Guidance for corporate trustees and trustee bodies managing NHS charitable funds
This guidance has been updated following the confirmation that government accounting rules require in certain circumstances the results of an NHS charity to be consolidated with those of its linked NHS body.
1 Background to this guidance
1.1 The trustees or corporate trustee of an NHS charity have specific duties under charity law. These duties include preparing their accounts under the Charities Act 2011 and filing these with the Charity Commission within 10 months of their financial year end.
1.2 NHS charities may also be asked to provide separate information to their linked NHS bodies to facilitate their linked NHS body's compliance with the government accounting framework for the NHS and public funds. This is likely to result in the consolidation of NHS Charities into the group accounts of the linked NHS body where the NHS body has the power to control and benefit from the related charities administered by that NHS Body as corporate trustee.
1.3 Following consideration of the HM Treasury appointed Review Group reports and discussions at the Financial Reporting Advisory Board, the Relevant Authorities within central government and the NHS have decided to apply IAS 27 to NHS Organisations in respect of linked charitable trusts from 1 April 2013.
1.4 Advice on the application of the NHS accounting framework should be obtained in the case of:
- Primary Care Trusts and NHS Trusts from their Strategic Health Authority Performance Manager
- NHS Foundation Trusts from the Lead Technical Accountant at Monitor
1.5 NHS bodies report under government accounting rules whilst NHS Charities will continue to report as charities under the Charities Act 2011.
2 Separate accounting duties of an NHS body and any related NHS Charities
2.1 The requirement to prepare group accounts by an NHS body, which consolidates a related NHS charity, is a separate and distinct duty from those of the corporate body when acting as managing trustee. As managing trustee, the corporate trustee is subject to the separate reporting requirements of the Charities Act 2011 and the charities SORP.
2.2 An NHS charity has separate duties of accountability to its donors and other stakeholders which are met in part through the preparation and filing with the Charity Commission of a separate Trustees’ Annual Report and accounts for the NHS charity. A separate audit or independent examiner’s report on the NHS charity’s accounts is also required by the Charities Act 2011.
3 The Commission's view
3.1 NHS charities remain clearly within our regulatory ambit. The Commission's regulatory interest is in ensuring that charities are independent and that charity trustees, including corporate trustees, recognise that a charity exists to pursue its own purposes and not to carry out the policies or directions of any other body.
3.2 Consolidation may incorrectly affect the public perception as to whether charities are independent and so it is of vital importance that NHS Bodies and their senior managers understand that this accounting treatment must not impact in any way on the legal integrity of trusteeship or on the requirements for trustee independence.
4 Trustee independence
4.1 The defining characteristics of a charity include independence, public benefit and being established exclusively for charitable purposes. Upon initial registration, a charitable trust will have been considered to be independent of any public authority.
4.2 In interpreting the governing document to establish whether the trustee is able to act independently of its interests as a public authority, the Commission will consider primarily the constitutional provisions, but it may also in addition consider how the trust operates in practice. For guidance on how independence is demonstrated by NHS corporate trustees and trustee bodies refer to our separate guidance NHS charities and independence, indicators and evidence.
4.3 Where a charity is constituted as an independent charity but the trustees are administering and managing it directly in the interests of an NHS body, as opposed to the interests of its beneficiaries and in so doing compromising its own independence, the trustees may be committing a breach of duty. Such a breach of duty is capable of remedy through a change in behaviour by the NHS body and the trustee(s). Steps will need to be put in place to respect the independence of the charity (refer to our separate guidance NHS charities and independence, indicators and evidence. If steps are not taken to preserve independence then the trustee(s) should file a Serious Incident Report. The trustee(s) should also consider appropriate disclosure within their Trustees' Annual Report.
5 Would the transfer of trusteeship of charitable funds from corporate trustee to a trustee body avoid consolidation?
5.1 The form of trusteeship for NHS charities is set out in the NHS Act 2006 and NHS (Wales) Act 2006. Corporate trustees that consider an independent trustee body would be a more appropriate form of trusteeship (for whatever reasons) should contact the Department of Health or the Department for Health and Social Services in Wales.
5.2 The Charity Commission is unable to give advice on issues of transfer of trusteeship as these are reserved matters for the Department of Health or Welsh Assembly.