(a) disclose at any time, with reasonable accuracy, the financial position of
the charity at that time, and

(b) enable the trustees to ensure that, where any statements of accounts are
prepared by them under section 132(1), those statements of accounts
5comply with the requirements of regulations under section 132(1).

(2) The accounting records must in particular contain—

(a) entries showing from day to day all sums of money received and
expended by the charity, and the matters in respect of which the receipt
and expenditure takes place, and

(b) 10a record of the assets and liabilities of the charity.

131 Preservation of accounting records

(1) The charity trustees of a charity must preserve any accounting records made
for the purposes of section 130 in respect of the charity for at least 6 years from
the end of the financial year of the charity in which they are made.

(2) 15Subsection (3) applies if a charity ceases to exist within the period of 6 years
mentioned in subsection (1) as it applies to any accounting records.

(3) The obligation to preserve the accounting records in accordance with
subsection (1) must continue to be discharged by the last charity trustees of the
charity, unless the Commission consents in writing to the records being
20destroyed or otherwise disposed of.

132 Preparation of statement of accounts

(1) The charity trustees of a charity must (subject to section 133) prepare in respect
of each financial year of the charity a statement of accounts complying with
such requirements as to its form and contents as may be prescribed by
25regulations made by the Minister.

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

(a) for any such statement to be prepared in accordance with such methods
and principles as are specified or referred to in the regulations;

(b) as to any information to be provided by way of notes to the accounts.

(3) 30Regulations under subsection (1) may also make provision for determining the
financial years of a charity for the purposes of this Act and any regulations
made under it.

(4) But regulations under subsection (1) may not impose on the charity trustees of
a charity that is a charitable trust created by any person (“the settlor”) any
35requirement to disclose, in any statement of accounts prepared by them under
subsection (1)—

(a) the identities of recipients of grants made out of the funds of the
charity, or

(b) the amounts of any individual grants so made,

40if the disclosure would fall to be made at a time when the settlor or any spouse
or civil partner of the settlor was still alive.

133 Account and statement an option for lower-income charities

If a charity’s gross income in any financial year does not exceed £250,000, the
charity trustees may, in respect of that year, elect to prepare—

(a) a receipts and payments account, and

(b) 5a statement of assets and liabilities,

instead of a statement of accounts under section 132(1).

134 Preservation of statement of accounts or account and statement

(1) The charity trustees of a charity must preserve—

(a) any statement of accounts prepared by them under section 132(1), or

(b) 10any account and statement prepared by them under section 133,

for at least 6 years from the end of the financial year to which any such
statement relates or (as the case may be) to which any such account and
statement relate.

(2) Subsection (3) applies if a charity ceases to exist within the period of 6 years
15mentioned in subsection (1) as it applies to any statement of accounts or
account and statement.

(3) The obligation to preserve the statement or account and statement in
accordance with subsection (1) must continue to be discharged by the last
charity trustees of the charity, unless the Commission consents in writing to the
20statement or account and statement being destroyed or otherwise disposed of.

135 Charitable companies

Nothing in sections 130 to 134 (preparation and preservation of individual
accounts) applies to a charitable company.

136 Exempt charities

(1) 25Nothing in sections 130 to 134 (preparation and preservation of individual
accounts) applies to an exempt charity.

(2) But the charity trustees of an exempt charity—

(a) must keep proper books of account with respect to the affairs of the
charity, and

(b) 30if not required by or under the authority of any other Act to prepare
periodical statements of account must prepare consecutive statements
of account consisting on each occasion of—

(i) an income and expenditure account relating to a period of not
more than 15 months, and

(ii) 35a balance sheet relating to the end of that period.

(3) The books of accounts and statements of account relating to an exempt charity
must be preserved for a period of at least 6 years unless—

(a) the charity ceases to exist, and

(b) the Commission consents in writing to their being destroyed or
40otherwise disposed of.

