As a former SORP committee member calls for "fundamental change" in the way charities report to the public, Andrew O'Brien gives his view on the changes suggested.
Joe Saxton, driver of ideas at nfpSynergy, has published a paper on the Charities SORP which has stated that the SORP making process needs to be changed.
His view is that the SORP is weighted too much towards charity finance professionals and that the interests of the public are not being appropriately considered, particularly regarding the introduction of things like key facts summaries.
At this point, I think it is important to declare that Caron Bradshaw, our CEO, is a member of the Charities SORP Committee and has served alongside Joe Saxton in recent months.
Is the SORP really weighted towards charity finance professionals?
There is an insinuation throughout the report that the SORP has been dominated by charity finance professionals and that it is written for the benefit of charity preparers, not anyone else.
This will be news to many charities because as we found through our extensive consultation with members and the wider sector most have seen the SORP get longer and more complicated despite their objections. More and more time is spent by charities in compiling the SORP and the complexity means that charities are having to spend more time on getting advice from their auditors.
In our response we asked for the SORP to be slimmed down and caution before adding further requirements because of the significant changes that keep taking place. This appears to be in line with what the public wants given the comments that Mr Saxton presents from his focus groups.
As Mr Saxton notes in his report, it is the Charity Commission for England and Wales and the Office of the Scottish Charity Regulator which are responsible for the SORP. I would argue that a lot of changes that have been put forward in recent years have come from the regulators, rather than from the charity finance community itself.
It is easy to point fingers at charities for not accepting the recommendations that Mr Saxton has made, but I think he is overestimating the power of the charity finance professionals.
You could argue that if charity finance professionals don’t like the SORP, Mr Saxton doesn’t like it, the public doesn’t like it, you probably have an independent process.
Of course, we’d prefer if the SORP making bodies took on board our suggestions but that’s because we think that they are the right thing to do, not because charity finance professionals should dominate the process.
The public interest should inform changes, not popularity
We have always shaped our public responses with a view to how we can advance the public interest through accounts. This isn’t about popularity; it is about how we can ensure meaningful accountability.
A classic example is the point made about pie-charts in the focus groups. It is good to know the audience and to tailor to their needs. However, pie-charts and numbers without narrative are not going to make much sense to a lay person if they don’t know the significance of the information.
We have argued in our consultation response that more narrative and less numbers would be better so that readers can be educated about what the numbers actually mean rather than having to decipher graphics or tables that don’t mean anything to them.
Mr Saxton is very keen on key facts summaries and he says that this is because they would make the reports more readable for the public. In our response to the SORP research consultation on key facts summaries, we raised concerns about the fact that selecting arbitrary facts and making them a “standard” without context would give false assurance. What do they mean? Do they really effectively judge charities’ performance? Pesh Framjee of CCW has demonstrated the problems with fundraising ratios time and time again, I don’t intend to go over his arguments.
A lot of the points made in Mr Saxton’s paper relate to fundraising. But they are similar to arguments made around CEO and senior salary pay that we should lead with this information. Our concern is that if we put these as the core of a Key Facts Summary, would it not just reinforce perceptions of those that think that charities are just out for themselves.
It also reinforces the ideas that these are measures of a good charity, even though nearly everyone would admit that a CEO’s salary doesn’t tell you anything about the performance of a charity. Surely impact should lead a key facts summary, not fundraising costs or salaries? And what are the standard measures for that?
Imposing standards through the SORP though isn’t sensible. If standards exist and there is consensus, then they can be integrated into the SORP. This needs to be based on evidence that proves that such standards are the hallmarks of an effective charity, and not merely on popularity or a desire to do something.
Change is slow, but that isn’t necessarily a bad thing
It can be frustrating from the outside to see how slow regulation of any kind moves. However sometimes taking your time is necessary and the SORP is one of those.
You could argue that this is special pleading. I have to be honest that our members did not want many changes to the SORP in the most recent consultation because they had only just implemented the last set of changes!
But it also makes sense for readers. If we keep chopping and changing the SORP every 12 months when new issues hit the media, then people will struggle to compare performance with previous years and find relevant information. And if this is true for seasoned professionals who have to implement the SORP as part of their jobs, you can bet it is true for the public.
We need continuity between SORP revisions so that we can actually implement changes and see if they work in practice. This is not something that can be done overnight.
No room for complacency
The SORP has matured over time and it has been led by a desire, particularly from finance professionals, to boost accountability with the view that this will improve performance.
We cannot rest on our laurels, and there is still improvement to be made, particularly around simplifying the SORP so that it reads better and gives information which really aids to accountability. But it is important to say that transparency isn’t about dumping data on the public or snazzy infographics, but educating and informing readers so that they can ask the right questions.
Charities can be complex organisations and this is often reflected in the accounts. There are no short cuts to educating and informing the public on the performance of charities, however much we may like there to be.
Hopefully Mr Saxton will keep up his engagement and not lose faith with the process, because the perspective of donors which he brings is an important factor to the debate – but the public interest must be our guide, not one interest group.
Andrew O'Brien is director at policy and engagement at Charity Finance Group