SORP made simple

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SORP made simple

• Mark Burrage
• Annabel Elliott

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Aims

• By the end of this session you will have an
  understanding of
• Key points about the Charities SORP including
• The format of charity financial statements
• Statement of Financial Activities
• Restricted and unrestricted funds
• Cost allocation

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Objectives of SORP

• Improve quality of financial reporting of
  charities
• Enhancing relevance, comparability and
  understandability
• Providing clarification, explanation and
  interpretation of accounting standards in the
  sector
• Assisting preparation of trustees annual report

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What does a set of accounts consist of?

• In general
• Trustees Annual Report
• Statement of Financial Activities (SoFA)
• Balance sheet
• Note to the accounts
• Auditors report

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Differences between company accounts and charity
accounts
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Fund accounting
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What are restricted funds?

• Restriction imposed by donor
• Restricted funds may be
• For a specified project
• For a specific geographical area
• Funds raised in an appeal

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What are unrestricted funds?

• Funds received for the charitable objects
• General donations
• General legacies
• Self-generated income from sales of goods or
  services
• Investment income

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What are designated funds?

• Unrestricted
• Earmarked by Trustees

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Reserves?

• Definition
• Purpose
• Reserves policy

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Trustees annual report

• 6 headings prescribed
• Reference and admin details
• Structure, governance and management
• Objectives and activities
• Achievements and performance
• Financial review
• Plans for future periods

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Statement of Financial Activities (SoFA)

• Gives details of the financial performance of the
  year
• Includes both income and expenditure account and
  statement of total recognised gains and losses
  (STRGL)
• Separate columns for restricted and unrestricted

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SoFA - key principles

• Activities, not generic type
• Link activity headings to charitable objects
• Link income to expenditure headings
• Explain in trustees report

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Income

• Incoming resources from generated funds
• Voluntary income
• Activities for generating funds
• Investment income
• Incoming resources from charitable activities
• Other incoming resources

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Expenditure

• Cost of generating funds
• Charitable activities
• Match headings under income and expenditure
• Governance costs
• Support costs
• do not show on face of SoFA
• analyse in notes as part of activity costs

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Support costs

• Allocate out to activities
• Analysis of total support costs in notes
• Amount or percentage of support costs allocated
  to each activity
• Accounting policies should also explain methods
  of cost allocation

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Allocation methods

• Common allocation methods
• Staff numbers
• Staff time
• Staff costs
• Number of clients/beneficiaries
• Space occupied

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Balance Sheet

• Snap shot of financial position
• Very similar to that of a company except
• Heritage Assets
• Investments
• Grant commitments
• Unusual to have share capital
• Funds

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Notes to the Accounts

• Provides further details to SoFA and the balance
  sheet
• Specific to charities
• Net assets analysis (restricted, unrestricted)
• Movement in funds must give details of
  different funds
• Also treatments of particular
• Income resources (e.g. legacies)
• Expenditure (e.g. irrecoverable VAT, support
  costs)
• Assets (capitalisation policy)

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Aims of SORP 2005

• It provides a framework that enables charities
  to explain what they aim to do, how they go about
  it and what they achieve. It does so in a way
  that pulls together narrative and financial
  reporting into a coherent package focused on
  activities undertaken
• Statement by the Charity Commission for England
  and Wales in SORP 2005

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CAF online accounts awards - 2009 Winners

• Top 100 fundraising charities
• 1st British Heart Foundation
• (http//www.bhf.org.uk/annualreview09/index.html)
• 2nd Cancer Research UK
• (http//www.cancerresearchuk.org)
• Charities with income over 2m
• 1st British Library
• (http//www.bl.uk/)
• 2nd The national Trust
• (http//www.nationaltrust.org.uk)

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2009 Winners (2)

• Charities with income between 500,000 2m
• 1st Charity Finance Directors Group
• (http//www.cfdg.org.uk/cfdg/cfdg.asp)
• 2nd Hilton in the Community Foundation
• (http//www.hilton-foundation.org.uk/)
• Charities with income between 100,000 499,999
• 1st Cecilys Fund
• (http//www.cecilysfund.org/)
• 2nd National Association for Gifted Children
• (http//www.nagcbritain.org.uk/about.php?id14)

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Further information

• SORP made simple
• Mark Burrage
• mark_at_sayervincent.co.uk
• Annabel Elliott
• annabel_at_sayervincent.co.uk
• 020 7841 6360