Independent Examination: From 1996-2019

A brief history and the development of legislation on Independent Examination 1996-2019

Prepared by Prof Gareth Morgan as used in 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.  ‘GM’ refers to the author.

1996: The First known record of training on IE

Presentation by Don Bawtree (BDO) at DSC Charity Accountants Conference

1997-98 Various training events on the new charity accounting regime arising from the Charities Act 1993 (including the IE framework) presented by GM – including brief coverage of the differing arrangements in Scotland.

1998:  The idea of a professional body for IEs

How could charities decide if someone had the ‘requisite ability and practical experience to carry out a competent examination’?

Risk that only qualified accountants would be IEs if charities uncertain about ‘lay examiners’

Yet the whole idea of the IE regime as proposed by the Woodfield Report was to allow a wide range of people with some financial experience to act as IEs

GM circulated paper proposing idea for an Association of Charity Independent Examiners – responses generally welcomed

Provisional ACIE newsletter circulated autumn 1998: from the outset UK-wide

1999: Launch conference for ACIE held in York – 21 January

61 ‘Founder members’ had signed up prior to the launch

Main speaker: Dr Ken Ashford, Principal Accountant at Charity Commission

8 committee members (subsequently chariy trustees) elected incl Prof Jeff McLachlan CA FCCA (Scotland) elected as first ACIE President

1999: ACIE formalises its operations

Constitution adopted from 1 July 1999 by postal vote: GM appointed as first General Secretary (freelance)

August 1999 – ACIE registered as a charity in E&W

13 September 1999 – first Full Members admitted – awarded MACIE qualification

Recognition of Full members could be for England & Wales and/or Scotland with different domains of competence according the type and size of charities.

At 31 Dec 1999 ACIE had 261 members: 237 Associates + 24 Full Members

Adrienne Airlie (Glasgow) joined the Council in April 2000 and became Scottish Convenor

1999: Scottish Parliament established and charity law a devolved issue under the Scotland Act 1998

2001: Charities and Third Sector Review (UK-wide)

2002 Report: Private Action – Public Benefit

Proposed a wide range of reforms to charity and third sector law

Introduction of CIOs, CICs, new powers and structure for CC etc

Proposed raising IE threshold (but government decided this should be subject to IEs of larger charities having relevant professional body membership)

Eventually leads to Charities Act 2006 for E&W and Companies Act 2006 (UK-wide)

2001: McFadden Review:

Scottish Charity Law Commission which Recommended establishment of a Scottish charity regulator: CharityScotland (subsequently OSCR).  Said charities should file accounts with the regulator – but no detail.

2003: OSCR (Scottish charity regulator) established on a non-statutory basis

2004: Scottish ministers agree that new charity legislation needed

Bill introduced in Scottish Parliament – but accounting detail is left to regulations

ACIE submits detailed evidence at consultation stage

Bill enacted as Charities and Trustee Investment (Scotland) Act 2005

2004: ACIE established permanent office

Fiona Gordon appointed Director / Eric Marsden Administrator

2004: Proposals to extend the scope of the IE regime in England & Wales (Private Action Public Benefit proposal)

Government proposed to extend IE from £250K maximum income to £500K but only if IEs are members of traditional accountancy bodies.  ACIE expressed concern that this did not include qualified members of ACIE.

Real Charities Bill introduced in House of Lords – still no change to qualifications for IEs at £250K to £500K

2005: ACIE launches major campaign to persuade peers to amend the E&W Charities Bill

Strong support for ACIE from Lord (Robin) Hodgson Conservative & Lord (Andrew) Phillips LibDem – Government eventually agreed to consider including ACIE qualifications

2005: Charities Bill (E&W) re-introduced after General Election

Provisions in Bill now include Fellows of ACIE amongst those qualified to act as IEs for charities in the £250K-£500K band

2005: Charities and Trustee Investment (Scotland) Act 2005 enacted

February 2006 – OSCR gains statutory powers under the Act

Charity registration compulsory – Register starts from Inland Revenue list

2006: Modern charity accounting regulations implemented in Scotland: Charities Accounts (Scotland) Regulations 2006

The modern IE regime for Scottish charities took effect from accounting years starting from 1 April 2006

2006: Company Law Reform Bill (UK-wide) also progressing in Parliament at Westminster

Changes to company audit regime lead to debate regarding the Reporting Accountant regime applicable at that time to charitable companies

ACIE proposes allowing Independent Examination of charitable companies – which would give far more effective scrutiny than the Reporting Accountant approach.

