CHARITIES Citation and commencement 1 These Regulations may be cited as the Charities (Accounts and Reports) Regulations 1995 and shall come into force on 1st March 1996. Interpretation 2 1 In these Regulations, the expression— “common deposit fund” means a common deposit fund established by a scheme under section 25 of the 1993 Act ; “common investment fund” means a common investment fund established by a scheme under section 24 of the 1993 Act, other than a fund the trusts of which provide for property to be transferred to the fund only by or on behalf of a participating charity of which the charity trustees are the trustees appointed to manage the fund; “financial year” shall be construed in accordance with regulation 5 below; “institution or body corporate connected with the charity”, in relation to a charity, means an institution or body corporate which— in the case of an institution, is controlled by, in the case of a body corporate, in which a substantial interest is held by, the charity or any one or more of the charity trustees acting in his or their capacity as such; “recognised stock exchange” has the meaning assigned to it by section 841 of the Income and Corporation Taxes Act 1988 ; and “the 1993 Act” means the Charities Act 1993. 2 For the purposes of these Regulations, a person is connected with a charity trustee if — a he is the child, parent, grandchild, grandparent, brother or sister of the charity trustee; b he is the spouse of the charity trustee or of any person connected with him by virtue of sub-paragraph (a) above; c he is a trustee of any trust, not being a charity, the beneficiaries or potential beneficiaries of which include the charity trustee or any person connected with him by virtue of sub-paragraph (a) or (b) above and is acting in his capacity as such; d he is a partner of the charity trustee or of any person connected with him by virtue of sub-paragraph (a), (b) or (c) above and is acting in his capacity as such; or e the person is a body corporate, not being a company which is connected with a charitable institution within the meaning of section 58(5) of the Charities Act 1992 , in which the charity trustee has, or the charity trustee and any other charity trustee or trustees or person or persons connected with him by virtue of sub-paragraph (a), (b), (c) or (d) above, taken together, have, a substantial interest. 3 Any expression in this regulation which also appears in Schedule 5 to the 1993 Act shall be construed in accordance with paragraphs 2 to 4 of that Schedule. Form and content of statements of accounts 3 1 Subject to regulation 4 below, the requirements as to form and contents of a statement of accounts prepared in accordance with section 42(1) of the 1993 Act are those set out in the following provisions of this regulation. 2 The statement shall consist of the following, that is to say— a a statement of financial activities which satisfies the requirements set out in Part I of Schedule 1 to these Regulations; and b a balance sheet which satisfies the requirements set out in Part II of that Schedule. 3 The statement shall be prepared in accordance with the methods and principles specified and referred to in Part III of Schedule 1 to these Regulations. 4 There shall be provided by way of notes to the accounts the information specified in Part IV of Schedule 1 to these Regulations. 5 Part V of Schedule 1 to these Regulations shall have effect for the purposes of defining expressions used in that Schedule. 6 The balance sheet shall be signed by one or more of the charity trustees of the charity, each of whom has been authorised to do so, and shall specify the date on which the accounts to which the statement relates were approved by the charity trustees. Form and contents: special cases 4 1 In the case of a common investment fund or a common deposit fund which is deemed to be a charity by virtue of section 24(8), including that subsection as applied by section 25(2), of the 1993 Act, the requirements as to form and contents of a statement of accounts prepared in accordance with section 42(1) of the 1993 Act are those set out in paragraphs (2) to (6) below. 2 Subject to paragraph (8) below, the statement shall consist of the following, that is to say— a a statement of total return which satisfies the requirements set out in Part I of Schedule 2 to these Regulations; b a statement of movement in funds which satisfies the requirements set out in Part II of Schedule 2 to these Regulations; and c a balance sheet which satisfies the requirements set out in Part III of Schedule 2 to these Regulations. 3 The statement shall be prepared in accordance with the methods and principles specified and referred to in Part IV of Schedule 2 to these Regulations. 4 There shall be provided by way of notes to the accounts the information specified in Part V of Schedule 2 to these Regulations. 5 Part VI of Schedule 2 to these Regulations shall have effect for the purposes of defining expressions used in that Schedule. 6 The balance sheet shall be signed by one or more of the trustees appointed to manage the fund, each of whom has been authorised to do so, and shall specify the date on which the accounts to which the statement relates were approved by the trustees appointed to manage the fund in accordance with the scheme by which the fund was established. 