Before 2018 I knew relatively little about the Charities SORP, the set of rules that governs charity financial reporting and accounting for larger charities (fuller definition below). I was aware it was used by accountants tasked with preparing charity accounts, and by finance colleagues on the other side of the office.
I saw reference to it in hundreds of accounts I read as a foundation programme manager. I occasionally heard views from sector colleagues that it was too onerous, and from time to time I received training offers to understand recent changes.
Becoming a charity trustee, and then joining ACF, was the start of my SORP awakening! It quickly moved from the abstract to the immediate when I was asked to represent ACF as an observer member of the SORP Committee in 2018, just as an independent review of that committee’s governance was getting underway.
Alongside getting to grips with the SORP’s technical content, history and future plans, I was tasked with drafting ACF’s response to the review, which led to a range of conversations with members and others about the current SORP, the impact of charity accountancy practice on their work, the reality of using it for charities on the ground, and where it all might lead in the future.
The charity sector’s most fundamental tool
I quickly came to realise that the SORP is perhaps the charity sector’s most fundamental tool: It’s a public safeguard for the integrity of the charity sector and a leveller of the playing field. It’s a lever for driving progressive change and a mechanism to enhance practice. It’s a framework for charities to demonstrate their impact, express their personality, and give themselves a voice. It’s a safeguard that offers readers of accounts consistency in how information about a charity’s finances, governance and operations is prepared and how it is presented.
The Charities SORP is widely lauded as a best in class exemplar of guidance on accountancy practice. As an observer member, I witnessed a committee that was passionate, ambitious, highly expert, and utterly rigorous.
The independent review of the SORP committee, published last summer, agreed with this, but also said it was too technical and not sufficiently representative of the charity sector, particularly the reality of smaller charities.
Wider range of views will strengthen the SORP
ACF, in our submission to the review’s consultation, recommended that readers of accounts, including funders and donors, should have greater representation on the committee, and more involvement in the engagement process that informs the SORP-making body’s deliberations. We were pleased this was echoed in the review’s final report.
The regulators that comprise the SORP-making body responded quickly to the review, disbanding the committee and launching a recruitment for new members. It also proposed an unprecedented broadening out of the engagement with the sector through stakeholder engagement groups, which will bring renewed energy, new audiences and a greater legitimacy to the process.
Listening to a wider range of voices, including small charities and donors from the general public, will strengthen the SORP-making body’s understanding of the value of the SORP, its current use, and its future potential.
Coming up with bold ideas for the SORP
This new way of working will uncover bold ideas for future editions of the SORP.
The potential impact of a future SORP for driving change as well as showcasing charity ambition is huge – it could empower charities to present not only their financial data and impact narrative, but perhaps their approaches to some of the most pressing issues for the sector, including diversity, climate action, investment policies and transparency.
The future SORP could enable charities to more readily present their impact in terms of value to society, as well as in terms of their income and assets. It could better inform donor choice, public interest, media scrutiny, and workforce pride.
The greatest challenge, it seems, is in how to deliver this ambition, while ensuring that the SORP is proportionate to the vast majority of charities that are small. It also must retain its function as a robust, technically grounded, trusted, regulated framework for accountancy practice, for these features are what underpins the validity and value of everything else.
Drawing on the experiences of members
The new committee is comprised of a balance of technical experts, sector representatives, active users, people involved in frontline delivery, and bold visionaries. We are delighted that the regulators chose to offer a place for a representative of charitable funders, who not only use the SORP as charities themselves, but represent the single largest audience for charity accounts.
It’s an immense privilege to be able to draw on the huge experience and expertise of our 400 members, enabling ACF to contribute to the committee with immense credibility.
To inform our position on the committee, we will listen carefully to the foundation sector’s views, from across our whole membership.
In the months ahead, we will begin a programme of engagement activities, primarily through our Members’ Policy Forum, but also through our regular bulletins and newsletters, to engage members on what they’d like to see from the next SORP. We’ll keep members updated on developments, and hope that charitable funders and others with something they’d like us to consider will get in touch and let us know your thoughts.
Max Rutherford is head of policy at the Association of Charitable Foundations (ACF)
The Charities Statement of Recommended Practice (the SORP) is the set of rules that governs charity financial reporting and accounting for larger charities with an income of £250,000 and more, and charitable companies (which may be small). A Charities SORP committee is tasked with overseeing these rules, identifying potential changes to the SORP and advising the four charity regulators of the UK and Ireland.