Regulators' Sorp consultation accused of being 'a response to headlines'

The training and publishing charity the Directory of Social Change says it doesn't read as 'a considered evolution of priority areas for the Sorp'

Sorp: consultation over
Sorp: consultation over

Too many of the proposals from the Charity Commission and the Office of the Scottish Charity Regulator to reform the Statement of Recommended Practice "read as a response to recent media headlines", the regulators have been told.

In May, the two bodies launched a research consultation, which closed yesterday, about the FRS 102 Financial Reporting Standard.

The responses to the consultation are expected to inform a review of the Sorp next year and a new version of the Sorp expected in 2019.

In its response to the consultation, the training and publishing charity the Directory of Social Change says that "most of the themes proposed by the regulators for consideration in the Sorp read as a response to recent media headlines, rather than as a considered evolution of priority areas for the Sorp".

It says the regulators need to do more to help the public access, read and understand charity accounts, "rather than assuming that extrapolating certain bits of information out of context will improve transparency".

The response says: "Too many of the regulatory suggestions are the wrong solution to the problem or fail to sufficiently understand what the problem is. If ‘the problem’ is the lack of public awareness about charity regulation and reporting, the solution is not to randomly increase regulatory requirements."

The DSC says the reintroduction of a key facts summary, which was scrapped in an earlier version of the Sorp, is "bizarre", and calls for a free helpline to be set up and run by the regulators to provide support and guidance to charities.

Another response to the consultation from the Charity Finance Group says that, in its current format, the Sorp is too long and needs to be based on "the principle of public interest" rather than shaped by recent media coverage.

It says: "If the Sorp is to be used to engage with the public, therefore the narrative side of the Sorp is more important in helping those with a limited understanding. Adding financial disclosures is not likely to improve understanding, as it assumes a level of knowledge that does not exist among the readership."

The reintroduction of a key facts summary is also opposed by the CFG, with its consultation response arguing that the summary would "give false assurances and comfort to the public" and therefore undermine long-term public confidence in the charity sector.

Its response calls for an end to the "three-year review cycle" of the Sorp to allow for any new changes to bed in, but supports the retention of the Sorp in principle.

The CFG response says there should be more consideration of the ways charities are reporting their impact outside the traditional publication of an annual report and financial statements.

"An increasing number of charities are compiling annual reviews, using social media to engage with supporters and trying to find innovative ways to demonstrate their impact," the response says.

"The Sorp-making bodies must consider what the role of the Sorp is in the midst of this change, and whether it is time to refocus the SORP as a consequence of these developments."

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