7 In the case of a charity which— a is a registered housing association within the meaning of the Housing Associations Act 1985 and whose registration has been recorded under section 5(3) of that Act; or b has during the financial year in question— i conducted an institution in relation to which a designation made, or having effect as if made, under section 129 of the Education Reform Act 1988 or section 28 of the Further and Higher Education Act 1992 has effect; ii received financial support from funds administered by a higher education funding council or further education funding council within the meaning of that Act of 1992 in respect of expenditure incurred or to be incurred by the charity in connection with that institution; and iii incurred no expenditure for charitable purposes other than the purposes of that institution or any other such institution, the requirements as to form and contents of a statement of accounts prepared in pursuance of section 42(1) of the 1993 Act are that the statement shall consist of a balance sheet as at the end of the financial year in respect of which the statement of accounts is prepared and an income and expenditure account. 8 In the case of any financial year of a common deposit fund in which there are no gains or losses on disposal or revaluation of assets, paragraph (2) above shall have effect as if sub-paragraph (b) were omitted. Financial year 5 1 The financial year of a charity shall, for the purposes of the 1993 Act and regulations made thereunder, be determined in accordance with the following provisions of this regulation. 2 The first financial year of a charity shall be— a in the case of a charity which is established before the date on which these Regulations come into force, the period beginning with the day immediately following the end of the period in respect of which a statement of accounts was required to be prepared under any statutory provision contained in or having effect under an Act of Parliament applicable to that charity before the coming into force of section 42 of the 1993 Act and ending with the accounting reference date of the charity or such other date, not more than seven days before or after the accounting reference date, as the charity trustees may determine; b in the case of a charity which is established on or after the date on which these Regulations come into force, the period beginning with the day on which the charity is established and ending with the accounting reference date of the charity or such other date, not more then seven days before or after the accounting reference date, as the charity trustees may determine. 3 Subsequent financial years of a charity begin with the day immediately following the end of the charity’s previous financial year and end with its accounting reference date or such other date, not more than seven days before or after the accounting reference date, as the charity trustees may determine. 4 The accounting reference date of a charity shall, for the purposes of this regulation, be— a in the first financial year of a charity which is established before the date on which these Regulations come into force, such date, not less than 6 months nor more than 18 months after the date on which that financial year began, as the charity trustees may determine; b in the first financial year of a charity which is established on or after the date on which these Regulations come into force, such date, not less than 6 months nor more than 18 months after the date on which the charity was established, as the charity trustees may determine; c in any subsequent financial year of a charity, the date 12 months after the previous accounting reference date of the charity or such other date, not less than 6 months nor more than 18 months after the previous accounting reference date of the charity as the trustees may determine: Provided that— the charity trustees shall not exercise their powers under sub-paragraph (c) of this paragraph so as to determine an accounting reference date in respect of any financial year which is consecutive, or follows immediately after a financial year which is consecutive, to a previous financial year in respect of which that power was exercised; and the charity trustees shall exercise their powers under sub-paragraph (a) or (c) of this paragraph so as to determine a date earlier or later than 12 months from the beginning of the financial year only where satisfied that there are exceptional reasons to do so (which reasons shall, in the case of a charity subject to the requirements of regulation 3(4) or 4(4) above, be disclosed in a note to the accounts). Annual audit of charity accounts 6 1 The duties of an auditor carrying out an audit of the accounts of a charity under section 43 of the 1993 Act shall be those specified in the following provisions of this regulation. 