The Charity Commission for England and Wales and the Office of the Scottish Charity Regulator (OSCR) have launched a consultation on a new draft Statement of Recommended Practice (SORP), closing on 4 November.
The SORP provides a comprehensive framework for charity accounting and reporting that enables charities to adopt a consistent interpretation of financial reporting standards and to account for those transactions that arise when undertaking charitable activities. All charities that prepare their accounts on an accruals basis to give a ‘true and fair’ basis must follow the SORP.
In March of this year, the Financial Reporting Council (FRC) issued a new Financial Reporting Standard (FRS102) that will form the basis of financial reporting for accounting periods starting on or after 1 January 2015. For the first time, this new financial reporting standard addresses some of the key issues faced in charity and ‘public benefit entity’ accounting and reporting.
In their joint role as the SORP-making body for UK charities, the regulators have been working with the sector-based SORP Committee to write a new draft SORP specifically to accommodate this new reporting standard and also the needs of smaller charities that choose to continue reporting under the existing Financial Reporting Standard for Smaller Entities.
The draft SORP for consultation has been written in a new modular style that the SORP-making body hopes will make the recommendations easier for charities to navigate and identify the parts of the new SORP that apply to them. Amongst the proposed changes are:
· a new module on social investments
· a reduced number of headings required in Statement of Financial Activities
· material grants made to institutes to be listed in notes, rather than made available in a separate publication
Sam Younger, Joint Chair of the SORP Committee and CEO at the Charity Commission said: ‘It has been many years since the Charities SORP underwent a fundamental revision so this is an important opportunity for the sector to be involved in shaping a new accounting framework. The SORP Committee provides a good representation of the charity sector and has been working hard to produce this draft in collaboration with us, but it is this consultation process that is the most important step to make sure the sector gets a SORP that works for them.’
Laura Anderson, Joint Chair of the SORP Committee and Head of Enforcement at the Office of the Scottish Charity Regulator said: ‘Understanding of, and compliance with, the Charities SORP isn’t just for accounting professionals. Charity trustees are ultimately responsible so it’s important that they visit the microsite to see the new, simplified format that’s intended to help them meet the accounting requirements. We want as many charity trustees, accountancy professionals, funders and other interested stakeholders as possible to take part in the consultation and give us their feedback – this is a key opportunity to shape the way accounts are prepared in the future.’
The consultation which is published on a ‘SORP’ micro-site will run for four months closing on 4th November 2013. Today a PDF of the Exposure Draft of the SORP has been published and includes the facility to select and download individual modules of the SORP, along with an Invitation to Comment including a list of consultation questions.
The micro-site will be further developed in stages and will allow users to ‘customise’ their own e-version of the SORP by identifying their structure and activities they undertake. The SORP-making body will use the later stages of the consultation to test the ease of navigation of this function. In addition, a number of umbrella bodies and professional organisations are hosting events during the consultation period which the SORP-making body hope will attract further participation from charities, trustees and charity experts from all over the UK.
More details about the consultation, how to comment and the upcoming events can be found by visiting either the Charity Commission or OSCR websites or the new SORP micro-site: charitysorp.org
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