The guidance considers the implications for the trustees’ annual report, going concern and the alternative basis to going concern when preparing accounts under the Charity SORP [Statement of Recommended Practice].

It does not amend the SORP and preparers and auditors are under no obligation to follow it.

The SORP committee warns the measures being taken to contain Covid-19 will impact on charities in many different ways and it is important for charity trustees to understand the impact on the delivery of their activity and their governance including their finances.

Where a charity is preparing a set of accounts and these have not yet been approved, trustees should consider whether information needs to be included to explain the impact of the Covid-19 situation.

There could be changes to the financial statements needed as a result of the current situation and it is important that trustees understand and consider these, and that charities keep up to date with developing guidance from the relevant charity regulator in their jurisdiction.

The coronavirus control measures involve a high degree of social disruption which has an impact on the delivery of and demand for the activities of charities, the availability of staff for work, and levels of illness across society which will affect the beneficiaries of charities. There are therefore potential implications for charity income, expenditure and commitments, and the value of charity assets and liabilities. In some cases the implications may be so severe as to cast doubt upon a charity’s financial sustainability.

Specific areas the SORP committee deemed worthy of close consideration include when reporting the main achievements of the charity, explaining how the virus control measures affected the charity’s activities, taking the opportunity to explain any financial uncertainties regarding the charity’s financial sustainability and consideration of going concern  and the steps being taken to address these uncertainties.

The reporting should explain how the contribution of volunteers, where appropriate, assisted the charity in its work in managing in the changed circumstances, and the impact coronarvius controls had on the charity’s ability to fundraise and how the trustees managed this situation.

The guidance advises reporting on how the outbreak of the virus has affected staff, volunteers and beneficiaries and the implications for the charity’s operations and activities for the coming year, the impact on  the principal risks and uncertainties facing the charity during the reporting period and any implications for any existing or potential defined benefit pension liability.

It also states that if the accounts cannot be prepared on a going concern basis this is disclosed Consideration should then be given to the effect on the accounting policies, in particular judgments and estimates to do with the valuation on assets and liabilities including any known liabilities resulting from any decision to wind the charity up.

The decision to wind up the charity is not a pre-requisite for not preparing accounts on a going concern basis because in deciding as to whether the accounts are prepared on a going concern the trustees will have had to make judgments as to the future financial circumstances facing their charity; provided continued operations would not amount to wrongful trading then the trustees may decide to continue to operate after the reporting date.

A disagreement as to the going concern status of their charity between the trustees and their auditor or independent examiner is not a reason for non-submission of the accounts.  

The regulator also recommended trustees consider the Financial Reporting Council’s guidance to company directors when looking at going concern.

Charity SORP: Implication of Covid-19 control measures and charity financial reporting guidance