2 Where a statement of accounts has been prepared under section 42(1) of the 1993 Act for the financial year in question the auditor shall make a report on that statement to the charity trustees which— a states the name and address of the auditor and the name of the charity concerned; b is signed by him or, where the office of auditor is held by a body corporate or partnership, in its name by a person authorised to sign on its behalf and states that the auditor is a person falling within paragraph (a) or, as the case may be, (b) of section 43(2) of the 1993 Act; c is dated and specifies the financial year in respect of which the accounts to which it relates have been prepared; d specifies that it is a report in respect of an audit carried out under section 43 of the 1993 Act and in accordance with regulations made under section 44 of that Act; e states whether in the auditor’s opinion the statement of accounts complies with the requirements of regulation 3 or, as the case may be, 4, above and gives a true and fair view of the state of affairs of the charity at the end of the financial year in question and of the incoming resources and application of the resources of the charity in that year; f where the auditor has formed the opinion— i that accounting records have not been kept in respect of the charity in accordance with section 41 of the 1993 Act; or ii that the statement of accounts does not accord with those records; or iii that any information contained in the statement of accounts is inconsistent in any material respect with any report of the charity trustees prepared under section 45 of the 1993 Act in respect of the financial year in question; or iv that any information or explanation to which he is entitled under regulation 8 below has not been afforded to him, contains a statement of that opinion and of his grounds for forming it. 3 Where a receipts and payments account and statement of assets and liabilities have been prepared under section 42(3) of the 1993 Act for the financial year in question the auditor shall make a report on that account and statement to the charity trustees which— a states the name and address of the auditor and the name of the charity concerned; b is signed by him or, where the office of auditor is held by a body corporate or partnership, in its name by a person authorised to sign on its behalf and states that the auditor is a person falling within paragraph (a) or, as the case may be, (b) of section 43(2) of the 1993 Act; c is dated and specifies the financial year in respect of which the accounts to which it relates have been prepared; d specifies that it is a report in respect of an audit carried out under section 43 of the 1993 Act and in accordance with regulations made under section 44 of that Act; e states whether in the auditor’s opinion— i the account and statement properly present the receipts and payments of the charity for the financial year in question and its assets and liabilities as at the end of that year; and ii the account and statement adequately distinguish any material special trust or other restricted fund of the charity; f where the auditor has formed the opinion— i that accounting records have not been kept in respect of the charity in accordance with section 41 of the 1993 Act; or ii that the account and statement do not accord with those records; or iii that any information or explanation to which he is entitled under regulation 8 below has not been afforded to him, contains a statement of that opinion and of his grounds for forming it. 4 The auditor shall, in preparing his report for the purposes of paragraph (2) or, as the case may be, (3) above, carry out such investigations as will enable him to form an opinion as to the matters specified in sub-paragraph (e) and (f) of that paragraph. 5 The auditor shall communicate to the Commissioners, in writing, any matter of which the auditor becomes aware in his capacity as such which relates to the activities or affairs of the charity or of any institution or body corporate connected with the charity and which the auditor has reasonable cause to believe is, or is likely to be, of material significance for the exercise, in relation to the charity of the Commissioners' functions under section 8 (general power to institute inquiries) or 18 (power to act for protection of charities) of the 1993 Act. 6 Where an auditor appointed by charity trustees ceases for any reason to hold office he shall send to the charity trustees a statement of any circumstances connected with his ceasing to hold office which he considers should be brought to their attention or, if he considers that there are no such circumstances, a statement that there are none; and the auditor shall send a copy of any statement sent to the charity trustees under this paragraph (except a statement that there are no such circumstances) to the Commissioners. 7 In the case of an auditor appointed by the Commissioners, the report required by paragraph (2) or, as the case may be, (3) above shall be made to the Commissioners instead of to the charity trustees. Independent examination of charity accounts 7 An independent examiner who has carried out an examination of the accounts of a charity under section 43 of the 1993 Act shall make a report to the charity trustees which— a states his name and address and the name of the charity concerned; b is signed by him and specifies any relevant professional qualifications or professional body of which he is a member; c is dated and specifies the financial year in respect of which the accounts to which it relates have been prepared; d specifies that it is a report in respect of an examination carried out under section 43 of the 1993 Act and in accordance with any directions given by the Commissioners under subsection (7)(b) of that section which are applicable; e states whether or not any matter has come to the examiner’s attention in connection with