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Finance | Andrew Hind | 24 Nov 2008

Andrew Hind discusses emerging findings from the Sorp Committee's research.

Against a backdrop of financial  uncertainty and increasing expectations for charities, developments in charity reporting and accounting continue unabated. Demands for increased transparency and accountabil-ity are affecting all sectors. We need only look to the debate about the accounts of UK and international banks and the application of fair value accounting to financial deriva-tives to see how back room accountancy can become centrepiece publicity.

For financial years beginning on or after 1 April 2008 trustees must report on the activities their charity has undertaken for the  public benefit and confirm that they have read our guidance. The general guidance has been out since January and all trustees should have read this by now. The additional sub-sector guidance for charities with objects to advance religion, relieve poverty, advance education and fee charging are due to be  published at the end of this year so it is key that trustees start to give some thought as to how to report what they have achieved.

New example reports have now been issued to assist with public benefit reporting. The reports can be navigated in an interactive way to see how trustees clearly meet their new public benefit reporting obligations.

To make life simpler both OSCR and the Commission provide a receipts and pay-ments accounts pack with pro-forma report, accounts and examiner's report. Remember if you do receipts and payments accounts you don't need to follow Sorp. This is an option for smaller charities with a gross income below £100,000 provided they are not com-panies registered with Companies House.

For charities preparing accounts on the accruals basis the Sorp provides the key ref-erence manual to preparing those accounts. The second edition of Sorp 2005, which was published in May 2008 and updated for legislative changes since 2005, includes an introduction specifically written for smaller charities setting out what Sorp is about and what is needed for the accounts and the report. It signposts smaller charities to appen-dix 5 of the Sorp which sets out the simplifi-cations on offer to smaller charities.

The Commission also produces an accru-als pack for smaller non-company charities including pro-forma report, accounts and examiner's report.

The Sorp Committee research programme is now taking shape and there are some emerging findings including broad support for the existing content of the annual report but with some scepticism about the value of all the governance related disclosures, and a desire to retain the SoFA with changes made to the ter-minology to clarify and simplify its contents.

While there is a wish to simplify the Sorp wherever possible, stewardship reporting remains central to the needs of charities and their funders, and performance reporting does add value and needs to stay. Funders strongly endorsed the Sorp as maintaining the quality of charity reporting and accounting and the consistency Sorp brings is a powerful benefit to funders.

Alongside the roundtables, the Sorp Committee has convened a series of techni-cal working groups to consider a number of topical issues in preparation for the next Sorp. These topics are: Designated funds - should they be reported on the balance sheet at all? Capital grants and funding - should grants be matched to the life of the asset? Consolidations and combinations - is acqui-sition accounting now the only solution? The structure of the primary statements - is charity accounting really that different to commerce or other not for profit bodies? The annual report and its contents - what do users want? And recognition of multi-period funding arrangements - should we keep the idea of constructive obligations or return to cash accounting for grants?

The research programme is unprecedented in the history of Sorp. Together with OSCR we are transparent about what we are plan-ning and doing but you must play your part and take part. If you are unhappy with some-thing, now is your chance - please take it.

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