News / Charities’ consolidation put back one year

Trusts and foundation trusts will not be required to consolidate their charitable fund accounts into their main organisation accounts in 2009/10 after the Treasury granted the NHS a one-year divergence from the new rules.

As part of the new international financial reporting standards being adopted by the NHS for 2009/10 accounts, international accounting standard IAS27 requires NHS bodies to consolidate charities where specific control tests are met.

The Charity Commission is understood to be concerned about consolidation , believing that it contradicts charities’ independence and would portray charitable funds as belonging to NHS bodies.

The Treasury dispensation was welcomed by Charity Commission deputy head of accountancy policy Nigel Davies. ‘It will provide time for further debate with the Treasury, Monitor and the Audit Commission,’ he said.

The Charity Commission’s chief executive, Andrew Hind, has requested a meeting with the Financial Reporting Advisory Board to raise concerns.

NHS finance managers have also objected to the consolidation approach. In its response to Monitor’s Financial reporting manual (FReM) consultation last year, the HFMA argued that FTs did not have control over charities and should not have to consolidate. They also said consolidation would lead

to inconsistencies within and among FTs.

‘Cash gifts would result in an unpredictable and uneven income stream, while donated assets would involve a reserve and amortisation,’ it said, adding that this could even lead to FTs paying dividends on assets to which the Department of Health had not contributed.

In its FReM for 2009/10, Monitor said that delaying the consolidation requirement for a year would ‘afford charities the opportunity to amend their governance structures where NHS foundation trusts currently meet the control tests but where the trustees of the charities conclude that it is not in the wider interests of the charity for its accounts to be consolidated’.