.

(4) The Commission may dispense with the requirements of subsection (1)—

(a) in the case of a particular charity or a particular class of charities, or

(b) in the case of a particular financial year of a charity or of any class of
25charities.

Availability of documents to public

170 Public inspection of annual reports etc. kept by Commission

Any document kept by the Commission in pursuance of section 165(1)
(preservation of annual reports etc.) must be open to public inspection at all
30reasonable times—

(a) during the period for which it is so kept, or

(b) if the Commission so determines, during such lesser period as it may
specify.

171 Supply by charity trustees of copy of most recent annual report

(1) 35This section applies if an annual report has been prepared in respect of any
financial year of a charity in pursuance of section 162(1) or 168(3).

(2) If the charity trustees of a charity—

(a) are requested in writing by any person to provide that person with a
copy of its most recent annual report, and