Charities SORP - quarterly update
Overview
The new Charities SORP (Statement of Recommended Practice) development process commenced in July 2020 following on from a governance review, which reported in June 2019 (see Attachment A below).
The SORP-making body is appointed by the FRC and is ultimately responsible for the SORP and its updating. The SORP-making body is made up of the Charity Commission for England and Wales (CCEW), the Charity Commission for Northern Ireland and the Office of the Scottish Charity Regulator (OSCR), with the Charities Regulator - Republic of Ireland as observer. The SORP-making body are also joint-chairs of the SORP Committee.
The initial stages involved the recruitment of a new SORP Committee (14 members); to which the SORP-making body turns for advice on how the SORP should be changed and Engagement Strands (6 strands); each with a convenor who provide particular perspectives on what needs changing and why change is needed to assist the SORP Committee.
Both the SORP Committee and Engagement Strands are made up of stakeholders from across the UK and Ireland, reflecting the coverage of UK-Irish Generally Accepted Accounting Practice. CIPFA and engagement strand secretariats provide technical advice and support and, in the case of CIPFA, act as publisher of the SORP
The engagement strands began their work in earnest in autumn 2020 and this culminated with the strand convenors sharing their ideas coming out of the ‘exploration’ stage in January 2021.
The outcomes from the exploration stage
The reports from each engagement strand were reviewed from the perspective of readers of the report and accounts, and from the perspective of the user of the SORP and preparer of the accounts. These findings were then shared with the SORP Committee over two meetings in February 2021
The SORP Committee reflected on the many suggestions from the engagement strands and settled on 15 topics for review (Attachment B below); and these were tabled at the joint SORP convenor: SORP Committee meeting in March 2021 and brought forward to the next stages of reflection and problem-solving.
The initial thinking was that the topics would be grouped into: narrative reporting, income, expenditure, and presentation of the financial statements and notes to the accounts. It was noted that not all the desired changes would be part of the SORP process and so to facilitate progressing some of the ideas, especially the opportunity to better use tiering to simplify the accounts, a request for changes to FRS102 would need to be made to the FRC.
The SORP Committee meeting in April 2021 considered a letter and annex setting out those areas that the FRC will be requested to consider when looking to update FRS102 (Attachment C and D below). This initial submission looks at findings coming out of the exploration stage only with a focus on suggestions that will facilitate simplification of the notes to the accounts with discretion requested for the SORP to identify what disclosures might be needed beyond those set out in Section 1A to FRS102. The FRC is receiving suggestions for changes until late October 2021 and will then decide which suggestions to consult upon as changes to the standard.
A second submission for October by the SORP-making body is anticipated in order to make any further requests that may emerge from the SORP development process.
The 'reflection' and 'problem solving' stages
At the March 2021 joint meeting of the SORP Committee and Engagement strand convenors it was agreed that the topics be scheduled with tiers and objectives for drafting the SORP considered first.
The initial focus on tiering is because it affects how the SORP is written and for each topic it will be considered if an assessment can be made as to whether a requirement applies to all tiers or only some, and also whether requirements for the same topic might differ between the tiers. In writing the next SORP, having a sense as to how far requirements may differ will frame the approach to drafting the whole SORP.
In addition, having an updated SORP-making body’s statement of drafting aims and principles will allow the SORP Committee to advise on any decisions or trade offs that may arise in the process and at the later drafting stage of the process.
The engagement strands reported back on principles and tiering on 14 May, and papers were then prepared and presented to the SORP Committee on 27 May. A copy of decisions reached and next steps forward will be published in a follow up report when minutes have been approved and distributed.
To allow the necessary time to draft the new SORP the combined reflection and problem-solving stages need to be completed by January 2022. After this stage closes, it is planned to hold a joint SORP Committee and SORP convenor meeting by the end of that month to settle the approach to drafting the SORP. The advisory SORP Committee will then go through all the proposed changes with the SORP-making body together with reviewing any changes needed to keep the SORP aligned with the new FRS102 standard.
Next steps, including new research
A comprehensive timeline and scheduling of the 15 topics for the reflection and problem-solving has been prepared by the SORP-making body and covers the rest of this year up to January 2022 (Attachment E below). This was approved by the SORP Committee at its meeting of May 2021. Any additional research provided by the engagement strands will also be reviewed and considered during this period.