Articles

By Aedon.Accounting CEO Paul Foden

For a full version of this article, please visit our AccountingWEB Industry Insights page.

Preface

The SORP committee has unintentionally created a compliance framework that feels overwhelming for many in the charity sector. My discussions with charities reveal a troubling pattern: most are unaware of the specifics of the SORP, and those who are often pass the responsibility to their accountants at year-end.

Professional accountants, in turn, frequently find this work tiresome and tedious, offering little value to their clients. The financial impact is staggering, with SORP compliance costing large charities around £5,000 each per year. This translates to a total sector-wide cost of over £500 million annually—money that could be far better spent furthering charitable missions.

I include the SORP 2025 Revision Timetable below. The chilling aspect for charities is that there is only 3 months after publication in which to assimilate the changes before they must be applied in January 2026.

As someone with a career spanning accounting, consulting, and entrepreneurship, I approached the SORP from a fresh perspective while developing Aedon.Charities. Over the past nine months, I’ve uncovered significant challenges in making sense of the SORP due to its lack of resources, limited guidance, and overwhelming complexity.

While these suggestions come late in the 2025 SORP revision process, I believe they can still provoke valuable discussion. I am submitting this paper to the SORP committee and am happy to assist with any redrafting efforts.

Introduction

The 2025 SORP revision involves a monumental task of updating technical requirements to align with evolving accounting standards. While these adjustments are critical, my focus is on making the SORP more accessible and manageable for charity finance professionals.

The current framework is daunting, particularly for small charities with limited expertise and resources. My suggestions aim to improve usability and encourage constructive debate to ensure the SORP works for everyone.

1. Assess the Cost of Compliance

The UK could take inspiration from the U.S. Paperwork Reduction Act, which requires agencies to evaluate the costs of compliance. The Charity Commission should undertake a similar analysis to determine whether the SORP’s benefits justify its significant financial burden on the sector.

2. Cater to the Audience’s Skill Level

The SORP’s current language assumes a level of accounting expertise that many charity staff and volunteers do not possess. Simplifying the wording and improving clarity would make the document more accessible to a broader audience.

3. Create Separate Versions for Small and Large Charities

Over 90% of charities are small, yet they are handed the same lengthy document as larger organisations. A condensed version tailored to smaller charities would significantly reduce their compliance burden.

4. Restructure the SORP

The SORP should guide readers to the sections most relevant to their specific needs. For example, core modules for large charities could precede explanations of key reports such as the Trustees’ Report, SoFA, and Balance Sheet.

5. Standardise the Use of “Activity”

The term “Activity” is used inconsistently throughout the SORP. It should be reserved for its specific definition in the Trustees’ Report, referring exclusively to charitable objectives, not support, governance, or fundraising activities.

6. Separate Governance and Support Costs from Charitable Activities

Allocating governance and support costs to charitable activities creates a misleading picture of how donations are spent. These costs should remain distinct to provide a clearer understanding of a charity’s expenditure.

7. Add an Index to the Trustees’ Report

The Trustees’ Report is one of the most effective sections of the SORP. Adding an index that distinguishes requirements for small and large charities would make it even more user-friendly.

8. Clarify Fund Trial Balances

Each fund should generate its own Trial Balance, yet the SORP does not explicitly state this. Clear guidance on fund accounting would simplify year-end processes for both charities and their auditors.

9. Rename the Statement of Financial Activities

The term “Statement of Financial Activities” is confusing and misuses the word “Activity.” A more appropriate title, such as “Income and Expenditure Report,” would better reflect its purpose.

10. Ensure Consistency in Terminology

The SoFA and Balance Sheet currently use inconsistent terms for similar concepts, such as “Reconciliation of Funds” versus “The Funds of the Charity.” Aligning these terms would reduce confusion and errors.

11. Use Classes for SoFA and Balance Sheet Notes

Reclassifying notes as “Classes” or “Categories” would simplify compliance and align the SORP with a logical chart of accounts.

12. Provide a Model Multi-Dimensional Chart of Accounts

A model chart of accounts, incorporating examples from the SORP, would be a practical tool for charities. Treating funds and activities as additional dimensions would streamline compliance.

13. Reclassify Transfers Between Funds

Transfers between funds are balance sheet transactions and should not appear in the SoFA. This change would enhance the clarity and accuracy of financial reporting.

14. Clarify Fixed Asset Codes

The SORP should provide clear guidance on nominal codes for fixed assets, particularly for compliance with the Cash Flow Statement.

15. Address Losses on Asset Disposals

While gains on fixed asset disposals are categorised under A5 Other Income, the SORP does not specify where losses should be recorded. Clear guidance is needed.

16. Revise the SoFA

16.1 Cosmetic Changes

The SoFA’s layout should be improved by removing gridlines, using title case, and ensuring sub-totals are clearly labelled.

16.2 Substantive Changes

Significant revisions, such as renaming sections and reclassifying transfers, would make the SoFA more intuitive. (Our article published on AccountingWEB’s Industry Insights page contains a revised table for details.)

17. Revamp the Balance Sheet

The Balance Sheet should align with the SoFA in its use of fund columns and terminology. Structural and cosmetic improvements, as shown in the accompanying table, would enhance usability.

18. Simplify the Cash Flow Statement

Mapping the chart of accounts to the Cash Flow Statement would make this section more accessible, especially for non-accountants.

19. Maintain a List of SORP-Compliant Software

The Charity Commission could publish a list of verified software, similar to HMRC’s VAT-compliant software registry, to help charities select appropriate tools.

20. Introduce SORP Accreditation

A professional accreditation system would allow charities to identify experts in SORP compliance, ensuring they receive reliable advice.

Final Thoughts

Simplifying the SORP is not just a technical necessity—it’s a moral imperative. By reducing complexity and compliance costs, the sector can redirect resources to its core mission of making a difference.

💡For a full version of this article, please visit our AccountingWEB Industry Insights page.

💡 Learn more and share your feedback at Aedon.Charities

📩 Have suggestions? Email me directly at paul@aedon.co

💡Learn more about our work on the Charity SORP on our dedicated SORP page.