The new Charities State of Recommended Practice (SORP) fails to address the “fundamental issues” facing charity accounting, charity experts have said.
Yesterday, Civil Society Media hosted a webinar on the new Charities SORP, which will apply to reporting periods starting on or after 1 January 2026.
Richard Bray, chair of the Charity Tax Group, told attendees that there has been “a lot of tidying up” to try to make the new SORP clearer, including its section on the natural classification of costs.
However, he said: “All of those things, commendable as they are, are most probably marginal increases on a journey of always trying to improve the content of the Charities SORP.
“My concern is that maybe some of the fundamental issues that face charity accounting at the moment haven’t been addressed, and they’ll have to be addressed at some stage.
“That includes the complexities that come from the new lease accounting and from having to follow the new requirements about income recognition.”
Concerns over document length
Bray, who is also finance, regulatory and taxes manager at Cancer Research UK, pointed out that the new SORP is over 300 pages, up from around 200 in the previous version.
He said: “If this is a direction of travel, we’re in serious problems. It’s time to fundamentally look at some of the issues that form the envelope for the Charities SORP.”
Also speaking at the event, Fiona Condron, national head of charities at accountancy and business advisory company BDO, said her firm had found about 5,300 changes between the new SORP’s initial exposure draft and final version.
“Now, that’s everything from a full stop and comma to changes in wording,” Condron told attendees.
“But it gives me some confidence that the SORP-making body did take that feedback process seriously within the time frame they had to try and resolve some ambiguities and difficulties that we saw in the language of the exposure draft.”
Condron added, however, that the SORP-making body “could have gone further on things like legacy accounting to try and work out where the differences in accounting recognition could be harmonised”.
“There are some slight ambiguities there that charities are going to have to navigate around the types of investments that they’ve got, whether they’re more on the charitable side, programme-related or on the mixed motive side,” she said.
“We now have a very long document which in itself doesn’t give you all the answers.
“There are lots and lots of references to ‘please go back to FRS 102’ in addition to your 300 pages. You need to sit with the similarly sized FRS 102 document to navigate some of these changes.”
Lack of compliance could undermine ‘trust in sector’
The panellists were asked how the UK charity regulators would ensure that charities comply with the SORP.
Bray said the Charity Commission, Scottish Charity Regulator OSCR and Charity Commission for Northern Ireland “don’t necessarily have the resources to look at accounts in the way that ideally they should”.
“It’ll be interesting to see what happens because some of the new requirements in regards to lease and income recognition are very complex, and I can imagine that there’ll be charities that’ll hardly realise that there’s been a change, and will be fundamentally incorrect in what they file with the commission,” he said.
“The concern is that very often, those accounts won’t get picked up.”
Bray said that while many charities are committed to best practice and want to get it right, others “might simply ignore what’s required, and there won’t be the sanctions that there should be”.
“That’s an area which will be important because it also undermines our credibility as a sector if we’re not producing information that we should.”
Condron highlighted the differences between Companies House using AI to check the compliance of company accounts and the Charity Commission, which she said were “worlds apart”.
“We’d definitely encourage more resources from the Charity Commission to vet effectively the quality of accounts and professional advisors that have signed opinions on those accounts if issues are beginning to emerge,” she said.
“I completely agree that it’ll undermine transparency and trust in the wider sector if people don’t embrace this and get it right.”
