Independent Examination up to 1996

Note prepared by Prof Gareth Morgan as used in his presentations at the ACIE 20th anniversary conferences in England & Wales (June 2019) and in Scotland (August 2019). 

These notes are only a summary of key events as perceived by the author and they are presented in bullet form only so they should not be taken as an authoritative record.  Please contact ACIE if you feel there are errors or omissions.

Before Independent Examination:

Primary charity legislation in E&W: Charities Act 1960

Charities required to keep books and prepare ‘statements of account’

But except for endowed charities, the statement of accounts only submitted to CCEW on request

So in practice no accounting requirements for vast majority of charities

Accounts even if requested by CCEW only had to contain very basic information

Scottish charities – no specific charity law

Accounts had to be available to Inland Revenue (now HMRC) but no specific formats or scrutiny

Charity Commission guidance sometimes used

No audit requirement (except for charitable companies) unless in governing document

A Charities SORP first issued 1988 (But no requirement in regulations anywhere in the UK to force charities to apply it)

Early Charity Commission guidance CC25 (1992) - recommendation of something approaching IE: “An independent audit (even if not a professional one) is however strongly recommended.”

No specific legislation on charity regulation in Scotland

Very little regulation in Northern Ireland – Charities Act (Northern Ireland) 1964 did not create a charity regulator although some powers were given to the Ministry (now DSDNI).  Charities were required to prepare ‘statements of account’.

The Development of Legislation for IE in England & Wales, and Scotland.

1987: Woodfield Report (UK)

Sir Philip Woodfield et al., Efficiency Scrutiny of the Supervision of Charities – report to Parliament – various reforms to charity law proposed

Included idea of a mandatory charity accounting regime with audit for larger charities and a simpler form of scrutiny for smaller charities (up to £10K)

1998: Secretary of State of Scotland consultation

The Supervision of Charities in Scotland

Raised proposals for a charity register, accounting regulations, etc

1989: Charities White Paper (pre-devolution)

Charities: A Framework for the Future (Home Office)

Primarily E&W but includes one chapter on Scotland & N Ireland

1990: Law Reform (Miscellaneous Provisions) (Scotland) Act

Part I of the Act: Charities – Based on Scottish charities recognised by Inland Revenue

No charity regulator, but gives powers to Lord Advocate leading to Scottish Charities Office

Sections 4 and 5 of the 1990 Act created the first mandatory charity accounting regime anywhere in the UK: the Act allowed for regulations to include auditing requirements.  This was ahead of the1991 Charities Bill in E&W which became law as the Charities Act 1992

1992: Charities Accounts Scotland (Regulations) - the first formal regime for independent examination

Regulations made under  – made under the 1990 Act. Took immediate effect from 30 September 1992.

Allowed R&P accounts up to £25K income – details as in a Schedule to the Regulations

Above £25K, accounts must comprises balance sheet and income and expenditure account giving a true and fair view (but no reference to SORP)

Allowed for independent examination up to £100K income/expenditure

So the first statutory independent examinations in Scotland took place in 1992/93 – five years before the first mandatory IEs in E&W (1997)

Definition of an independent examiner (IE) in 1992 Regulations as used today

An independent person who is reasonably believed by the charity trustees to have the requisite ability and practical experience to carry out a competent examination of the accounts”

Charities Accounts (Scotland) Regulations 1992, reg. 8(1)

The same definition used in:

Charities Act 1993 s.43. Now in Charities Act 2011, s.145(1)(a).

Charities Accounts (Scotland) Regulations 2006

1991: Charities Bill (E&W) introduced to Parliament

First statutory regime for charity accounting

Became law as the Charities Act 1992

1993: Charities Act

Consolidated 1992 Act with Charities Act 1960 to give:

Charities Act 1993 – the initial primary legislation for charity accounting in E&W

IE allowed for charities not over £100K income for last 3 years

1996: Regulations took effect to implement the IE provisions in the 1993 Act

Charities (Accounts and Reports) Regulations 1995

Took effect for financial years starting on or after 1.3.1996

Thresholds increased to allow IE up to £250K and lower band created with no IE up to £10K

So the first statutory independent examinations in E&W took place in 1997 – with accounts filed with the Charity Commission from late 1997/early 1998


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