Accounts
296.Sections 127 to 143 broadly replicate the effect of Part 3 of Schedule 1 to the 1996 Act.
Section 127 - Directions
297.Subsections (1), (2)and (3) give the regulator the power to give directions to registered providers about the preparation of accounts for the purpose of ensuring that accounts are prepared in a proper form and that they present a true and fair view of a registered provider’s state of affairs as far as it concerns social housing, including its present and past social housing assets and funds. This broadly replicates the effect of paragraph 16(1) of Schedule 1 to the 1996 Act. A direction may be given to a profit-making registered provider only in so far as its accounts relate to social housing activities.
298.Subsection (4) provides that a direction may provide specifically for how registered providers that are charities should distinguish in their accounts between social housing activities and other matters. This broadly replicates the effect of paragraph 16(2) of Schedule 1 to the 1996 Act.
299.Subsection (5) provides that directions under this power may make general provision, or provision specific to particular cases, and that provision may vary according to different cases or types of provider.
300.Subsection (6) provides that where directions relate to more than one provider, those directions must first be consulted on by the regulator with bodies appearing to represent the interests of registered providers.
301.Subsection (7) requires the regulator to make arrangements to ensure that providers to whom directions apply are made aware of their requirements.
Section 128 - Submission to regulator
302.This section broadly replicates the effect of paragraphs 16(5) to 16(8) of Schedule 1 to the 1996 Act. It requires all registered providers to send a copy of their accounts to the regulator within six months of the end of the year to which they relate. These accounts must be accompanied by an auditor’s report, or, if an enactment requires a report other than an auditor’s report, that other report. The report must specify whether the accounts comply with any relevant directions under section 127.
Section 129 - Companies exempt from audit
303.This section applies in relation to a registered provider which is a registered company, other than a registered charity, which is exempt from the audit requirements of the Companies Act 2006 by virtue of section 477 of that Act, because it is a small company. Registered providers in this category must cause an accountant’s report to be prepared, in accordance with section 130 and made to the company’s members in respect of the company’s individual accounts for any financial year in which the company takes advantage of its exemption from audit. ‘Individual accounts’ has the same meaning as in section 396 of the Companies Act 2006.
Section 130 - Exempt companies: accountant’s report
304.Subsection (1) of this section specifies that the report required by section 129 must be prepared by a reporting accountant eligible under section 131.
305.Subsection (2) requires the report to state whether the individual accounts are in accordance with the company’s accounting records kept under section 386 of the Companies Act 2006.
306.Subsection (3) requires that on the basis of information contained in the accounting records the report must also state whether the accounts comply with Part 15 of the Companies Act 2006, and whether the company is entitled to exemption from audit under section 477 of that Act (small companies’ exemption) for the year in question.
307.Subsection (4) requires that the report must give the name of the reporting accountant and be signed and dated.
308.Subsection (5) requires that the report is signed by the reporting accountant (where it is an individual) or an authorised person (where the reporting accountant is a firm).
309.Subsection (6) defines the meaning of ‘firm’.
Section 131 - Exempt companies: reporting accountant
310.This section specifies who is eligible to act as a reporting accountant for a company. Under subsections (1) to (3), a person is eligible if the person is not prohibited from acting as an auditor and is:
a member of one of the professional accountancy bodies listed in subsection (4) and under its rules entitled to engage in public practice and not ineligible for appointment as a reporting accountant, or
subject to the rules of one of the professional accountancy bodies listed in subsection (4) in seeking appointment or acting as a statutory auditor under Part 42 of the Companies Act 2006, and under those rules is eligible for appointment as a statutory auditor.
311.Subsection (4) lists the professional accountancy bodies mentioned in subsections (1) to (3). Subsection (5) allows the Secretary of State to amend the list by order.
312.Subsection (6) defines the rules of those bodies, which are rules which the body has power to enforce and which are relevant for the purposes of Part 42 of the Companies Act 2006 (statutory auditors) or this section.
313.Subsection (7) specifies that an individual or a firm may be appointed as a reporting accountant; and that section 1216 of the Companies Act 2006 applies to the appointment of a partnership constituted under the law of England and Wales, Northern Ireland, or any other country or territory in which a partnership is not a legal person.
