News / Charity consolidation could face more delay

The requirement to consolidate NHS charitable funds into the accounts of their host NHS body could be delayed while the Department of Health holds further discussions with the Treasury.

The new accounting treatment is a result of the move to international financial reporting standards and specifically the application of international accounting standard IAS 27, which requires the consolidation of subsidiaries where certain control tests are met. It affects charitable funds where corporate trustee arrangements apply.

While the NHS is implementing IFRS from 2009/10, it has already received a year’s deferment on the consolidation requirement, with the aim of applying the change from April 2010.

Discussions have been ongoing between the Department, the Charity Commission and auditors throughout the past year.

Health minister Phil Hope has insisted that the application of IFRS would have ‘no effect on the independence of NHS charitable funds’ and that ‘people can continue to donate to NHS charities, safe in the knowledge that their donations will be used in the way they intended’.

The Charity Commission, while disagreeing with the need for consolidation, has acknowledged that consolidation itself should not be an issue as long as its wider independence tests are met.

However, the issue has caused concern over the impact on charitable donations, even prompting the People newspaper to launch a ‘hands off NHS gifts’ campaign in which it portrays the change as an attempt to ‘nationalise NHS charity money’.

Mr Hope told the Commons in January: ‘In recognition of the concern this issue has caused, we are working with colleagues in the Treasury and elsewhere to seek to delay the implementation of this requirement while we review the ways in which NHS charities are governed, to ensure their independence continues to be protected and is clear and transparent to all.’

A further meeting between the health minister and officials from the Department and the Charity Commission was being held as Healthcare Finance went to press.

It is understood only three organisations applied to the Department to change their corporate trustee status, which would have sidestepped the consolidation requirement. Two of those organisations have subsequently withdrawn their requests.

Once materiality is taken into account, some estimates suggest that only 30 of the 280 affected charities might face consolidation. But the impact could be wider.