The current consultation on a proposed new accounts framework for the charity sector does not go far enough and should be extended, according to a preliminary assessment by the group of experts set up to review the charities Statement of Recommended Practice (Sorp) exposure draft (ED).
The proposed changes have been developed by the Charity Commission and Office of the Scottish Charity Regulator in response to the release of the FRS 102 financial reporting standard and are intended to make charity accounts more useful and relevant. The consultation on the Sorp ED opened on 8 July and will close on 4 November 2013.
In its preliminary response, the Shadow Sorp Working Party (SSWP) says that further clarification is needed on a number of key issues, stating that 'in many areas, an opportunity has been missed to properly update, enhance and clarify guidance and requirements.'
Don Bawtree, head of charities at BDO LLP and chair of the SSWP, said: 'The SSWP believes that there are certain aspects of the proposed new Sorp that need careful additional consideration and in some cases, wider or more extensive consultation. The Sorp ED often attempts to justify certain accounting treatments which are perhaps popular with the sector or representative of a long-standing practice but which have no substantive basis in the new accounting framework.'
The SSWP, which is an independent cross sector group of charity executive staff, advisers, and trustees, has identified several areas where it says this is particularly true. These include principles of income recognition in respect of legacies; the treatment of volunteers and donated shop stock; the Statement of Financial Activities (SOFA) columnar presentation; the rationale for the treatment of endowment funds; and the definition and presentation of some restricted funds. It also has concerns over the rules for smaller charities, and what charities disclose about reserves.
The SSWP says it will be commenting formally on these areas but would welcome further contributions from interested parties. Any feedback should be directed to [email protected]
