Grant makers call for accounting simplifications for smaller charities

Charity grant makers have called for the simplification of financial reporting for small charities ahead of the introduction of the new Charities Statement of recommended practice (SORP).

The findings form part of the Survey of Charitable Funders’ Views of Accounts prepared under the Charities SORP, published as part of the SORP Engagement Process.

The Charities SORP already includes a number of concessions for small charities – defined as those with an income of less than £500,000. For example, smaller organisations are not required to provide a cash flow statement and do not have to use the functional analysis of income and expenditure on the Statement of Financial Activities (SOFA).

However, the Association of Charitable Foundations (ACF), Scottish Grantmakers (SGM), and Philanthropy Ireland agreed that more could be done to ease the reporting burden.

According to the survey, six out of 10 (60 per cent) members agreed that they would “like to see more simplifications for smaller charities”. Almost half (49 per cent) also felt there was “unnecessary complexity”, making it “harder for grantmakers to use SORP accounts in their decisions”.

A further 48 per cent agreed or strongly agreed that “accounts produced under charity SORP are unnecessarily complex for those who need to read them”.

However, just one in 10 called for an entirely new reporting system for smaller charities, with the majority instead calling for simplifications to a single, all-encompassing SORP.

In total, the members said they spent an average time of 27 minutes reviewing Charity SORPs – indicating that grantmakers spend a “considerable time” reviewing SORP accounts received from applicants.

Commenting on the report, Max Rutherford, the head of policy at ACF and a member of the SORP Committee, said: “It’s important to hear foundations’ views on whether charity accounts are easy to understand and digest, given that they are one of their primary audiences.

“Nearly every funding decision will be directly informed by a charity’s accounts, and so it’s essential that every charity has the right sort of guidance to enable it to prepare accounts that present a clear and accurate picture of its past, present and likely future.

“I’m sure the findings from this research will be of real interest to those involved in the process of reviewing the Charities SORP in the year ahead. The SORP is a vital tool, and considering how to make it less complex, particularly for small charities, will be a vital consideration.”

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Posted in Charities.