CHAPTER 2 Group accounts

137 Accounting records

(1) The charity trustees of a parent charity or of any charity which is a subsidiary
undertaking must ensure that the accounting records kept in respect of the
5charity under—

(a) section 130(1) (individual accounts: accounting records), or

(b) (as the case may be) section 386 of the Companies Act 2006 (duty to
keep accounting records),

are such as to enable the charity trustees of the parent charity to ensure that,
10where any group accounts are prepared by them under section 138(2), those
accounts comply with the requirements of regulations under section 142.

(2) The duty in subsection (1) is in addition to the duty to ensure that the
accounting records comply with the requirements of—

(a) section 130(1), or

(b) 15section 386 of the Companies Act 2006.

(3) Subsection (4) applies if a parent charity has a subsidiary undertaking in
relation to which the requirements of—

(a) section 130(1), or

(b) section 386 of the Companies Act 2006,

20do not apply.

(4) The charity trustees of the parent charity must take reasonable steps to secure
that the undertaking keeps such accounting records as to enable the trustees to
ensure that, where any group accounts are prepared by them under section
138(2), those accounts comply with the requirements of regulations under
25section 142.

138 Preparation of group accounts

(1) This section applies in relation to a financial year of a charity if—

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

(b) (where it is a company) it is not required to prepare consolidated
30accounts for that year under section 399 of the Companies Act 2006
(duty to prepare group accounts), whether or not such accounts are in
fact prepared.

(2) The charity trustees of the parent charity must prepare group accounts in
respect of that year.

(3) 35If the requirement in subsection (2) applies to the charity trustees of a parent
charity (other than a parent charity which is a company) in relation to a
financial year—

(a) that requirement so applies in addition to the requirement in section
132(1) (statement of accounts), and

(b) 40the option of preparing the documents mentioned in section 133
(account and statement) is not available in relation to that year
(whatever the amount of the charity’s gross income for that year).

(4) If—

(a) the requirement in subsection (2) applies to the charity trustees of a
parent charity in relation to a financial year, and

(b) the charity is a company,

that requirement so applies in addition to the requirement in section 394 of the
5Companies Act 2006 (duty to prepare individual accounts).

(5) Subsection (2) is subject to section 139.

139 Exceptions to requirement to prepare group accounts

(1) The requirement in section 138(2) does not apply to the charity trustees of a
parent charity in relation to a financial year if at the end of that year it is itself
10a subsidiary undertaking in relation to another charity.

(2) The requirement in section 138(2) does not apply to the charity trustees of a
parent charity in relation to a financial year if the aggregate gross income of the
group for that year does not exceed such sum as is specified in regulations
made by the Minister.

(3) 15Regulations made by the Minister may prescribe circumstances in which a
subsidiary undertaking may or (as the case may be) must be excluded from
group accounts required to be prepared under section 138(2) for a financial
year.

(4) Where, by virtue of such regulations, each of the subsidiary undertakings
20which are members of a group is—

(a) permitted to be excluded from any such group accounts for a financial
year, or

(b) required to be so excluded,

the requirement in section 138(2) does not apply to the charity trustees of the
25parent charity in relation to that year.

140 Preservation of group accounts

(1) The charity trustees of a charity must preserve any group accounts prepared
by them under section 138(2) for at least 6 years from the end of the financial
year to which the accounts relate.

(2) 30Subsection (3) applies if a charity ceases to exist within the period of 6 years
mentioned in subsection (1) as it applies to any group accounts.

(3) The obligation to preserve the accounts in accordance with subsection (1) must
continue to be discharged by the last charity trustees of the charity, unless the
Commission consents in writing to the accounts being destroyed or otherwise
35disposed of.

141 “Parent charity”, “subsidiary undertaking” and “group”

(1) This section applies for the purposes of this Part.

(2) A charity is a parent charity if it is (or is to be treated as) a parent undertaking
in relation to one or more other undertakings in accordance with the provisions
40of section 1162 of, and Schedule 7 to, the Companies Act 2006.

(3) Each undertaking in relation to which a parent charity is (or is to be treated as)
a parent undertaking in accordance with those provisions is a subsidiary
undertaking in relation to the parent charity.