Section 132 - Application of Companies Act
314.This section specifies the provisions of the Companies Act 2006 which apply to the reporting accountant and to the report as they apply to an auditor of the company and an auditor’s report on the company’s accounts (with any necessary modifications). The provisions, listed in subsection (2) are.
sections 423 to 425 (duty to circulate copies of annual accounts),
sections 431 and 432 (right of member or debenture holder to demand copies of accounts),
sections 434 to 436 (requirements in connection with publication of accounts),
sections 441 to 444A (duty to file accounts with registrar of companies),
section 454(4)(b) and regulations made under that provision (functions of auditor in relation to revised accounts),
sections 499 to 502 (auditor’s right to information), and
sections 505 and 506 (name of auditor to be stated in published copies of report).
315.Subsection (3) specifies that in sections 505 and 506 of the Companies Act 2006 as they apply by virtue of this section in a case where the reporting accountant is a firm, any reference to the senior statutory auditor shall be read as a reference to the person who signed the report on behalf of the firm.
Section 133 - Exempt companies: extraordinary audit
316.This section applies where, in accordance with section 129 a company appoints a reporting accountant to prepare a report in respect of its accounts for any year. The regulator may require the company to cause a qualified auditor to audit its accounts and balance sheet for that year, and to send a copy of the report to the regulator by a specified date. A requirement may not be imposed before the end of the financial year to which it relates. Subsection (4) of the section also defines ‘qualified auditor’ in relation to a company.
Section 134 - Non-audited industrial and provident society
317.This section broadly replicates the effect of paragraph 17 of Schedule 1 to the 1996 Act. Subsection (1) provides that this section applies only to industrial and provident societies. Subsection (2) provides that an accountant’s report is required even where the society’s turnover does not exceed a sum specified in the Friendly and Industrial and Provident Societies Act 1968, that would otherwise allow the society to disapply the requirement for an accountant’s report.
318.Subsections (3) and (4) give the regulator a power to require the society to appoint a qualified auditor to audit their accounts, and to send to the regulator a copy of the auditor’s report, when the society has disapplied the requirement to appoint a qualified auditor under section 4A of the Friendly and Industrial and Provident Societies Act 1968. The regulator may only use this power in the year following the year to which the accounts relate.
319.Subsection (5) defines “qualified auditor” and “year of account” for the purposes of this section.
Section 135 - Charity
320.This section broadly replicates the effect of part of paragraph 18 of Schedule 1 to the 1996 Act.
321.Subsection (1) specifies that this section relates to non-profit registered providers that are registered charities. Subsection (2) requires such providers to keep accounting records and maintain systems of control in relation to housing activities.
322.Subsection (3) requires such providers to prepare a revenue account giving a true and fair view of its housing activities and a balance sheet giving a true and fair view of its activities as a whole for each accounting period. Subsection (4) requires that the reports specified in subsection (3) must be signed by at least two of the provider’s directors or trustees.
323.Subsection (5) defines “period of account” for the purposes of this section.
324.Subsection (6) specifies that this section does not override other provisions relating to charity accounts in the Charities Act 1993.
Section 136 - Charity: audit
325.This section broadly replicates the effect of part of paragraph 18 of Schedule 1 to the 1996 Act.
326.The purpose of this section is to define whether a charity must appoint an auditor to produce a report under section 137 or a reporting accountant to produce a report under section 138 on the accounts required under subsection (3) of section 135.
327.Subsection (2) specifies that if either of the conditions specified in subsection (4) or subsection (5) are met, then the requirements for an auditor’s report under section 137 apply. Otherwise, the requirements for an accountant’s report under section 138 apply.
328.Subsection (4) is the first condition which is that the charity’s gross income in relation to housing activities for a period exceeds the amount specified in section 43(1)(a) of the Charities Act 1993.
329.Subsection (5) is the second condition which is that the charity’s gross income in relation to housing activities for a period is greater than the amount specified in section 43(1) of the Charities Act 1993, and that, at the end of that period, the aggregate value of assets (before deduction of liabilities) that relate to housing is greater than the sum specified in section 43(1)(b) of the Charities Act 1993.
330.Subsections (6) and (7) define “gross income” and “qualified person” for the purposes of this section.
Section 137 - Charity: auditor’s report
331.This section broadly replicates the effect of part of paragraph 18 of Schedule 1 to the 1996 Act.
