My Lords, these regulations are among a number of statutory instruments relating to the audit of the accounts of relevant authorities in the new regime introduced by the Local Audit and Accountability Act 2014. The Act also abolishes the Audit Commission, passing responsibility for auditor appointments to the local public bodies.
I will not take up the Committee’s valuable time by repeating the arguments put forward during the passage of the 2014 Act in this debate. There was broad support across the House during the debates on the Act for creating a more efficient audit system, giving greater responsibility to local bodies while providing greater opportunities for local people to hold those bodies to account.
These regulations introduced today make a minor but important change to the application of the Act, relating to one particular type of local public body—special trustees appointed by the Secretary of State for NHS charities. Special trustees are established by the Secretary of State to administer property or funds held on trust at particular teaching hospitals. There are currently special trustees at only three hospitals—
Great Ormond Street Hospital, Moorfields Eye Hospital and Royal National Orthopaedic Hospital. All the special trustees were established to manage charitable funds and they represent some of the largest NHS charities.
The Local Audit and Accountability Act 2014 makes provisions for audit appointment, conduct and regulation for a range of local bodies which are defined as “relevant authorities”. The relevant authorities include local government, parish councils, NHS trusts, clinical commissioning groups and special trustees. The special trustees’ charitable accounts fall outside the account definition in the Local Audit and Accountability Act. These accounts are covered by the Charities Act 2011, which sets the audit and reporting arrangements for all English NHS charities. However, the Local Audit and Accountability Act 2014 applies generally to matters which do not relate to the accounts of trustees. For example, there is a requirement in the Act for relevant authorities, which include special trustees, to have auditor panels. The intention, however, was that the Act should apply to special trustees only if they held non-charitable funds.
These regulations therefore amend the definition of relevant authorities as far as it relates to special trustees so as to restrict its application to instances where the trustees are dealing with non-charitable funds. The amendment would also remove any overlap which exists in relation to matters which are already covered by the Charities Act 2011, and so it will restore the current position, making special trustee arrangements consistent with those for other NHS charities. This amendment will also make the application of the Local Audit and Accountability Act to special trustees clearer. The fact that the Act does not apply to special trustees’ charitable accounts is currently not directly stated. To establish this, readers have to follow two cross-references to other Acts. In preparing these regulations, we discussed the implications with the Charity Commission and the Association of NHS Charities, which agreed that the overlap between the Acts should be removed.
In conclusion, these regulations will amend the Act so that it does not apply to the charitable trust funds of special trustees and applies only where the trustees are dealing with non-charitable funds. I commend these regulations to the Committee.