Speak up over Sorp consultation

03 Sep 2013 Voices

With the Sorp consultation closing next month, now is the time to make your views heard, says Rui Domingues.

With the Sorp consultation closing next month, now is the time to make your views heard, says Rui Domingues.

I’ve writen a number of my civilsociety.co.uk columns recently about the new draft Sorp, and I make no apologies for continuing to bang the drum about the consultation that is still going on.

The Sorp exposure draft is key to establishing public trust and confidence in the accounts we all produce, so exercising sound financial leadership to get it right is vital.

Previously, I’ve written about four areas – the new modular format of the Sorp; the change in income recognition principles from certainty to probability; the need to recognise pension-recovery-plan liabilities; and changes to the format of the Sofa. These, for me, are the main areas of change contained within the draft Sorp.

New ground being covered

However, there are other areas of difference between this exposure draft and the existing Sorp 2005. The Charity Commission and the Office of the Scottish Charity Regulator (OSCR) have issued a helpsheet on their Sorp microsite, in which the “more significant changes” are listed.

For many FDs this will no doubt be quite an off-putting range of subjects. To go through each of these items can seem daunting, but help is at hand. Most audit firms have prepared briefings on the changes, as have umbrella bodies, but this shouldn’t stop each of us looking at how this will affect our own charity’s accounts.

It’s been suggested that the best way to approach this consultation is to also think about which bits of Sorp 2005 have been causing your charity difficulties. Check whether these have been fixed in the new Sorp exposure draft and, if not, ask why not during the consultation exercise.

We have reviewed what we think the main impact of the new proposals will be on us at Friends of the Elderly. Fortunately we won’t be significantly affected by the need to include pension liabilities on our balance sheet. However, we do have some pension liabilities and, although recognising them won’t push us into a position where we look insolvent, they will be the most significant item to impact our balance sheet as a result of the new Sorp.

This, of course, is a requirement of FRS 102, so probably isn’t negotiable, but I will be feeding back to the Sorp committee during the consultation that we might need additional disclosure in the notes to the accounts.

Providing direction

In 2009, the Charity Commission and OSCR sponsored Queen’s University, Belfast, to look into the state of financial reporting by charities at the time, and make some predictions about possible future developments.

It is difficult to see how the draft Sorp aligns with some of the key findings of that research, so there is still a place for finance leaders to provide direction on how to shape Sorp 2014; especially, in my view, in respect of the format of the new Sofa.

Additionally, I am looking at how we can reassure any potential funders of our continuing financial strength. This will probably entail extra narrative within the trustees’ annual report and I will be working with our fundraising team to ensure this is done in a way that works for our key funding audiences.

The Sorp consultation runs until 4 November. After that I won’t be banging this drum any more, because finance teams will then be moving into the phase of implementing what will soon, thereafter, be the new reporting requirements.

If you want to provide leadership to your charity through this process, check today what the impact will be on your own accounts.

Rui Domingues is finance director at Friends of the Elderly

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