Appendix B
Letter from the Department of Health to the Clerk
of the Committee
Proposal for the Regulatory Reform (National Health
Service Charitable Trust Accounts and Audit) Order 2004
Thank you for your letter dated 21 January 2004.
I have detailed below the Department of Health's response to the
questions raised by the Committee. Also included is some additional
information for the Committee, which clarifies paragraph 46 of
the Explanatory Document.
1. The explanatory statement indicates that the
proposed order will place a requirement on NHS charities to assist
in the audit or examination of their accounts. It is not immediately
apparent that this requirement derives from the proposed order.
Q 1 Please indicate where the requirement
on NHS charities to assist the Audit Commission with audits or
examinations is to be found, either in the existing legislation
or in the proposed order.
The requirement for NHS charities to assist in the
audit or examination of their accounts is contained in the Audit
Commission Act 1998, which provides access powers for auditors
appointed by the Audit Commission. Section 6 of the Act provides
for the auditor's right to documentation and information and section
48 provides for the provision of information and documents to
the Audit Commission and any person authorised by it.
2. It appears to the Committee that the proposed
order may re-enact two of the burdens in existing legislation:—
(a) New section 43A(5) of the Charities Act
1993 (the 1993 Act), inserted by article 3(3) of the draft order,
appears to re-enact the burden in existing section 43(7)(b) which
new subsection 43(10) (inserted by article 3(2)) disapplies.
(b) New section 43B of the 1993 Act, inserted
by article 3(3) of the draft order, appears to re-enact the existing
provisions of section 98(1) of the National Health Service Act
1977 in respect of the inspection rights of the Comptroller and
Auditor General and the Auditor General for Wales, which article
2(3) of the draft order disapplies.
Q 2 Please indicate whether the Department
considers that the draft order would re-enact the burdens described
in paragraphs 2a) and 2b) above: and, if so, whether it believes
that the re-enacted burdens meet the test of proportionality set
out in section 1(1)(b) of the 2001 Act.
The Committee is correct that new section 43A(5)
of the draft Order does re-enact the burden. It brings NHS charities
in line with other charities and provides a legally defined structure.
However, the burden of examination is lighter and less onerous
than an audit for both NHS charities and the auditors and therefore
meets the test of proportionality as set out in section 1(1)(b)
of the 2001 Act.
The new section 43B of the 1993 Act maintains the
Comptroller and Auditor General's (C&AG)(or the Auditor General
for Wales (AGW)) access and inspection rights. The proposal is
not for the C&AG and the AGW to routinely examine NHS charities
accounts as is required under the present legislation.
Therefore this is a significant reduction in the present burden,
which is mainly borne by Department of Health (DH) and National
Assembly for Wales (NAW), and not the charities themselves. Although
these access and inspection provisions will be continued to
our knowledge there has only been one such report on NHS charities
which involved the charities themselves over the last 25 years.
It maintains a protection on behalf of Parliament and secures
accountability and we believe it is proportionate.
3. It appears to the Committee that, in terms
of the 2001 Act, the proposal would also impose new burdens on
the Audit Commission, which are not explicitly identified in the
explanatory statement (paragraph 39):—
(a) New section 43A of the 1993 Act, inserted
by article 3(3) of the draft order, requires the Audit Commission
to provide an auditor to audit the accounts of NHS charities whose
gross income or total expenditure in any financial year exceeds
£250,000.
(b) In the same section, the Audit Commission
is required to determine whether the accounts of charities whose
income or expenditure does not exceed the £250,000 threshold
require either a full audit or an examination, and to appoint
an Audit Commission auditor or examiner as appropriate.
Q 3 Please indicate whether the Department
considers that the draft order would impose the new burdens described
in paragraphs 3a) and 3b) above: and, if so, whether it believes
that these new burdens meet the test of proportionality set out
in section 1(1)(b) of the 2001 Act.
The draft Order reinstates the current position.
Where only an examination is required this is less demanding and
onerous on the Audit Commission and also on NHS charities and
therefore does meet the test of proportionality as set out in
the 2001 Act.
4. The summary of consultation responses (at Annex
A of the explanatory statement) indicates that a number of respondents
were concerned that guidance on the preparation and submission
of accounts, presently available to NHS charities when they prepare
accounts for submission under section 98 of the 1977 Act, would
no longer be available. In its marginal comments on the consultation
responses, the Department has indicated that the accounting guidance
issued to NHS charities has been based on the Charity Statement
of Recommended Practice (SORP), and that this requirement will
continue.
5. The arrangements envisaged have not been set
out in full in the body of the explanatory statement. It is therefore
difficult to ascertain whether the proposals are likely to result
in an increased administrative or financial outlay for NHS charities.
Q 4 Please indicate whether, under the
proposals, NHS charities will still be able to receive guidance
from the Department of Health on the preparation of their annual
accounts; if not, what forms of guidance will be available to
NHS charities; and whether the Department considers that NHS charities
are likely to incur additional expenditure in the preparation
of their accounts if Department of Health guidance is no longer
available.
Under the proposals the DH/NAW guidance will not
be issued. NHS charities will, however, be able to use current
DH or NAW guidance as a baseline. NHS Trustees will have access
to Charity Commission guidance and also support from the Charity
Commission accounts section in the same way as other charities.
If any additional expenditure were to be incurred by NHS charities
it would be de minimis and there would be overall savings for
NHS charities as is reflected in the consultation responses.
