Accounting rules for larger charities updated to require them to provide extra detail

25 Oct 2019 News

Larger charitable companies will need to include extra details about their activities in their annual accounts from next year, following an update from the body that sets accounting rules.

Regulators behind the Statement Of Recommended Practice (SORP) have published Information Sheet Three, which explains how charitable companies need to respond to changes to the Companies Act.

There are three new accounting requirements, of which two apply to charities with over £36m in gross annual income, gross assets over £18m or more than 250 employees. The other applies simply to charities with more than 250 employees.

Don Bawtree, partner at BDO, told Civil Society News that charities will be required to put in place new processes to guide how directors undertake their roles.

He said: “These reporting requirements aren't just a matter of sitting down at the end of the year and adding something to your annual reports. They will require putting processes in place to make sure that there are underlying systems doing what you say you're doing.”

A. Directors duties to promote the charity's purpose

Requirement A, for charities meeting one of the three size criteria, says directors must act to promote the charity's purposes and that their duties should be modified to reflect this.

A reporting statement should testify to that activity. Charities are required to publish the statement on their website and it must be included in the strategic report or trustees' annual report.

The information sheet warns that it is not enough for charities to only publish their annual report on a regulator or registrar's website.

B. Employee engagement

Requirement B, for charities with over 250 staff, asks for a statement on how directors have engaged with employees.

The information sheet says this could also apply to volunteers.

Charities should also consider employees' reward or incentive schemes within the reporting statement.

C. Stakeholder engagement

The final reporting requirement asks for a statement on how directors have engaged with stakeholders and gives service users, beneficiaries, funders and the wider community as examples.

Requirement C applies to charities that meet one of the three size criteria.

Updated SORP expected 'any day now'

A revised version of the SORP is expected before the end of the year, which will round up all updates from information sheets and bulletins.

Civil Society Media's Charity Finance magazine will be releasing its latest SORP Compliance Checklist, which will be updated for all the changes, early next year in association with accountancy firm BDO. To register your interest in buying a copy please email [email protected]



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