2 Introduction
2. On 7 January 2004 the Government laid before Parliament
a proposal for the Regulatory Reform (National Health Service
Charitable Trust Accounts and Audit) Order 2004 in the form of
a draft of an order and an explanatory memorandum from the Department
of Health (the Department) and the National Assembly for Wales.[1]
3. The proposed order deals with the accounting arrangements
for charitable funds administered by National Health Service bodies,
known as National Health Service charitable trusts ("NHS
charities").[2] The
Department stresses that other charities associated with the National
Health Service (for example, Hospital Leagues of Friends) are
independent of NHS bodies. They are not affected by these proposals.[3]
4. Before the establishment of the NHS in 1948, charitable
funds were often held by hospitals operated by local authorities
or voluntary concerns. On the establishment of the NHS, the Secretary
of State for Health took on responsibility for administration
of the charitable funds. NHS charities are now administered either
by the board of the relevant NHS body, acting as a charitable
trustee, or by separate Special Trustees or Trustees for NHS Trusts.[4]
In England, non-executive NHS board members and trustees are
appointed by the Appointments Commission. In Wales, the Minister
for Health and Social Services of the Welsh Assembly Government
makes non-executive board appointments to health bodies.[5]
The trustees of each charity are responsible for the administration
of their charity and for ensuring that its assets are properly
managed and applied in accordance with charity law.
5. In the explanatory statement the Department indicated
that in the financial year 2000/01 there were 451 NHS charities
in England and Wales. Of the 431 in England, 413 were administered
by the relevant NHS body acting as a charitable trustee and 18
by separate Special Trustees, while the 20 trusts in Wales were
all administered by NHS bodies.[6]
Annex F of the explanatory statement provides an overall figure
of 419 NHS charities. The Department has explained that this
reflected the number of charities at the end of the 2001/02 financial
year.[7]
6. At the end of the 2002/03 financial year there
were 338 NHS charities in England and Wales. The Department has
explained that this reduction in numbers follows internal reorganisation
within the NHS.[8] The
Department has supplied figures for the number of NHS trustees
and bodies administering charitable funds at the end of the financial
year 2002/03. These are set out in Figure 1.
Figure 1:
Number of NHS charities operating in England and Wales at 31
March 2003, by category
Country
| Category
| Number
|
England
| Corporate Trustees
| 302
|
| Trustees for NHS Trusts
| 11
|
| Special Trustees
| 5
|
| Total
| 318
|
Wales
| Corporate Trustees
| 20
|
| Total
| 20
|
Total (England and Wales)
| 338
|
Source: Department
of Health memorandum (Appendix B)
7. At 31 March 2002, the end of the last financial
year for which audited figures are available, the sum of charitable
funds held by all NHS charities in England and Wales amounted
to £1,682 million.[9]
Funds held by individual charities in the financial year 2001/02
ranged from less than £1,000 to over £380 million.[10]
8. The regulatory impact assessment prepared for
the proposal gave figures for the numbers of NHS charities in
England and Wales at 31 March 2002, broken down by annual income
and expenditure band.[11]
These bands indicate the different levels of audit scrutiny to
which charity accounts are subject under the Charities Act 1993.[12]
9. On the basis of their provisional unaudited accounts
for the financial year 2002/03, the Department has provided a
similar breakdown of the income and expenditure of the 338 NHS
charities which were operating in England and Wales at the end
of that financial year. The details are given in Figure 2.
Figure 2:
Number of NHS charities operating in England and Wales at 31
March 2003, by total annual income and expenditure band
Country
| Total annual income or expenditure
| Number of charities
|
England
| Less than £10,000
| 25
|
| Between £10,000 and £250,000
| 125
|
| Over £250,000
| 168
|
| Total
| 318
|
Wales
| Less than £10,000
| 4
|
| Between £10,000 and £250,000
| 3
|
| Over £250,000
| 13
|
| Total
| 20
|
Source: Department
of Health memorandum (Appendix B)
Present audit and accounting arrangements
Requirements of the National Health Service Act
1977
10. The present audit and accounting arrangements
for most NHS bodies (excluding the proposed NHS Foundation Trusts)
are set out in section 98 of the National Health Service Act 1977.[13]
NHS bodiesincluding NHS charitiesare required to
prepare annual accounts in a form directed by the Secretary of
State for Health and approved by the Treasury. The accounts are
audited by auditors appointed by the Audit Commission. Following
audit, they are submitted to the Secretary of State for Health
or the National Assembly for Wales.
