The Charity Commission in England and Wales is responsible for monitoring the activities of over 150,000 charities. It is important to remember though that Scotland has its own public body, the Office of the Scottish Charity Regulator (OSCR), which supervises the activities of around another 25,000 charities. Not only is the number of charities regulated by OSCR smaller, but so too is the average size of these charities when measured by annual income. It is estimated that around 75% of charities regulated by the Charity Commission have an income of less than £100,000, while those charities regulated by OSCR 75% have an income of less than £25,000.
This very different landscape which exists in Scotland has a number of implications for the way in which charities are regulated. It is important to remember that it is not only a different regulator, but also that the regulations which charities are obliged to comply with are different in each of the jurisdictions and charities must be mindful of these differences when preparing accounts. It is worth saying at this stage that this article refers specifically to charities which are predominantly Scottish based. Different rules apply to charities already registered with the Charity Commission in England and Wales but which also operate in Scotland and further advice should be taken in such cases.
The main legislation which Scottish-based charities must follow is contained in the Charities and Trustee Investment (Scotland) Act 2005 which requires charities to prepare accounts in accordance with the Charities Accounts (Scotland) Regulations 2006 (as amended). The implementation of this legislation coincided with the formation of OSCR and followed a number of high-profile cases of fraud and embezzlement in Scottish charities which reinforced the need for more stringent regulation.
There are a number of differences between what is required from Scottish charities when compared to those in England and Wales. As far as accounts are concerned, the main differences concern the income thresholds which determine the style of accounts and type of external scrutiny required. In England and Wales, only charities with an income in excess of £1 million require their accounts to be audited rather than independently examined, while in Scotland, those charities with income in excess of £500,000 require an audit.
While the income threshold for requiring accrued accounts rather than having the option to prepare receipts and payments accounts is the same in both jurisdictions (£250,000), the Scottish legislation interprets this amount as total receipts rather than total income. This means that a Scottish charity whose receipts exceed £250,000, possibly because of receiving a loan or proceeds from the sale of assets, will be required to prepare accrued accounts even though the income in those accounts will be less than £250,000, while in England and Wales such capital receipts will be excluded in arriving at the threshold.
It is also worth noting that all Scottish charities are required to submit accounts which have been independently examined to the regulator, whereas in England and Wales unincorporated charities with an income of less than £25,000 do not require their accounts to be independently examined and many small charities are not even required to submit accounts. Of particular interest to the main church denominations is that in Scotland there is no equivalent category of “excepted charities” (which allows some charities in England and Wales who are members of certain denominations to be exempt from submitting accounts). Charities also have less time to submit accounts to OSCR, as the deadline is nine months after the year end compared to ten months when accounts are being submitted to the Charity Commission.
It is helpful to be aware of these differences when preparing year end accounts for independent examination and submission, particularly for those charities registered in Scotland where the requirements are more stringent.