Most of us have heard of The Companies (Audit, Investigations and Community Enterprise) Act 2004 as the vehicle that established the legal form of the community interest company (that we discussed in the February issue). However, it also has significant personal implications for directors of charitable companies (commonly known as trustee directors) and enhances the rights of auditors to obtain information from charitable companies.

The trustee directors’ statement in the annual report

For charitable company accounts from 31 March 2006 year-ends onwards the trustee directors’ statement must include the two paragraphs set out below. The significant issue for trustee directors is that these statements should apply to each of them individually:

a) so far as the director is aware, there is no relevant audit information of which the company’s auditors are unaware, and

b) he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the company’s auditors are aware of that information.

In most corporate organisations the directors have a level of involvement with their auditors to varying degrees and are more likely to be able to make the above statements without further work. However, many trustee directors will not have this involvement as the auditors may report to the executive staff or a sub committee of the board. Also part-time trustee directors and those in a non-executive capacity would have even less contact.

Therefore, charitable companies should ensure that there are controls and systems in place that will allow each trustee director to make the above declaration.

Providing information to auditors

Previously auditors of charitable companies had the right to require information and explanations from officers of a charitable company. This term was not fully defined and some confusion arose over who was actually required to reply to the auditors. This situation has been partially rectified with the widening of those required to respond to include employees, those holding the books and accounts, subsidiaries and their officers, employees and auditors together with all such persons who held any of the above posts in the period being examined by the auditors (e.g. past employees). There are strong sanctions against the failure to give information and to stop false information being given as these are both now criminal offences.

Charities Act update

The Commission is still hopeful that there will be a new Charities Act by the end of 2006.

Simplification

The Commission are seeking suggestions for ways to reduce regulatory burdens, email suggestions to simplification@ charitycommission.gsi.gov.uk.

Fundraising Standards Board (FSB)

Charities can display a quality mark indicating a commitment to best practice in fundraising thus providing donors with some reassurance. Details are available from www.fsboard.org.uk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.