On this page:

Unincorporated Charities Group Accounts

Audit or Independent Examination of Unicorporated Charities

Obligation to Provide Annual Report to Anyone Who Asks

Change in Annual Return Threshold

Failure to Submit Annual Reports or Returns

Audit or Independent Examination of Charitable Companies

Whistleblowing by Auditors and Independent Examiners

Power to Spend Permanent Endowment

Group accounts

A parent charity now has to prepare group accounts for itself and its subsidiary charities

Charitable company groups will prepare their accounts under charity law rather than company law.

Level of expenditure is no longer a factor in determining whether an unincorporated charity must have a full audit, nor is level of income or expenditure in the preceding two years.

An audit is required if the unincorporated charity's annual income is £500,000 or more, or if its annual income is more than £100,000 and its total assets are valued at more than £2.8 million.

An independent examination is required by the Charities Act 2006 for unincorporated charities income is above £10,000, unless a full audit is required (see criteria above).

The Act does not require an independent examination for charities with an income of between £5,000 and £9,999 - however, if it is required by the organisation's constitution it will still be necessary.

Independent examiners for charities with an income of above £250,000 must have a professional qualification or be a fellow of the Association of Charity Independent Examiners.

ALL charities have to provide their annual accounts and trustees' statutory annual report to anyone who asks. A reasonable fee can be charged for this.

Trustees are obliged to report on public benefit in their annual reports for financial years starting on or after 1 April 2008. Charities with an income under £500,000 will need to include a short statement about how they meet the public benefit requirement. More information will need to be given by larger charities.

Charities with annual income under £10,000 but expenditure over this amount no longer have to submit a return.

It is a criminal offence not to submit charity reports or returns to the Charity Commission if required, and each person who was a trustee immediately before the report or return was due can be fined.

It is a defence for the trustees to be able to prove that he or she took reasonable steps to try to ensure the report or return would be submitted on time.

In summary, the audit rules for charitable companies under charity and/or company law are:

• For financial years starting before 27 February 2007; reporting accountant's report or full audit if income is between £90,000 and £250,000, and assets are not more than £1.4 million; full audit above this
• For financial years starting between 27 February 2007 and the day before the implementation date, which will probably be 1 October 2007: reporting accountant's report or full audit if income is between £90,000 and £500,000, and assets are not more than £2.8million; full audit above this
• For financial years starting on or after the implementation date: independent examination if income is between £10,000 and £500,000, and assets are not more than £2.8 million; full audit above this

The group turnover threshold will be increased where a charitable company is a parent company or a subsidiary undertaking.

Auditors and independent examiners of unincorporated charities and charitable companies are obliged to report significant abuse or breaches of charity law to the Charity Commission. Less significant abuse or breaches may, but do not have to, be reported.

The rules allowing the expenditure of capital (also known as permanent endowment) have been relaxed and extended to all unincorporated charities, not just those with annual income under £1,000, where the income form permanent endowment is too small to be effectively spent.

Similar rules, but with more safeguards, will be put in place for larger endowment funds with a single purpose or given by a single individual or institution.