the examination which gives him reasonable cause to believe that in any material respect— i accounting records have not been kept in respect of the charity in accordance with section 41 of the 1993 Act; or ii the accounts do not accord with those records; or iii in the case of an examination of accounts a statement of which has been prepared under section 42(1) of the 1993 Act, the statement of accounts does not comply with any of the requirements of regulation 3 or, as the case may be, 4 above except the requirements specified in paragraph 1 of Part III of Schedule 1 to these Regulations; f states whether or not any matter has come to the examiner’s attention in connection with the examination to which, in his opinion, attention should be drawn in the report in order to enable a proper understanding of the accounts to be reached; g where any of the following matters has become apparent to the examiner during the course of the examination, namely, that— i there has been any material expenditure or action which appears not to be in accordance with the trusts of the charity; or ii any information or explanation to which he is entitled under regulation 8 below has not been afforded to him; or iii in the case of an examination of accounts a statement of which has been prepared under section 42(1) of the 1993 Act, any information contained in the statement of accounts is inconsistent in any material respect with any report of the charity trustees prepared under section 45 of the 1993 Act in respect of the financial year in question, contains a statement to that effect. Audit and independent examination: supplementary provisions 8 1 An auditor or independent examiner carrying out an audit or examination of the accounts of a charity under section 43 of the 1993 Act shall have a right of access to any books, documents and other records (however kept) which relate to the charity concerned and which the auditor or examiner in question considers it necessary to inspect for the purposes of carrying out the audit or, as the case may be, examination. 2 Such an auditor or independent examiner shall be entitled to require, in the case of the charity concerned, such information and explanations from past or present charity trustees or trustees for the charity, or from past or present officers or employees of the charity, as he considers it necessary to obtain for the purposes of carrying out the audit or, as the case may be, examination. Dispensations from audit or examination requirements 9 1 The Commissioners may, in the circumstances specified in paragraph (2) below, dispense with the requirements of section 43(2) or (3) of the 1993 Act in the case of a particular charity or of a particular financial year of a charity. 2 The circumstances referred to in paragraph (1) above are where the Commissioners: a are satisfied that the accounts of the charity concerned are required to be audited in accordance with any statutory provision contained in or having effect under an Act of Parliament which, in the opinion of the Commissioners, imposes requirements which are sufficiently similar to the requirements of section 43(2) for those requirements to be dispensed with; b are satisfied that the accounts of the charity concerned have been audited by the Comptroller and Auditor General; c are satisfied that the accounts of the charity concerned for the financial year in question have been audited or, as the case may be, examined in accordance with requirements or arrangements which, in the opinion of the Commissioners, are sufficiently similar to the relevant requirements of section 43 of the 1993 Act applicable to that financial year of that charity for those requirements to be dispensed with; d are satisfied that there has in the financial year in question been no transaction on the part of the charity concerned which would be required to be shown and explained in the accounting records kept in pursuance of section 41 of the 1993 Act; e consider that, although the financial year in question of the charity concerned is one to which subsection (2) of section 43 of the 1993 Act applies, there are exceptional circumstances which justify the examination of the accounts by an independent examiner instead of their audit in accordance with that subsection, and the accounts have been so examined, and where the charity trustees of the charity concerned have supplied to the Commissioners any report made to them with respect to the accounts of that charity for the financial year in question which the Commissioners have requested. Annual reports 10 1 Subject to paragraph (4) below, the report on the activities of a charity during the year which is required to be contained in the annual report in respect of each financial year of the charity prepared under section 45 of the 1993 Act shall specify the financial year to which it relates and shall— a in the case of any financial year of a charity in which its gross income does not exceed £100,000, be a brief summary of the main activities and achievements of the charity during the year in relation to its objects; b in the case of any financial year of a charity in which its gross income exceeds £100,000, be a review of all activities, including material transactions, significant developments, and achievements, of the charity during the year in relation to its objects, any significant changes