The intermingling of funds between some NHS bodies and their
charities have caused the Charity Commission serious concern,
resulting in the Commission issuing guidelines (
http://www.charity-commission.gov.uk/supportingcharities/connhs.asp).
Lack of independence breaches a fundamental requirement of
charitable status and no charity is absolved of that requirement.
Although the consolidation of accounts will not of itself prove
fatal, the circumstances giving rise to that consolidation must
fall within the guidelines' requirements to demonstrate
independence.
Why the confusion?
Even where a charity is clearly independent, some NHS bodies are
incorporating the charity's accounts into the NHS body's
accounts, which in turn suggests that they are not separate bodies
but that one is controlled by the other. This seems to arise from a
misunderstanding of the nature of 'Group of Entities' and
the relationship of a charity to a related NHS or other central
government body.
International Accounting Standard 27 requires that accounts for a
group of entities under the control of a parent must be
consolidated. In the case of a related charity, 'control'
only arises when the NHS body has power to govern the charity's
financial and operating policies so that the NHS body can obtain
benefit for itself from the charity's activities. It is not
enough that both organisations have beneficiaries in common or that
the charity chooses to supplement services provided by the NHS
body. However, if the NHS body is a corporate trustee or its
trustees are also trustees of the charity and the activities of the
charity resulted, for example, in relieving the NHS body of part of
its staffing costs or in providing direct care to patients which
would otherwise have been the responsibility of the NHS trust, the
situation would be very different.
What must charity trustees do?
- Consider whether the charity's governing document and actions evidence independence
- If they do, the trustees should recommend to the NHS body and its auditors that the organisation's accounts are dealt with separately
- If the NHS body or its auditors refuse and consolidate the accounts, the trustees are not required to take any action
- If the NHS body then or at a later stage seeks to impose requirements to fulfil its agenda onto the charity, the trustees are under an obligation to advise the Charity Commission
What are the consequences of not being independent?
An organisation which is not independent, but makes decisions at the behest of another, is not a charity. Where an organisation is registered as a charity and it is found to be acting improperly, the Commission has the power to investigate both the charity's documentation and its activities. Where an NHS charity is found not to be independent, it risks losing its charitable status and its activities will arguably be the responsibility of the NHS body which has sought to control it.
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