New charity accounting framework published
Two new SORPs to be used for financial years beginning 1 January 2015.
Two new Statements of Recommended Practice (SORP) have today been published by the joint SORP making body, the Charity Commission and the Office of the Scottish Charity Regulator (OSCR).
The new SORPs provide a comprehensive framework for charity accounting that all charities that prepare accrual accounts must follow. The new SORPs apply to financial years beginning on or after 1 January 2015. (endnote 1)
The new SORPs were needed due to changes in UK accounting following the new Financial Reporting Standard (FRS102) that was issued by the Financial Reporting Council in March 2013. In their joint role as the SORP-making body for UK charities, the regulators have been working closely with the sector-based SORP committee to write the new SORPs, which included a public consultation held from July to November 2013.
Responding to sector feedback the new framework provides a SORP to support each of the accounting standards from which charities can choose, depending on their size. The new SORPs can be viewed on the SORP microsite along with a help sheet to assist charities in making their decision about which accounting framework to follow. (endnote 2)
Jane Hobson, Head of Policy at the Charity Commission said:
We are pleased to announce the publication of the first new SORPs in over five years and are grateful for the hard work of the SORP committee in producing a framework that we believe works with charities.
Recent research into public trust and confidence in charities revealed that the public’s appetite for knowing how charities spend their money continues to increase and is a key factor effecting trust. The SORPs clearly lay out the reporting rules to help charities be transparent, meet the high expectations held by the public and uphold the high levels of trust in the sector. (endnote 3)
Accounting and reporting is a critical activity for charities which is why these changes aren’t just for Finance Directors and Treasurers to think about - trustees must engage with what the changes mean for the charity and start thinking now about the information they will need to report on next year.
Laura Anderson, Joint Chair of the SORP Committee and Head of Enforcement at OSCR, said:
The two new SORPs reflect the feedback we received during the consultation and allow for the specifics of the different accounting standards. The online modular format should be welcomed by the sector, as it allows users to select only those areas that are relevant to them, resulting in a more streamlined, user friendly document.
We will also publish help sheets to support charities in choosing which SORP is relevant to them, and to assist in using the SORPs. I would encourage all charities preparing accrued accounts to visit the SORP microsite to familiarise themselves in good time for next year.
By doing so, charities will be able to equip themselves to be ready to prepare compliant accounts that ultimately underpin public confidence in their work.
The SORPs can be viewed on the SORP microsite: www.charitysorp.org
Ends
PR 60/14
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Notes to Editors
- The Charity Commission is the independent regulator of charities in England and Wales.
- Our mission is to be the independent registrar and regulator of charities in England and Wales, acting in the public’s interest, to ensure that: * charities know what they have to do * the public know what charities do * charities are held to account
- The Scottish Charity Regulator is the independent regulator and registrar of Scotland’s 23,500 charities and publishes the Scottish Charity Register at www.oscr.org.uk. Our vision is for charities in which the public has confidence and which provide public benefit.
- The SORP Committee is a sector-based expert committee that advises the joint SORP-making body in its development of the SORP. The Committee includes charity finance directors, charity auditors as well as members reflecting broader charity sector and academic interests.
Endnotes
1 Charity law requires all charities in England and Wales with a gross income of more than £250,000 to prepare accruals accounts. In Scotland, accruals accounts are required where the gross income is £250,000 or more. Company law requires all companies, including charitable companies, to prepare accruals accounts.
2 The two new accounting standards are the Financial Reporting Standard applicable in the UK and the Republic of Ireland (FRS102) and the Financial Reporting Standard for Smaller Entities (FRSSE). In order to use the FRSSE, charities must meet two out of three of the following criteria: an annual income of less than £6.5million; total assets of less than £3.26million; or fewer than 50 employees.
3 Almost half of people cite ‘ensuring a reasonable proportion of donations gets to the end cause’ as the most important factor affecting their trust in charities and the importance of this has risen since the last research in 2012. The public are interested in whether charities explain what they do with, the majority of people (96%) saying that ‘it is important that charities provide the public with information about how they spend their money’.