6. The explanatory statement (paragraph 55) indicates
that a sample of views was sought on the proposed amendment to
the original proposal, which would give the Comptroller and Auditor
General the power to examine the accounts of NHS charities submitted
to the Charity Commission. The response from the sample indicates
that the amendment to the proposal was discussed and approved
at a meeting of the Informal Group of Charities Associated with
NHS Bodies on 20 November 2002.
Q 5 Please indicate how the "Informal
Group of Charities Associated with NHS Bodies" is constituted,
and the bodies which are members of the Group; how often the Group
meets; and whether, in the Department's opinion, the Group is
properly representative of the opinion of NHS charities in England
and in Wales.
The 'Informal Group of Charities Associated with
NHS bodies' is made up of NHS charities which hold funds valued
at £5 million or more. The group has a high level of experience
in NHS charity matters and is therefore in our opinion can provide
a view reflecting issues affecting all NHS charities. It holds
2-4 meetings per year to which the Department of Health and the
Charity Commission are invited. Twenty-two members of the 'Group'
provided a response to the original consultation and were included
in the 79 responses received. There were 3 new respondees from
the members of the 'Group'.
7. The Committee has examined the statements made
by the Department in the explanatory statement concerning the
appointment of Audit Commission auditors to audit the accounts
of NHS charities and the appropriate NHS host body. A number
of consultees indicated in their responses that they would like
the auditor appointed to the host body to audit the accounts of
the NHS charity. Against one response (explanatory statement,
annex A, p. 9) the Department has stated that "[Audit Commission]
auditors appointed to the host body are automatically appointed
to the charity. We do not envisage any change in this process."
But against another response requesting joint appointments (annex
A, p. 8) the Department has stated that "we have asked the
Audit Commission to try to ensure that this is the case."
Q 6 Please clarify, in the light of apparently
conflicting observations in the explanatory statement, whether
there will be any change to the existing arrangements whereby
the same Audit Commission auditors are appointed to scrutinise
the accounts both of the host NHS body and of its associated charity.
The apparent conflict reflects the fact that, currently,
in each case the Audit Commission appoints the same auditors for
the accounts of the host NHS body and its associated charity.
This is however a matter for the Audit Commission and there could
be circumstances where the Commission would decide this is inappropriate.
The Department of Health has thus asked the Audit Commission
to ensure that for NHS Trusts and Primary Care Trusts that this
arrangement continues whenever possible; however under the proposals
final decisions on this will continue to lie with the Audit Commission.
8. The figures for the number of NHS charities
in England and Wales in the financial year 2001/02 appeared to
differ between the explanatory statement and the accompanying
regulatory impact assessment (annex F). It would assist the Committee
to have a definitive statement of the number of NHS charities
in England and Wales as at the end of the most recent financial
year for which figures are available.
Q 7 Please indicate the total number of
NHS charities in England and in Wales, and indicate how many fall
into each category of trusteeship at the end of the last financial
year for which figures are available.
Q 8 Please also indicate how many of those
charities had income or expenditure of less than £10,000;
how many had income or expenditure between £10,000 and £250,000,
and how many had income or expenditure exceeding £250,000,
in respect of the last financial year for which figures are available.
The figure of around 450 NHS trustee bodies administering
charitable funds (paragraph 3 of the Explanatory Document) reflects
the numbers for 2000-01. The 419 shown at Annex F are the number
of NHS Trustees at the 31st March 2002. A table reflecting
the latest figures, which are for 2002-03, as requested above
is attached. The reduction in numbers reflects changes in the
structure of the NHS. Please note these numbers remain subject
to audit.
9. The explanatory statement (paragraph 20) gives
an indication of the extent to which the proposals will extend
to the proposed NHS Foundation Trusts. It does not appear to
explain what the relationship will be between an NHS Trust and
its associated NHS charity once the NHS Trust has been designated
a Foundation Trust.
Q 9 Please indicate the extent to which
it is envisaged that the proposals will extend to NHS charities
associated with NHS trusts, once those trusts are designated as
foundation trusts under the Health and Social Care (Community
Health and Standards) Act 2003.
For those NHS trusts that become foundation trusts,
under the Health and Social Care Act 2003 the arrangements would
be as follows:
(a) where the NHS trust was a corporate trustee,
the foundation trust will become the corporate trustee (see paragraph
20 of the Explanatory Document, and the Health and Social Care
Act 2003);
(b) where there was a body of trustees for the
NHS trust it will become the body of trustees for the foundation
trust; and
(c) where special trustees were appointed for
a named hospital this will continue line with the proposals of
the RRO.
The Department would also like to take this opportunity
provide the Committee with the some clarification on paragraph
46 of the Explanatory Document, to bring out the effect of proposals
in the draft Order and explain why the procedure is considered
appropriate. The following amended paragraphs better reflect what
the proposal sets out to do. The position is:
The Charities (Accounts and Reports) Regulations
1995 currently apply to NHS charities. Article 5 and the
Schedule to the Order provide for the Regulations to continue
to apply to NHS charities, subject to modifications to take account
of the fact that the provisions on NHS charities are in a new
section 43A.
Article 5 and the Schedule to the Order were
identified as a matter to be dealt with by subordinate provision
under section 4(3) of the Regulatory Reform Act 2001. Article
6 of the Order designates article 5 and the Schedule as subordinate
provisions. While further amendments are not considered
likely, in the event that any were necessary it is sensible to
provide for amendment of these essentially technical provisions
in a subordinate provisions order, which would be subject to the
negative resolution procedure.
6 February 2004
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