(4) But subsection (3) does not have the result that any of the following is a
5subsidiary undertaking—

(a) any special trusts of a charity,

(b) any institution which, by virtue of a direction under section 12(1), is to
be treated as forming part of a charity for the purposes of this Part, or

(c) any charity to which a direction under section 12(2) applies for the
10purposes of this Part.

(5) “The group”, in relation to a parent charity, means that charity and its
subsidiary undertaking or undertakings, and any reference to the members of
the group is to be read accordingly.

(6) For the purposes of this section and the operation for those purposes of section
151162 of, and Schedule 7 to, the Companies Act 2006 “undertaking” means—

(a) an undertaking as defined by section 1161(1) of the 2006 Act, or

(b) a charity which is not an undertaking as so defined.

142 “Group accounts”

(1) For the purposes of this Part, “group accounts” means consolidated accounts—

(a) 20relating to the group, and

(b) complying with such requirements as to their form and contents as may
be prescribed by regulations made by the Minister.

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

(a) for any such accounts to be prepared in accordance with such methods
25and principles as are specified or referred to in the regulations;

(b) for dealing with cases where the financial years of the members of the
group do not all coincide;

(c) as to any information to be provided by way of notes to the accounts.

(3) Regulations under subsection (1) may also make provision—

(a) 30for determining the financial years of subsidiary undertakings for the
purposes of this Part;

(b) for imposing on the charity trustees of a parent charity requirements
with respect to securing that such financial years coincide with that of
the charity.

143 35Exempt charities

Nothing in sections 137 to 142 (preparation and preservation of group
accounts) applies to an exempt charity.

CHAPTER 3 Audit or examination of accounts

Audit or examination of individual accounts

144 Audit of accounts of larger charities

(1) Subsection (2) applies to a financial year of a charity if—

(a) 5the charity’s gross income in that year exceeds £500,000, or

(b) the charity’s gross income in that year exceeds the accounts threshold
and at the end of the year the aggregate value of its assets (before
deduction of liabilities) exceeds £3.26 million.

“The accounts threshold” means the sum for the time being specified in section
10133 (account and statement an option for lower-income charities).

(2) If this subsection applies to a financial year of a charity, the accounts of the
charity for that year must be audited by a person who—

(a) is eligible for appointment as a statutory auditor under Part 42 of the
Companies Act 2006, or

(b) 15is a member of a body for the time being specified in regulations under
section 154 and is under the rules of that body eligible for appointment
as auditor of the charity.

145 Examination of accounts an option for lower-income charities

(1) If section 144(2) does not apply to a financial year of a charity but its gross
20income in that year exceeds £25,000, the accounts of the charity for that year
must, at the election of the charity trustees, be—

(a) examined by an independent examiner, that is, an independent person
who is reasonably believed by the trustees to have the requisite ability
and practical experience to carry out a competent examination of the
25accounts, or

(b) audited by a person within section 144(2)(a) or (b).

(2) Subsection (1) is subject to—

(a) subsection (3), and

(b) any order under section 146(1).

(3) 30If subsection (1) applies to the accounts of a charity for a year and the charity’s
gross income in that year exceeds £250,000, a person qualifies as an
independent examiner for the purposes of subsection (1)(a) if (and only if) the
person is independent and—

(a) a member of one of the bodies listed in subsection (4), or

(b) 35a Fellow of the Association of Charity Independent Examiners.

(4) The bodies referred to in subsection (3)(a) are—

(a) the Institute of Chartered Accountants in England and Wales;

(b) the Institute of Chartered Accountants of Scotland;

(c) the Institute of Chartered Accountants in Ireland;

(d) 40the Association of Chartered Certified Accountants;

(e) the Association of Authorised Public Accountants;

(f) the Association of Accounting Technicians;

(g) the Association of International Accountants;

(h) the Chartered Institute of Management Accountants;

(i) the Institute of Chartered Secretaries and Administrators;

(j) the Chartered Institute of Public Finance and Accountancy.

