What is the Statement of Recommended Practice (SORP) for charities?

Evolution of SORP in Ireland

• SORP originated in the UK in 1988 and has evolved significantly over time to meet stakeholder needs, becoming more detailed and charity-specific.
• SORP is not yet mandatory in Ireland but likely will be once the Charities Act is amended. Currently only about 14% of Irish charities voluntarily file SORP accounts.
• Research on SORP adoption found the main barriers are cost, resources, system limitations and it not being mandatory. But the majority of users found SORP beneficial for governance and stakeholder accountability.
• The Charities Regulator supports SORP to increase transparency and is consulting on making it mandatory above a threshold of €250,000.
• This is expected from 1 January 2025.

What is the consequences of non-compliance of SORP?

• Initially there may be no direct penalties for non-filing, but funders and stakeholders may require SORP accounts.
• Longer term, failure to comply could lead to scrutiny and action from the Charities Regulator, as well as reputational damage.
• Indirectly, non-compliance could impact funding, partnerships and public trust if charities are not transparent.
• Some level of SORP compliance would be advisable even before it becomes mandatory. Support is available to transition.

5 Key Takeaways:

1. The Statement of Recommended Practice (SORP) for charities in Ireland provides guidance on best practice in financial reporting for charities. While not currently mandatory, many charities voluntarily adopt SORP to demonstrate financial accountability and transparency.
2. The main principles of SORP are:
   • Improving the quality of financial reporting
   • Enhancing the relevance, comparability and clarity of information presented
   • Providing guidance on applying accounting standards in the charity sector
3. SORP requires additional disclosures beyond standard accounting requirements, such as a Trustees’ Report and more detailed breakdowns of income and expenditures.
4. Compliance with SORP is expected to become mandatory in Ireland for charities above a certain size threshold, once the Charities (Amendment) Bill is passed into law. This is anticipated to be for financial years beginning 1 January 2025 onwards.
5. Charities should start preparing now by reviewing their accounting policies, systems and reporting to identify any gaps in SORP compliance. Support is available from umbrella groups, accountancy bodies and training providers.

Read More: Ensuring Compliance and Transparency in Charity Accounting with XERO in Ireland

In Summary

The SORP is an important development to increase financial transparency and accountability in the charity sector. Irish charities should start preparing now, reviewing systems and policies to ensure they can comply when it becomes mandatory. Support is available to transition to SORP-compliant reporting.