Charity Commission supports the idea in principle.

But it requires very careful interaction between the Charities Bill (Home Office) and the Companies Bill (DTI) to make it happen.  Fortunately Lord Hodgson is Conservative spokesman on both Bills

ACIE drafts 18 amendments to Company Law Reform which are sent to Lord Hodgson for consideration – most of which he tables for formal debate.  But the Government is reluctant and asks for more time to consult.

Eventually on 18 May 2006, Lord Hodgson presses the key amendment to a vote in the House of Lord and very unusually for an opposition amendment.

Further changes are made by Government between the two Acts, with some changes only to take effect leate, but the principle is accepted.

Nov 2006: Charities Act 2006 and Companies Act 2006 enacted at Westminster:

once all provisions are implemented (from 2008) IE is now available in E&W up to £500K income with Fellows of ACIE allowed.  UK-wide, IE is available to charitable companies subject to the separate frameworks in E&W and in Scotland.

ACIE develops major role in Scotland

Strong relationship between ACIE and OSCR from the outset

Dec 2007 – ACIE becomes a dual-registered charity (E&W + Scotland)

2008 – First ACIE Scottish conference

2009 – ACIE and Scottish CVS network win funding for major training programme to build up IEs linked to CVSs across Scotland

2016: ACIE establishes its HQ in Scotland .

Subsequent changes to the Scottish Regulations

2011: R&P threshold increased to £250K income – but no specific changes to IE regime

2014: Regulations updated for SORPs 2015 (SORP FRS102 + FRSSE) [unlike E&W]

Subsequent changes to the E&W Regulations

2008: Charities (Accounts and Reports) Regulation 2008 – IE regime updated as permitted by Charities Act 2006

and Companies Act 2006

2011: Charities Acts 1993 and 2006 consolidated to create Charities Act  2011 – IE framework including ACIE Fellow now in s.145 of Charities Act 2011

2008: Charities Act (Northern Ireland) 2008

Creates Charity Commission for Northern Ireland (CCNI) and a register of charities.

Includes charity accounting regulations and IE framework closely following E&W – though with some differences of thresholds.

But it had some problems that were only corrected by Charities Act (Northern Ireland) 2013 – so implementation of the accounting regime was delayed.

In the meantime, ACIE started to develop links with CCNI and training

2012-15: Review of the upper limit for IE in E&W

2012: Lord Hodgson’s review of Charities Act 2006 supports raising of IE threshold to £1M income

2014 Government consults on this (idea as first raised in 2002)

IE threshold in England & Wales increased to £1M for years ending 31 March 2015 onwards

2016: Start of formal charity accounting regime in Northern Ireland including IE regime

Charities (Accounts and Reports) Regulations (Northern Ireland) 2015

All registered charities in NI required to file accounts with CCNI

All charities required to have IE or audit (no lower limit as in E&W)

IE allowed up to £500K income, but over £250K the IE must be professionally qualified (including ACIE Fellows)

IEs required to follow Directions of CCNI

2019: 20th Anniversary of ACIE

OSCR issues revised Guidance for IEs – further input from ACIE members

SORP Governance Review (chaired by GM) recommends stronger focus on smaller charities in the development of the SORP

2019 landmarks:

22 years since the first statutory Independent Examinations in E&W

27 years since the first statutory Independent Examinations in Scotland (under 1992 Regs)

12 years since the modern IE regime in Scotland took effect (OSCR / 2006 Regulations)

3 years since the IE regime in Northern Ireland took effect

20 years since the foundation of ACIE –

The professional body specifically for IEs

586 ACIE members at 31.3.18 – 429 Affiliates + 157 Full Members

Approx 120,000 charity independent examinations per year (UK-wide), and there are around 30,000 Independent Examiners.