(5) 5The Commission may—

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

(b) give such directions as it thinks appropriate with respect to the carrying
out of an examination in pursuance of subsection (1)(a);

10and any such guidance or directions may either be of general application or
apply to a particular charity only.

(6) The Minister may by order—

(a) amend subsection (3) by adding or removing a description of person to
or from the list in that subsection or by varying any entry for the time
15being included in that list;

(b) amend subsection (4) by adding or removing a body to or from the list
in that subsection or by varying any entry for the time being included
in that list.

146 Commission’s powers to order audit

(1) 20The Commission may by order require the accounts of a charity for 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 144(2), or (as the case may be) section 145(1), has not been
complied with in relation to that year within 10 months from the end of
25that year, or

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

(2) If the Commission makes an order under subsection (1) with respect to a
30charity, 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 themselves appoint an auditor in accordance with
the order.

(3) The expenses of any audit carried out by an auditor appointed by the
35Commission under subsection (2), including the auditor’s remuneration, are
recoverable by the Commission—

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

(b) to the extent that it appears to the Commission not to be practical to
40seek recovery of those expenses in accordance with paragraph (a), from
the funds of the charity.

147 Accounts required to be audited under Companies Act

(1) Nothing in sections 144 to 146 applies in relation to the accounts of a charitable
company for a financial year if those accounts are required to be audited in
45accordance with Part 16 of the Companies Act 2006 (“Part 16 accounts”).

(2) In the case of a charitable company, the Commission may by order require that
the condition and Part 16 accounts of the company for such period as the
Commission thinks fit are to be investigated and audited by an auditor who—

(a) is eligible for appointment as a statutory auditor under Part 42 of the
5Companies Act 2006, and

(b) is appointed by the Commission.

(3) An auditor acting under subsection (2)—

(a) has a right of access to all books, accounts and documents relating to
the company which are in the possession or control of the charity
10trustees or to which the charity trustees have access;

(b) is entitled to require from any charity trustee, past or present, and from
any past or present officer or employee of the company such
information and explanation as the auditor thinks necessary for the
performance of the auditor’s duties;

(c) 15must at the conclusion or during the progress of the audit make such
reports to the Commission about the audit or about the accounts or
affairs of the company as the auditor thinks the case requires, and must
send a copy of any such report to the charity trustees.

(4) The expenses of any audit under subsection (2) including the remuneration of
20the auditor, are to be paid by the Commission.

(5) If any person fails to afford an auditor any facility to which the auditor is
entitled under subsection (3), the Commission may by order give to that person
or to the charity trustees for the time being such directions as the Commission
thinks appropriate for securing that the default is made good.

148 25NHS charities: general

Nothing in sections 144 to 146 applies in relation to a financial year of a charity
where, at any time in the year, it is—

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

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

149 30Audit or examination of English NHS charity accounts

(1) This section applies in relation to a financial year of a charity where, at any time
in the year, it is an English NHS charity.

(2) If section 144(1)(a) or (b) is satisfied in relation to that financial year of the
charity, the accounts of the charity for that year must be audited by a person
35appointed by the Audit Commission.

(3) In any other case, the accounts of the charity for that financial year must, at the
election of the Audit Commission, be—

(a) audited by a person appointed by the Audit Commission, or

(b) examined by a person so appointed.

(4) 40Section 3 of the Audit Commission Act 1998 applies in relation to any
appointment under subsection (2) or (3)(a).

(5) The Charity Commission may give such directions as it thinks appropriate
with respect to the carrying out of an examination in pursuance of subsection
(3)(b); and any such directions may either be of general application or apply to
45a particular charity only.

(6) The Comptroller and Auditor General may at any time examine and inspect—

(a) the accounts of the charity for the financial year,

(b) any records relating to those accounts, and

(c) any report of a person appointed under subsection (2) or (3) to audit or
5examine those accounts.

