OG15 B5 - CHARITY ACCOUNTS AND REPORTS

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OPERATIONAL GUIDANCE

CHARITY ACCOUNTS AND REPORTS

ANNUAL REPORTS: SPECIAL REQUIREMENTS FOR CERTAIN CIFs AND CDFs

OG 15 B5 – 14 April 2008

Purpose

To summarise the way in which the requirements for the content of annual reports, and for the format of accounts prepared on the accruals basis pursuant to the 2008 Regulations, by certain CIFs and CDFs differs from the requirements for other charities. These special requirements do not affect pool charities, but they do apply to hybrid pool charities.

Functional responsibility

For information

All operational divisions

Contents

1. Background information on CIFs and CDFs
2. What are CDFs and CIFs for the purpose of the 2008 Regulations
3. Annual reports
4. Group annual reports
5. Annual accounts prepared on the accruals basis
6. Group annual accounts
7. Audit
8. Contact

Glossary of Terms used in this Guidance

Index to further related information


The Law	Refer to a lawyer	Refer to an accountant

1. Background information on CIFs and CDFs
	CIFs are investment vehicles which permit charities to pool their funds, thus giving them access to a wider range of investments. They are established by Schemes of the Commission under section 24 of the Charities Act 1993 and are open only to charities in England and Wales. Following the Charities Act 2006, they are also open to "appropriate bodies" (i.e. bodies established as charitable under the law of Scotland or Northern Ireland and eligible for UK tax relief) in Scotland and Northern Ireland.
	CIFs are similar to unit trusts but are not authorised by the Financial Services Authority (FSA). With the exception of "pooling scheme funds" (see below), CIFs (including hybrid pooling schemes) are not exempt from the provisions in the Financial Services and Markets Act 2000 which require those who operate collective investment schemes by way of business to be authorised under that Act.
	The Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 1201/2001) makes clear that trustees of pooling scheme funds are exempt from the general prohibition on unauthorised persons carrying out any regulated activity.
	The accounting regulations for CIFs mirror the "Financial Statements of Authorised Funds" SORP prepared by the Investment Management Association (IMA).
	CDFs are deposit-taking schemes, like those operated by banks and building societies. Before the Charities Act 2006, they were open only to charities in England and Wales, but are now also open to "appropriate bodies" (i.e. bodies established as charitable under the law of Scotland or Northern Ireland and eligible for UK tax relief) where the Scheme permits this. They are set up by Schemes of the Commission under section 25 of the Charities Act 1993. They are deemed by law to be charities themselves and are therefore eligible for registration as charities in their own right.
	CDFs accept deposits from depositing charities and place the money they have accepted on deposit in the money market. The pooling of such money in the form of large sums of money (usually for relatively short duration) on deposit should secure a higher rate of interest for the depositing charities than each charity would otherwise obtain, if undertaken separately.
	CDFs are exempt from the Financial Services and Markets Act 2000 by virtue of Part IV of the Financial Services and Markets Act 2000 (Exemption) Order 2001 SI number 1201.

2. What are CDFs and CIFs for the purpose of the 2008 Regulations
	Regulation 2 defines "common deposit fund" and "common investment fund" for the purpose of the 2008 Regulations as follows.
	Common deposit fund means a common deposit fund established by a scheme under s.22A of the 1960 Act or s.25 of the 1993 Act;
	Common investment fund means a common investment fund established by a scheme under s.22 of the 1960 Act or s.24 of the 1993 Act, other than a fund the trusts of which provide for property to be transferred to the fund only by or on behalf of a participating charity of which the charity trustees are the trustees appointed to manage the fund.
	Pool charities (as defined in section 3.1 of OG 49 A1) fall outside of the definition, so the special arrangements do not apply to them. Section 5 explains how they should account.
	The special arrangements do, however, apply to hybrid pool charities (see section 3.4 of OG 49 A1).

