Ease reporting burden for small charities, says SORP working group

07 Aug 2018 News

Incorporated charities with incomes below £250,000 should be allowed to prepare accounts on a receipts and payments basis, according to recommendations from a working group set up to advise the Charities SORP Committee.

The SORP Committee guides the development of the Charities Statement of Recommended Practice – the sector's accounting rules. Last year it set up a number of working groups to look at how the SORP may be reformed for its next incarnation, which is tentatively planned for publication in 2021.

The working group on small charities reported back to the Committee in June, outlining a number of recommendations. 

At present, only unincorporated charities with income below £250,000 are allowed to prepare accounts on a receipts and payments (R&P) basis. This means they only have to do simple cash accounting rather than measure and value their assets and liabilities.

According to minutes of the SORP Committee’s June meeting, a number of committee members expressed support for extending R&P accounting to small charitable companies. 

However, they also warned that if these charities were allowed to use the R&P framework, that framework would have to be changed to include additional disclosures in order to present a true and fair view, and that R&P accounts could give a “misleading picture of longer-term financial sustainability”.

The committee estimates that around two thirds of charitable companies would be eligible to use the R&P approach if the rules were changed.

‘Build-your-own-SORP’

Elsewhere, the working group on small charities recommended the creation of online functionality to make the SORP easier to navigate. It said that a “build-your-own-SORP” tool, which allows charities to identify only the bits of the SORP which are relevant to them, would give preparers a clearer picture of what information is required for their specific charity.

The group also called for charity regulators to allocate greater resources to reviewing the quality of the charity accounts that are filed with them. This would provide a greater incentive for charities to comply with the SORP.

Responding to the recommendations, one of the Committee’s joint-chairs (who is unnamed in the meeting minutes) acknowledged that the resources of the joint SORP-making body would be a factor in taking forward the proposals. 

They noted that the while the SORP is free as a PDF online, there is a charge for paper copies, and that a similar funding model may need to be considered for any more sophisticated digital versions of the SORP.

New reporting tiers

A separate working group on tiered reporting also presented its recommendations to the June meeting. 

At present the SORP is arranged into two tiers, with charities that have income over £500,000 required to give additional disclosures. A 2016 research exercise suggested a new, third tier for large charities to give even more disclosures, perhaps those with income above £10.2m, before concerns were raised that any new tier should be used to reduce requirements for smaller charities.

Now the working group has outlined proposals for four tiers, though it emphasised that further consultation would be required.

 

More on

We use cookies to ensure that we give you the best experience on our website. Read our policy here.