Overhaul of charity SORP committee sees change of membership

There is to be a major overhaul of the way the charity accounting rules under the Charity SORP framework are developed with a new, smaller SORP committee, following a highly critical government review

This follows a nine-month investigation into the rule setting process for the Charity SORP (statement of recommended practice), chaired by professor Gareth Morgan, an academic and charity practitioner.

One of the key decisions is to reduce the size of the membership of the SORP setting committee from 16 to 12, and for the first time it will include representatives from the corporate sector who have knowledge of charity accounts.

'But there will now be a new category of corporate members who will be representatives of organisations with an interest in the SORP and in charity trustees’ annual reports and accounts. We intend to have a mix of individual members appointed for their knowledge and insight and corporate members. Corporate members offer the opportunity to gain insights from their wider membership to gain views and ideas. The nominee of a corporate member would attend the Committee, the Charity SORP making body stated in the four-page update. 

The wide-ranging Morgan review included a complete governance probe into the constitution and composition of the Charities SORP committee, and the SORP making process. His review was supported by the four charity regulators in the UK and Ireland.

One of the main criticisms was the committee's slowness to reflect wider changes to FRS 102 accounting rules, as well as failing to strengthen the weak controls over anti money laundering and cross-border financial oversight of charities. There were also concerns about the over complexity of reporting for smaller charities and a lack of public confidence in the overall charity sector following some well-publicised scandals.

In response, the SORP-making body is to introduce a new process for developing the next SORP. There will be reforms to the SORP committee, which are designed to ensure a stronger culture of constructive challenge, better stability and better representation of small charities and funders with an interest in the impact charities have.

There will be a new engagement process, with seven stakeholder groups working in partnership with the SORP committee. Each engagement strand will involve individuals and organisations with an interest in financial reporting and the work of the sector, to ensure user needs are understood and considered early on in the process of writing the next SORP.

The SORP-making body said it will be actively recruiting engagement partners, individuals or organisations, who want to work with it, and also says it will be exploring topical issues of governance, transparency, simplification (tiered reporting) and the reporting needs of smaller charities.

A new SORP committee will be set up with representation from the UK and Ireland to support this work, and the SORP-making body is seeking applications from those interested or knowledgeable about charity financial reporting whether donors, funders, commentators, accountants, trustees, auditors, independent examiners or advisers.

The new arrangements are due to be in place by March 2020.

Myles McKeown, joint chair and head of compliance & enquiries at the Charity Commission for Northern Ireland said: ‘The recent governance review highlighted some positive aspects of the SORP development process, but it also made some constructive suggestions, particularly that charity reporting and accounting must become more user-focused.

‘The changes we are introducing today will lay important foundations to ensure the SORP can continue to be fit for purpose.’

The SORP-making body is made up of the Charity Commission for Northern Ireland, the Charity Commission for England and Wales and the Scottish Charity Regulator (OSCR). The Charities Regulator (Republic of Ireland) is an observer.

Details of new SORP-making process

Charity accounting needs radical overhaul, says Morgan review [10 Jun 2019] 

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