332.Where an auditor has been appointed under either section 136 or 139, the auditor’s report on the charity’s accounts must meet the requirements of this section.
333.Subsection (2) requires that the report must state whether the revenue account gives a true and fair view of the charity’s income and expenditure in relation to its housing activities, and whether the balance sheet also gives a true and fair view of the charity’s state of affairs at the end of the period to which it relates.
334.Subsection (3) requires the report to give the auditor’s name and for it to be signed.
335.Subsection (4) specifies that the auditor will carry out such investigations as are necessary to reach an opinion on whether the charity has complied with section 135 (2), and whether the accounts are consistent with the accounting records that the charity is required to keep.
336.Subsection (5) requires the auditor to state in the auditor’s report if the opinion arising from investigations under subsection (4) is that the requirements specified there have not been complied with.
337.Subsection (6) requires that where the auditor has not obtained all of the information or explanations that the auditor thinks necessary for the purposes of the audit, this must be stated in the auditor’s report.
Section 138 - Charity: accountant’s report
338.This section broadly replicates the effect of paragraph 18A of Schedule 1 to the 1996 Act.
339.The section specifies the requirements for an accountant’s report on the charity’s accounts as required by section 136(3).
340.Subsection (2) specifies that the report must say whether the accounts are consistent with the accounting records of the charity.
341.Subsection (3) specifies that the report must say whether, on the basis of the accounting records, the accounts comply with the requirements of the Charities Act 1993 and that the basis on which an accountant’s report rather than an auditor’s report is permitted, as set out in section 136, has been correctly established.
342.Subsection (4) requires the report to give the reporting accountant’s name and for it to be signed.
343.Subsection (5) requires that where the reporting accountant has not obtained all of the information or explanations that the reporting accountant thinks necessary for the purposes of the report, this must be stated in the report.
Section 139 - Charity: extraordinary audit
344.Where under section 136(3) the charity is required to appoint a reporting accountant, this section provides that the regulator has the power to require the charity also to appoint a qualified auditor to audit the accounts, and to send to the regulator a copy of the auditor’s report. The regulator may only use this power in the year following the year to which the accounts relate.
345.Subsection (4) defines “qualified person” and “period of account” for the purposes of this section.
Section 140 - Charity: auditor’s powers
346.This section requires that a charity must give a person appointed to prepare a report on the charity’s accounts under section 136 or 139, whether they are an auditor or a reporting accountant, access to documents that relate to the charity’s social housing activities, and must provide to that person such information or explanation as they require
Section 141 – Offences
347.This section broadly replicates the effect of aspects of paragraph 19 of Schedule 1 to the 1996 Act.
348.Subsection (1) specifies certain offences in relation to the accounting requirements.
349.Subsection (4)specifies that where one of the offences in subsection (1) is committed by a registered provider, then every officer of the registered provider is guilty of an offence. Subsection (5) specifies that it is a defence for an officer to show that he or she has done everything that could be reasonably expected to ensure compliance by the registered provider.
350.Subsection (6) provides that a person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 (currently £5000) on the standard scale.
351.Subsection (7) provides that proceedings for the offences under this section may only be brought by, or with the consent of, either the regulator or the Director of Public Prosecutions.
Section 142 - High Court
352.This section broadly replicates the effect of sub-paragraph (5) of paragraph 19 of Schedule 1 to the 1996 Act.
353.Where a registered provider has failed to do one of the things listed in section 141(1), the regulator may apply to the High Court for an order for the purpose of remedying the failure. A High Court order for this purpose may make provision for costs.
Section 143 - Disclosure
354.This section broadly replicates the effect of paragraph 19A of Schedule 1 to the 1996 Act, concerning the disclosure of information by auditors and reporting accountants.
355.Subsection (1) specifies that this section applies to information that a person has received while acting either as an auditor or a reporting accountant of a registered provider.
356.Subsection (2) permits persons in receipt of information as described in subsection (1) to disclose that information to the regulator for a purpose connected with the regulator’s functions even if there is otherwise a duty of confidentiality on those persons, and regardless of whether or not the regulator has requested the information.
357.Subsection (3) clarifies that disclosure of information in this way includes expression of an opinion on that information.
358.Subsection (4) defines “reporting accountant” for the purposes of this section.
