Charities SORP (FRS102)

What is Charities SORP?

Charities SORP is the Statement of Recommended Practice which provides guidance on how charities should prepare and present their financial statements in accordance with FRS102. It is issued by the Charity Commission for England and Wales, the Charity Commission for Northern Ireland and the Office of the Scottish Charity Regulator in their role as the joint SORP-making body, as recognised by the Financial Reporting Council. While it is not currently mandatory outside of the UK, it is widely accepted to be best practice for the charity sector and, as such, many Irish charities have chosen to adopt Charities SORP. The key principles underpinning Charities SORP are transparency and accountability.

Why apply Charities SORP?

  • It is best practice for charities
  • Openness
  • Transparency   
  • Accountability 
  • Enhanced reputation, trust and confidence           
  • Inspire confidence in funders and donors
  • Demonstrates a commitment to good governance

Challenges of applying Charities SORP

DisclosuresTrustee ReportAccounting system 
Charities SORP requires significant additional disclosures in the areas of reserves, sources of funding, analysis of expenditure, restrictions attaching to funding and staff costs. Trustee Report requires significantly greater detail than FRS102. To apply the spirit of Charities SORP requires full and frank disclosure of risks and risk management, challenges, future plans, achievements versus plans, governance practices and more.Accounting for transactions under Charities SORP can be significantly different compared to FRS102 and some accounting systems may not be capable of recording this accurately.
Knowledge and capacityAccounting policiesHistoric information 
Not all charities have the capacity or the knowledge within their organisation to devote the time and effort to become SORP compliant.  Equally many very experienced directors/trustees do not understand how to read/interpret SORP accounts.Accounting policies for certain classes of transaction vary substantially from FRS102. This has an impact on both recognition and the wording of accounting policies in the financial statements.Opening reserves at the start of the comparative period need to be analysed between restricted and unrestricted funds.  For some organisations it is not readily apparent what opening reserves comprise.

How can Forvis Mazars help?

The Forvis Mazars charity team has an in-depth working knowledge of Charities SORP and many years of experience in supporting our charity clients with both first-time adoption and with ongoing interpretation of Charities SORP. Below are some examples of how we can support you:

  • Perform an impact assessment
  • Prepare shadow financial statements
  • Train & upskill finance teams
  • Train directors/trustees to ensure they understand SORP accounts
  • Support and advice for in-house transition
  • Full transition to Charities SORP
  • In-depth SORP compliance review for organisations that currently apply SORP but may be concerned about the level of compliance 
  • Assist with tailoring your accounting policies
  • Ongoing technical advice post-transition
  • Assist with mapping nominal ledger codes for external and internal reporting