Have your say: research exercise on Charities SORP


By Easton Bilsborough, Technical Manager, CIPFA

The joint SORP-making body and SORP Committee are seeking the views of users of charity reports and accounts based on their first year's use of the new Charities SORP (FRS 102). The research exercise aims to gather the views of funders, financial supporters, preparers, trustees, employees and beneficiaries of charities and others who use charity accounts. Clearly that includes many in the health and social care system.

Why now?

The current Charities SORP (FRS 102) applies to all charities for financial years beginning on or after 1 January 2016. 

The consultation aims to identify any necessary changes in good time to prepare the next Charities SORP (FRS 102). This will coincide with the Financial Reporting Council’s planned triennial review of the accounting framework introduced by Financial Reporting Standard (FRS) 102 applicable in the UK and the Republic of Ireland. Changes to FRS 102 will require a new Charities SORP.

Therefore, the SORP research will inform the development of the next Exposure Draft of the SORP – which is likely to be consulted on in 2018. It is expected that the next SORP would take effect from 2019.

What is being consulted on?

The consultation questions are focused on five themes which look at:

  • the SORP’s structure, format and accessibility
  • implementation issues that require improvements to the SORP
  • SORP Committee members’ suggestions for changes to the SORP
  • charity regulator themes for making changes to the SORP
  • ideas for items to remove, change or add to improve the SORP.

What changes are being proposed?

Possible changes which are highlighted in the consultation include introducing:

  • a third tier of reporting by only the largest charities, where additional reporting and disclosures are required
  • a ‘Key Facts’ annex to the trustees' annual report. A simple summary is proposed, which contain key information – either charity-specific items or a mix of mandated items, including financial ratios
  • more specific definitions of support costs and fundraising costs to bring consistency across the sector
  • greater requirements of charities to report on risk management, internal financial controls and going concern – including reporting on the implications of pension liabilities.
  • greater disclosures around who funds the charity, including identifying material contracts and donations by both name and amount.

What is the significance of this consultation?

Just as charities have varied and diverse stakeholders, charity reports and accounts have a range of users with different needs. The research exercise presents a unique opportunity to consider the current charity reporting framework and users’ needs. 

Organisations operating in the public sector will often have strong interactions with charities through grants, contracts to deliver services and other forms of partnership. Within the UK there has been an increasing number of charities involved in delivering public services – allowing the state to expand both their reach and impact of their provision. As such, the public sector represents an important source of income for the charities, with many charities being wholly dependent on government funding.

Charity accounts and reports play an important part in the public sector’s interactions with charities. Financial information provided by charities is key in the commissioning process for contracts to deliver public services. Information about the charity’s performance, achievements and future plans help to facilitate and inform collaborations between the third and public sector.

As such, we would encourage CIPFA members who are users of charity accounts to read and respond to the consultation.

How to respond

Details about how to respond can be found on the SORP microsite together with the invitation to comment document, or via E: charities.sorp@cipfa.org. The consultation runs for 31 weeks from 4 May to 11 December 2016.