11. The Secretary of State for Health or the National
Assembly for Wales summarise the accounts of the funds derived
from the Exchequer and the funds belonging to the charitable trusts
separately, and transmit them to the Comptroller and Auditor General
or the Auditor General for Wales for examination. After examination,
the accounts for England are presented to Parliament and those
for Wales are presented to the National Assembly.[14]
12. The Secretary of State for Health and the National
Assembly for Wales have no powers to inquire into the management
of NHS charities. Their powers are limited to appointing and removing
trustees, determining their terms of office, summarising the accounts
of charities for examination and presentation to Parliament and
the National Assembly and transferring property held on trust
between NHS bodies.[15]
Requirements of the Charities Act 1993
13. In 1996 a separate and additional accounting
requirement was placed on NHS charities by the entry into force
of Part VI of the Charities Act 1993. NHS charities have always
been required to register for charitable status and submit to
the jurisdiction of the Charity Commissioners. After 1 March 1996
they were no longer exempt from the requirement in charity law
that all permanently endowed charities shall send their accounts
to the Charity Commissioners. NHS charities now fall within the
normal accounts monitoring programme undertaken by the Charity
Commission.
14. The explanatory statement summarises the accounting
regime which applies to all charities under charity law. This
is as follows:
- If a charity's gross income
or its total expenditure in any one financial year exceeds
£10,000, it must submit accounts to the Charity Commission.
But if the gross income or total expenditure do not exceed £250,000,
the accounts are permitted to be subject to an examination before
submission, rather than to a full audit.
- Charities with a gross income
or total expenditure of over £250,000 in any one financial
year must prepare full accounts for submission to the Charity
Commission, and are subject to a full audit.
- If a charity's gross income in any financial
year is £100,000 or less, the charity may elect to prepare
accounts of receipts and payments only, and a statement of assets
and liabilities.
- If neither a charity's gross income, nor its
total expenditure in any financial year, exceeds £10,000,
it is exempt from any requirement to have its accounts examined
or audited (unless the Charity Commissioners order otherwise),
and it is not required to submit its annual accounts to the Charity
Commissioners, unless requested to do so.
- The Charity Commissioners conduct routine monitoring
of 'larger charities', and have powers to institute general inquiries
into charities or to carry out inquiries for specific purposes.[16]
15. The Department explains that NHS charity trustees
presently seek a dispensation from the Charity Commission to allow
the audit undertaken by the Audit Commission for the purposes
of section 98 of the 1977 Act (see paragraph 10 above) to satisfy
the audit scrutiny requirements for accounts submitted to the
Charity Commission.[17]
16. The Department has indicated that changes are
proposed to the present structure of charity law, following a
Cabinet Office review. The Government proposes that the present
audit threshold of £250,000 should be raised to £500,000.
In addition, it is proposed that the type of accounts to be prepared,
and the level of audit scrutiny, should be determined by an asset
threshold as well as the present income threshold.[18]
A draft Charities Bill, intended to give effect to these changes
and others, was announced in the Queen's Speech.
1 Copies of the proposal are available to Members of
Parliament from the Vote Office and to members of the public from
the Department. The proposal is also available on the Cabinet
Office website: http://www.cabinetoffice.gov.uk/regulation/act/proposals.htm
Back
2
Article 3(3) of the draft order, which inserts new section 43A
into the Charities Act 1993, defines an NHS charity as follows:
"a charitable trust, the trustees of which are (a) a Strategic
Health Authority, a Special Health Authority, a Primary Care Trust,
a Local Health Board or a National Health Service trust; (b) special
trustees appointed under section 29(1) of the National Health
Service Reorganisation Act 1973 and section 95(1) of the National
Health Service Act1977; (c) trustees for a National Health Service
trust appointed under section 11 of the National Health Service
and Community Care Act 1990; or (d) trustees for a Primary Care
Trust appointed under section 96B of the National Health Service
Act 1977". Back
3
Explanatory statement, para 5 Back
4
A number of NHS charities, which were administered by Special
Trustees, are now administered by Trustees for NHS Trusts in order
to align their boundaries with those of the relevant Trusts. Back
5
Explanatory statement, para 11 Back
6
Ibid. Back
7
Explanatory statement, annex F, and Appendix B, para 8 Back
8
Appendix B, para 8 Back
9
Summarised accounts for NHS funds held on trust for the financial
year 2001/02: Explanatory statement, annex B Back
10
Explanatory statement, para 33 Back
11
Explanatory statement, annex F Back
12
See below, para 14 Back
13
The audit and accounting arrangements for NHS Foundation Trusts
are set out in Schedule 1 (paras 23 to 25) and Schedule 5 to the
Health and Social Care (Community Health and Standards) Act 2003. Back
14
An example of the summarised accounts for NHS charities (the accounts
presented to Parliament for the financial year 2001/02) is attached
to the explanatory statement as Annex B. Back
15
Explanatory statement, paras 9, 10 Back
16
Explanatory statement, para 9 Back
17
Explanatory statement, para 24 Back
18
Explanatory statement, para 12 Back
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