in those activities during the year, any important events affecting those activities which have occurred since the end of the year and any likely future developments in those activities; and c in either case, be dated and be signed by one or more of the charity trustees, each of whom has been authorised to do so. 2 Subject to paragraphs (4), (5) and (6) below, the information relating to a charity and to its trustees and officers which is required to be contained in that annual report shall be— a the name of the charity as it appears in the register and any other name by which it makes itself known; b the number assigned to it in the register and, in the case of a charitable company, the number with which it is registered as a company; c the principal address of the charity and, in the case of a charitable company, the address of its registered office; d a description of the trusts of the charity; e the names of the charity trustees or, in the case of a charity having more than 50 charity trustees, the names of 50 of those trustees including any charity trustee who is also an officer of the charity and the name of any other person who has at any time during the financial year in question been a charity trustee and of any person or body entitled to appoint a charity trustee of the charity; f a description of the organisational structure of the charity; and g a description of any assets held by the charity, or on behalf of the charity by any trustee of the charity, for another charity, and particulars of any special arrangements made with respect to the safe custody of such assets and their segregation from assets of the charity not so held and of the objects of the charity on whose behalf the assets are held. 3 The Commissioners may, where they are satisfied that, in the case of a particular charity or class of charities, or of a particular financial year of a charity or class of charities,— a the disclosure of the name of any person whose name is required by paragraph (2)(e) above to be contained in the annual report of a charity could lead to that person being placed in any personal danger; or b the disclosure of the principal address of the charity in accordance with paragraph (2)(c) above could lead to any such person being placed in any personal danger, dispense with the requirement— i in sub-paragraph (e) of that paragraph so far as it applies to the name of any such person; or ii in sub-paragraph (c) of that paragraph so far as it applies to the principal address of the charity, as the case may require. 4 In the case of a common investment fund or a common deposit fund which is deemed to be a charity by virtue of section 24(8), including that section as applied by section 25(2), of the 1993 Act, this regulation shall have effect as if— a for sub-paragraphs (a) to (c) of paragraph (1) above there were substituted the following sub-paragraphs: a be a review of the investment activities and policies of the trustees during that year; b contain particulars of any significant alteration in the terms of the scheme by which the fund was established or in the investment policies of the trustees during that year; c specify any material events affecting the fund which have occurred since the end of the year; d contain a statement as to whether the trustees have examined whether any person to whom they have delegated their functions in respect of the management of the fund has complied with the terms of the scheme by which the fund was established and with any agreement between the trustees and that person; e be dated and signed by one or more of the trustees appointed to manage the fund, each of whom has been authorised to do so. ; b for sub-paragraph (e) of paragraph (2) above there were substituted the following sub-paragraph: e the names and any professional qualifications of the trustees appointed to manage the fund and any other person who has been a trustee of the fund during the financial year in question and of any person or body entitled to appoint such a trustee; ; c for sub-paragraph (g) of paragraph (2) above there were substituted the following sub-paragraphs: g the name and address of any person to whom the trustees have delegated their functions in respect of the management of the fund or the holding of property transferred to, or sums deposited in, the fund or whom they have appointed to advise them on investment matters; h the name of any regulatory body of which any person referred to in sub-paragraph (g) above is a member; and i a description of any powers delegated by the trustees and of the procedures adopted to ensure that those powers are exercised consistently with the scheme by which the fund was established and the investment policies of the trustees. ; and d paragraph (3) were omitted. 5 In the case of a report prepared under section 46(5) of the 1993 Act (excepted charities which are not registered), paragraph (2) above shall have effect as if— a in sub-paragraph (a) the words from “as it appears in the register” to the end, and b in sub-paragraph (b) the words “the number assigned to it in the register and,”, were omitted. 6 In the case of a report in respect of a financial year of a charity in which its gross income does not exceed £100,000, paragraph (2) above shall have effect as if sub-paragraphs (f) and (g) were omitted. Blatch Minister of State Home Office 17th October 1995