Governance review of the SORP Committee

On 6 June 2019, the Oversight Panel published its report on the outcome of the governance review of the SORP making process; and the composition and constitution of the SORP committee itself.

Professor Gareth Morgan was the independent chair of this Oversight Panel who said. “I was delighted when the charity regulators launched this review and I was honoured to act as the Independent Chair. As an academic, and as a charity practitioner, I am aware of the strengths of the Charities SORP but I have also been aware of concerns expressed by some. Our consultation led to a wide range of really constructive suggestions, and I am confident that if the Panel’s recommendations are implemented the SORP will be considerably more effective in future.”

The report has some 36 recommendations arising on how to make the Charities SORP more effective. In summary:

• Reporting needs refocusing on the needs of the user from the public and beneficiary interest. There also needs to be a greater simplification of reporting for smaller charities.
• The SORP Committee is to be reformed regarding its size, composition and clarification of the respective roles of the SORP-making body and SORP Committee.
• Broader engagement is needed with a much wider group of stakeholders.
• The sector/charity regulators should collaborate to codify best practice in non-statutory financial reporting.
• The SORP-making body, supported by the Financial Reporting Council is to ensure the redesigned SORP process happens.
• The charity regulator is to ensure that SORP process is adequately resourced to implement these recommendations.

Key themes of the Governance review

Some of the key themes worthy of highlights from the report are that in developing the next SORP, the aim should be to simplify and clarify the report and accounts making these an easy read for proxy users and those interested in the work of charities. There is a SORP Committee policy to ‘think small first’ which is recognised not to have been acted on by the Committee well in the past and perhaps a small charities SORP is an answer. Generally, a drive for simplified accounts and key financial information – with proxies for what represents public interest should be used to develop the SORP. It would be very welcoming to have a root and branch review of the Charities SORP and the additional financial information required under it to determine what is useful and what is superfluous to produce more simplified meaningful accounts.

Wider engagement of SORP is needed

There is the recognition that the development of the SORP will require greater engagement with a wider group of stakeholders which includes the commissioning of focus groups and engaging critical friends. It was recognised that much wider consultation and broader engagement could uncover innovative and practical ideas.

The use of illustrative examples in the consultation process would aid the readers in understanding the practical implications of any suggested changes and help in that engagement. More channels such as social media, direct approaches to umbrella bodies and panels should be used to engage more audiences in the consultation process. Past consultations have reached limited audiences and a broader engagement is needed if the SORP is to become more meaningful.

Reviewing the SORP committee structure

Turning to the SORP Committee itself, which is an advisory body to the SORP-making body, it was recognised that the committee structure needed review. No observers and a need for much clearer terms of reference of both the committee and the Chair was acknowledged. An annual performance assessment with a review of Committee members every three years was also recognised.

The composition of the SORP Committee should change with membership reduced to a maximum of 16:

• Two to be drawn from each of the four jurisdictions, with at least one of the two representing smaller charities (eight members).
• Four members to bring additional skills and expertise including donor and government funder perspectives (four members).
• One member drawn from each regulator (four members).

Non-statutory financial reporting by charities

Finally on non-statutory financial reporting by charities, like annual reports, it was recommended that the SORP requires that the other financial information reported should be consistent with that detailed in the formal accounts. The charity regulators should also consult with the sector to develop this guidance.

Crystal ball

Although the Charity SORP is not expected until 2022/23 it is clear that if the recommendations of the Oversight Panel are implemented, the next SORP will be significantly different. More simplified seem to be a key theme, particularly for small charities and the sector would welcome a more focused set of charity accounts which are easy to read so as to aid transparency. We wait to see how these recommendations are implemented and to quote Professor Gareth Morgan ‘the SORP will be considerably more effective in future’.

This article was written by Charity Partner Helena Wilkinson. If you have any questions regarding this article you can contact Helena using the form below.