2 March 2017
In May of last year the Chartered Institute of Public Finance issued a consultation document, ‘Research Exercise on Charities SORP’, and the response of our Institute (ICAEW) has recently been published. The full text can be read on the ICAEW website (Rep 189/16).
Charities currently prepare their annual reports under the provisions of the 2015 Statement of Recommended Practice (SORP 2015). ICAEW’s view is that many charities, particularly smaller ones, find the existing regime taken as a whole to be too complex and burdensome and, therefore, an unwelcome drain on scarce resource. However, it says that the 2015 SORP is relatively new and it would be too early to rewrite or replace it. Instead consideration should be given to clarifying some of its more problematic areas.
One area of concern is the length of annual reports, caused by the amount of disclosure required by the SORP. Therefore, ICAEW thinks that the approach for smaller charities could be further improved, for instance by identifying more clearly which provisions do not apply to them. It suggests that a summary of the requirements and exemptions for small charities might be included in an appendix with flow charts at the front showing how the size of charities are determined for the purpose (including how ‘gross income’ is calculated).
In the longer term, ICAEW would like to see a flexible online version of the SORP “to enable a charity to download a version tailored to its key circumstances such as legal form; size; whether registered in England and Wales or elsewhere; and whether preparing cash-based receipts and payments accounts (to which accounting recommendations do not apply)”.
ICAEW’s response goes on to address other practical issues of interest mainly to smaller charities and highlights some confusion over definitions, especially those relating to the size of a charity and the thresholds beyond which an audit is required.
The Consultation contains a proposal to increase the amount of disclosure, in particular in the Trustees’ Report, including a requirement for charities to declare their funding from individuals. The ICAEW feels that this may detract from the ability of a charity to “tell its story” in the report, add to length and give the general appearance of clutter. It adds that if the Regulators believe that this kind of disclosure is necessary, consideration should be given to including it in the charity’s annual return.
We at UHY welcome ICAEW’s input to the debate. The vast majority of charities in the UK are small, and will be grateful for changes that make their reporting obligations easier to understand or that reduce the burden of preparing their annual report. If you are the Trustee of a charity and need a specialist opinion on what your annual accounts and report should contain, or indeed what it does not have to contain, you should contact your local UHY charity specialist. Alternatively, if you would like to read more charity focused blogs please click here.