3. Annual reports
	Under regulation 39, annual reports prepared by CIFs and CDFs must provide:
	a review of the investment activities of the investment fund during that year, including details of the objectives of the investment fund during the year, and of the policies adopted for achieving those objectives;
	any other significant information which the charity trustees consider would assist charities participating in the investment fund to make an informed judgement on the suitability to the charity of the investment fund as an investment for the charity;
	any material events affecting the investment fund which have occurred since the end of the year;
	a statement as to the steps (if any) taken to consider whether any person to whom functions in respect of the management of the investment fund has been delegated has complied with the terms of the delegation;
	the accounts to be signed:
	(i) if the scheme or schemes regulating the investment fund allocates responsibility for preparing the report to a particular person, by that person; and otherwise,
	(ii) by one or more of the charity trustees of the investment fund, each of whom has been authorised to do so.
	The information relating to an investment fund and to its trustees and officers which is required to be contained in the annual report should include:
	(a) the name of the investment fund as it appears in the register of charities and any other name by which it makes itself known;
	(b) the number assigned to the investment fund in the register;
	(c) the principal address of the investment fund;
	(d) particulars, including the date, of any scheme or schemes containing provisions which regulate the purposes and administration of the investment fund;
	(e) the name of any person or body of persons entitled under any such scheme or schemes to appoint any charity trustee of the investment fund, and a description of the method provided by any such scheme or schemes for such appointment;
	(f) a description of the objects of the investment fund;
	(g) a description of the organisational structure of the investment fund;
	(h) the name of any charity trustee of the investment fund, on the date of the signature of the report, where paragraph 3(e)(i) above applies, and otherwise on the date when the authority referred to in paragraph (3)(e)(ii) above is given, and, where any such person is a body corporate, the name of any person who is a director of the body corporate on that date;
	(i) the professional qualifications of any individual person referred to in subparagraphs (e) or (h);
	(j) the name of any other person who has, at any time during the financial year in question, been a charity trustee of the investment fund;
	(k) the name of any person who is, in relation to the investment fund, a trustee for the charity on the date referred to in sub-paragraph (h) above;
	(l) the name of any other person who has, at any time during the financial year in question, been, in relation to the investment fund, a trustee for the charity;
	(m) a description of any functions relating to the management of the investment fund which have been delegated (including the maintenance of the register of charities participating in the investment fund), and of the procedures adopted to ensure that those functions are discharged consistently with the scheme or schemes by which the investment fund is regulated, and with the investment policies adopted for the investment fund;
	(n) the name and address of any person to whom any such functions in respect of the management of the investment fund have been delegated or who have been instructed to provide advice on investment matters; and
	(o) a statement as to which, if any, of the persons whose names are given in accordance with the provisions of sub-paragraphs (h), (j), (k), (l) or (n) above, are authorised persons.

4. Group annual reports
	This is a new requirement. In the unlikely event that group accounts are required to be prepared for a CIF, group annual reports should also be prepared accordingly. For details, see regulation 41 of the 2008 Regulations.

5. Annual accounts prepared on the accruals basis
	Under Part 2 of Schedule 2 to the 2008 Regulations, CIFs and CDFs preparing annual accounts must provide:
	a Statement of Total Return;
	a Statement of Change in Net Assets; and
	a Balance Sheet.

6. Group annual accounts
	This is a new requirement introduced by section 30 of the Charities Act 2006. In the unlikely event that a CIF controls an undertaking(s) or operates within a group, it will be necessary for the CIF to prepare group annual accounts and which should be audited accordingly. For details, see regulations 11 to 15 of the 2008 Regulations.
	It is unlikely that a CDF will control an undertaking(s) or operates within a group

7. Audit
	The Schemes that regulate CIFs and CDFs make it a requirement that all CIF and CDF annual accounts must be audited.

8. Contact
	All enquiries about CIF and CDF accounting and annual report requirements must be referred to the Manager of CIFs and CDFs in the Large Charities Unit, London in the first instance.

Glossary of Terms used in this Guidance
	accounts
	annual report
	CIF
	CDF
	fund(s)
	material / materiality
	Regulation # / Regulations
	SORP / the Charities SORP
	trustees

Index to further related information