Connected Charities

The term connected charities is used when different charities meet the statutory definition set out in the Charities Accounts (Scotland) Regulations 2006 (SSI 2006/218), made under the Charities and Trustee Investment (Scotland) Act 2005.

The Regulations define connected charities as:

“connected charities means charities having common or related charitable purposes, or charities which have common control or unity of administration.”

This definition is used primarily for the purposes of charity accounting and financial reporting and appears in the interpretation provisions of the 2006 Regulations. It is used to determine when two or more charities may be treated as connected for accounting and reporting purposes.

Accounting treatment

Where charities are connected within the meaning of the Regulations, they may prepare a single set of accounts rather than separate accounts for each charity.

In such cases:

• a single set of accounts to cover all of the connected charities;
• the accounts must clearly identify each charity included; and
• the accounting records must still distinguish the funds belonging to each charity.

The ability to produce combined accounts is commonly used where several charitable funds are administered by the same governing body.

Practical examples

Situations where the connected charities provisions are commonly applied include:

• local authorities administering multiple educational or welfare trust funds
• governing bodies of schools managing several endowment funds
• umbrella bodies administering multiple small charitable trusts

Charity group with multiple charitable entities

IIn some cases the delivery of a charity’s purposes may be through several separate charitable bodies rather than a single charity. Each organisation may be entered separately in the Scottish Charity Register but operate within a wider organisational or ‘group’ structure.

This type of arrangement may arise where the ‘parent’ organisation of a group structure has subsidiary charities within its fold, each operating as a distinct legal entity but forming part of a broader charitable network. Through carefully considered governance agreements, service level agreements and schedules of reserved and devolved matters, the administration of the group, and therefore the subsidiary charities, is connected.

For example, a national charity may establish a number of regional charitable organisations responsible for delivering services in different parts of Scotland. Each regional body will have its own governing document, charitable purposes and charity number but share a common administrative structure.

In these cases it is likely possible for the charities to prepare a single set of accounts covering the connected charities, provided the requirements of the Regulations are met.

Further resources and links

• Guidance on the preparation of charity accounts and the treatment of connected charities is provided by the Office of the Scottish Charity Regulator (OSCR).
• Office of the Scottish Charity Regulator