Feature / Finance explained

Existing guidance from the Charity Commission has been highlighted as providing some accounting notes for managers faced with reporting on a wider portfolio of NHS charitable funds as a result of Transforming community services changes, writes Steve Brown.

Substantial numbers of community services were this year transferred out of primary care trusts and into new acute and mental health trust hosts. Understandably the focus has been on getting the services bedded in and, on the financial side, sorting out the merged reporting and accounting arrangements.

However in many cases, as part of the transfers, the new community service hosts have also inherited charitable funds – in some cases far bigger that those they already administered. There has been limited guidance to date on the actions that finance managers should take to prepare for the specific requirements they will face in preparing annual accounts for any newly inherited charitable funds.

The basic guidance appears to be for managers to assess the totality of funds that they are now administering. For example before the arrival of new community services, a foundation trust may have had several charities all grouped together under one registration with the Charity Commission. It may now find that it has, for example, two further charities with separate registration numbers, each of which might in fact contains numerous small separate funds.

The first task for managers should be to review the whole portfolio to assess any opportunity for rationalisation. For example perhaps there are now two funds looking to support oncology research. Or if there are unrestricted funds, they could potentially be held as designated funds within general purpose charitable funds.

Once this tidying up process has been completed, trusts and foundation trusts can approach the Charity Commission to seek a linking direction, which will effectively associate all the separate charities to a single registered number.

This would then require only a single annual statement of accounts, although the statement would still have to enable key information to be identified for all the individual charities. If this is not done, organisations may face the prospect of delivering numerous sets of audited accounts.

The Charity Commission guidance sets out the accounting implications for eight different scenarios on its website*.

Finance managers should engage early with auditors. They also need to ensure they have access to prior year data from the former funds host. Again early engagement is advised given the potential for staff to move on to new roles as part of the reorganisation of primary care trusts.

*See NHS charities guidance (revised October 2011), sections D2.2 (linking directions) and G5 (accounting for transfers).