Finance: Sorp requirements 'don't make sense' for smaller charities

The new Sorp contains elements that many charities cannot comply with, according to a leading sector accountant.

Peter Gotham, chairman of the Institute of Chartered Accountants of England and Wales' charities group, said even large charities were having difficulty meeting the new reporting demands, introduced in April.

"There are many requirements that can't be effectively adhered to by smaller charities - those with incomes below £1m or possibly even £5m," he said. "The Charity Commission is increasing the expectations on charities when it is apparent that many are not compliant. Over-regulation is detracting from the ability of finance volunteers to concentrate on the key issues."

Gotham highlighted the Sorp's "functional analysis", including the costs of generating funds, charitable activity and governance, as a real problem for smaller charities to comply with.

"If you want to calculate the cost of generating funds you need to say how much of a particular staff member's time was spent on generating voluntary income," he said. "For smaller charities, this could often be just a figure drawn from the air.

"I'm not saying there shouldn't be an audit for smaller charities, but the Sorp's more sophisticated requirements don't make sense for them."

But Andrew Hind, chief executive of the Charity Commission, said the regulator was lifting unnecessary red tape from charities.

"We are committed to concentrating our engagement with charities on where it is most needed," he said. "In the future, we will only ask for information that we need, work with other regulators to standardise requirements and increase thresholds to minimise the regulatory burden for smaller charities."

- See Focus Finance and Governance, page 21.

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