The Charities SORP should be redesigned from scratch in order to encourage charities to improve their annual accounts and reporting, according to a report by a top auditor for Charity Finance magazine.
Helena Wilkinson of Price Bailey reviewed the annual reports and accounts of 100 charities in positions 101 to 150 and 201 to 250 in the Charity Finance Indexes by income. This covers charities with three-year average income of £61.3m-£45.2m and £35.4m-£28.9m.
Wilkinson found that the majority of the 100 charity accounts she reviewed “needed to improve” but said this was unlikely to happen unless the SORP was overhauled.
“I do feel that the Charity SORP and its focus on very detailed disclosures in both the narrative and numbers has led to charities showing little interest in their accounts and having little impetus to improve," she wrote.
“I really wonder how many trustees could say that they are proud of their accounts and would like anyone to see and read them.”
She said that the SORP governance review, which opened in August, presented an opportunity to address some of the SORP’s shortcomings.
“I feel that we are at a momentous crossroads in the sector, where we can move away from an ‘everything but the kitchen sink’ style of reporting and towards a slick reporting process which has clarity of purpose.
“There is much that could be removed from charity accounts without losing any understanding.
“I am convinced that the only way to move charity reporting into a style which gives transparency and accountability is by recreating the Charities SORP from a blank piece of paper, at least for the trustees’ annual report element of these documents.”
Accounts falling short
In her review of 100 charity accounts, Wilkinson found that only 5 per cent of organisations reported very thoroughly on their strategy, success metrics and what these meant in terms of income generation.
Wilkinson highlighted the Woodland Trust’s accounts as the best in the sample of 100 that she looked at.
She said: “The very first page highlights how the charity works and the need for its existence. It mixes high level summary information with detail and case studies, giving a balance of summary information, high-level pointers and tie in to KPIs.
“There is a very clearly articulated strategy flowing through the report, evidence of reporting against strategic priorities during the year, and plans for the future.”
The full article is available here.