Throughout 2015, charities and not-for-profit organisations are having to incorporate some of the most significant changes in 10 years to the way they operate. The new SORP (Statement of Recommended Practice) arrangements introduced on 1 January have far reaching consequences for the sector, not least in meeting the new Trustees Reporting requirements.
So how are charities coping with the new regulations?
Eileen Houghton heads up the Not-for-Profit group at Sussex-based chartered accountants Carpenter Box, part of the MHA national association of independent accountants, and spoke to Queen Alexandra Hospital Home’s head of finance David Hood to get a closer insight:
Houghton: When preparing your trustees report, what do you think is the biggest challenge under the new SORP 2015 regulations?
Hood: The trustees report is vital to our charity, as we can show exactly what we have achieved and what our intentions are. The SORP changes should enhance our existing information and provide increased clarity for the users of the report. The new terms of ‘must, ‘should’ and ‘may’ indicate the important elements, and will provide a focus for information and give a clearer structure to the report. That said, whilst the changes are good, we still have to be mindful of producing too much information and losing the messages we are trying to communicate within the report.
Houghton: Do you have any concerns with any of these new requirements?
Hood: We currently adhere to many of the changes already and so the final implementation should not result in too much additional change. Our current reporting is very clear and to be compliant we are expecting only a few reporting layout changes. However, the new senior management personnel remuneration disclosures raise some concerns about how other staff internally may perceive the salary levels. The issue here is not whether the staff consider the senior team to be over/under paid, but whether it could cause unrest when pay structures are not understood between the skill levels of workers.
Houghton: Will you or have you taken professional advice in respect of the changes?
Hood: Yes, definitely, we have already discussed with our auditors. However, being the first to adopt new regulations means there are no comparisons that can be made with charities that have already gone through the process, so there is always a learning curve involved.
Houghton: Do you have all of the information you need to prepare your trustees report under the new regulations – is there a lot of additional information needed?
Hood: Having just signed off our December 2014 accounts, we were well aware of the changes to the legislation and how they may impact the 2014 accounts for the purpose of the 2015 comparatives. We have tried to make sure that anything needed in respect of changes in the 2015 accounts were also considered whilst doing the 2014 accounts. Planning is essential when there are new changes in legislation.
Houghton: What do you think will be the impact of the changes?
Hood: I believe there will be teething issues, but as always with charity accounts the idea is to make them as transparent as possible and provide a document that will give its readers, in our case future and existing residents and donors, the ability to see and understand exactly what we do, how it is funded and for the purpose of donors exactly how they are needed.