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Charity SORP must change to meet ‘new public expectations’

The SORP governance review panel says charity reporting and accounting in the UK and Ireland must be refocussed with the views and needs of the users of charity reports and accounts at its centre. The  panel, which was set up to review the future development of charity reporting and accounting, has made a number of recommendations in order to ensure that the way that charities report on their work and account for their income under the Statement of Recommended Practice (SORP) can meet new public expectations and are fit for the future.

The Charities SORP (Statement of Recommended Practice on Accounting and Reporting by Charities) sets out the financial reporting requirements that apply to almost all charities preparing accounts designed to give a true and fair view. The four charity regulators in the UK and Republic of Ireland held a governance review of the constitution and composition of the Charities SORP committee and the SORP making process over the last nine months.

The governance review was undertaken by an Oversight Panel comprising a representative from each of the four charity regulators and an observer representative nominated by the FRC. The work of the panel was overseen by Professor Gareth Morgan, an independent Chair retained by the SORP-making body.

The final report has made a number of recommendations under five key themes. These recommendations are that:

  • The needs of the wider public and beneficiaries require a refocusing of the SORP and greater simplification of reporting requirements for smaller charities
  • The SORP Committee should be retained but reforms are needed regarding size, composition and clarification of the respective roles of the SORP-making body and SORP Committee.
  • Broader and ongoing engagement is needed with a much wider group of stakeholders if the SORP is to continue to be fit for purpose.
  • The sector and charity regulators should collaborate to identify and codify best practice in non-statutory financial reporting.
  • The SORP-making body, supported by the Financial Reporting Council (FRC) needs to ensure that the redesigned SORP development process takes effect.

The charity regulators are being asked to ensure that SORP process is adequately resourced to implement these recommendations. The governance review was undertaken during 2018 and early 2019, and included a public consultation and a number of events for participants to share their views. The 36 recommendations will now be submitted to the charity regulators for consideration and response.

Charities SORP Committee Governance Review Panel Chair, Professor Gareth Morgan, said: “I was delighted when the charity regulators launched this Review and I was honoured to act as the Independent Chair. As an academic, and as a charity practitioner, I am aware of the strengths of the Charities SORP but I have also been aware of concerns expressed by some. Our consultation led to a wide range of really constructive suggestions, and I am confident that if the Panel’s recommendations are implemented the SORP will be considerably more effective in future.”

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