(7) In this section, “English NHS charity” means a charitable trust, the trustees of
which are—

(a) a Strategic Health Authority,

(b) a Primary Care Trust,

(c) 10a National Health Service trust all or most of whose hospitals,
establishments and facilities are situated in England,

(d) trustees appointed in pursuance of paragraph 10 of Schedule 4 to the
National Health Service Act 2006 for a National Health Service trust
falling within paragraph (c),

(e) 15special trustees appointed in pursuance of section 29(1) of the National
Health Service Reorganisation Act 1973, section 95(1) of the National
Health Service Act 1977 and section 212(1) of the National Health
Service Act 2006 for such a National Health Service trust, or

(f) trustees for a Primary Care Trust appointed in pursuance of paragraph
2012 of Schedule 3 to the National Health Service Act 2006.

(8) In this Chapter “the Audit Commission” means the Audit Commission for
Local Authorities and the National Health Service in England.

150 Audit or examination of Welsh NHS charity accounts

(1) This section applies in relation to a financial year of a charity where, at any time
25in the year, it is a Welsh NHS charity.

(2) If section 144(1)(a) or (b) is satisfied in relation to that financial year of the
charity, the accounts of the charity for that year must be audited by the Auditor
General for Wales.

(3) In any other case, the accounts of the charity for that financial year must, at the
30election of the Auditor General for Wales, be audited or examined by the
Auditor General for Wales.

(4) In this section “Welsh NHS charity” means a charitable trust, the trustees of
which are—

(a) a Local Health Board,

(b) 35a National Health Service trust all or most of whose hospitals,
establishments and facilities are situated in Wales,

(c) trustees appointed in pursuance of paragraph 10 of Schedule 3 to the
National Health Service (Wales) Act 2006 for a National Health Service
trust falling within paragraph (b), or

(d) 40special trustees appointed in pursuance of section 29(1) of the National
Health Service Reorganisation Act 1973, section 95(1) of the National
Health Service Act 1977 and section 160(1) of the National Health
Service (Wales) Act 2006 for such a National Health Service trust.

(5) References in this Act to an auditor or an examiner have effect in relation to this
45section as references to the Auditor General for Wales acting under this section
as an auditor or examiner.

Audit or examination of group accounts

151 Audit of accounts of larger groups

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

(a) 5the aggregate gross income of the group in that year exceeds the
relevant income threshold (see section 176(1)), or

(b) the aggregate gross income of the group in that year exceeds the
relevant income threshold and at the end of the year the aggregate
value of the assets of the group (before deduction of liabilities) exceeds
10the relevant assets threshold (see section 176(2)).

(2) This section also applies where—

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

(b) the appropriate audit provision applies in relation to the parent
15charity’s own accounts for that year.

(3) In this section “the appropriate audit provision”, in relation to a financial year
of a parent charity, means—

(a) (subject to paragraph (b), (c) or (d)) section 144(2) (audit of accounts of
larger charities);

(b) 20if section 149 (audit or examination of English NHS charity accounts)
applies in relation to that year, section 149(2);

(c) if section 150 (audit or examination of Welsh NHS charity accounts)
applies in relation to that year, section 150(2);

(d) if the parent charity is a company—

(i) 25section 144(2), or

(ii) (as the case may be) Part 16 of the Companies Act 2006.

(4) If this section applies in relation to a financial year of a parent charity by virtue
of subsection (1) or (2), the group accounts for that year must be audited—

(a) (subject to paragraph (b) or (c)) by a person within section 144(2)(a) or
30(b);

(b) if section 149 applies in relation to that year, by a person appointed by
the Audit Commission;

(c) if section 150 applies in relation to that year, by the Auditor General for
Wales.

(5) 35If this section applies in relation to a financial year of a parent charity by virtue
of subsection (1)—

(a) (subject to paragraph (b)) the appropriate audit provision applies in
relation to the parent charity’s own accounts for that year (whether or
not it would otherwise so apply);

(b) 40if the parent charity is a company and its own accounts for that year are
not required to be audited in accordance with Part 16 of the Companies
Act 2006, section 144(2) applies in relation to those accounts (whether
or not it would otherwise so apply).

(6) Subsections (4) and (6) of section 149 apply in relation to any appointment
45under subsection (4)(b) as they apply in relation to an appointment under
section 149(2).