Keeping your Charity on the Right Track: SORP compliance

We have worked together with our Charity and Not for Profit colleagues within MHA to create a 12-month guide to better governance. For month 3 of our Keeping your Charity on the Right Track series, we will focus on internal reporting versus Charity SORP compliance and why it is important to understand the differences.

Month 3: Does Your Finance Function Allow for Effective Financial Reporting – SORP Compliance

Charities need to manage their finances so they can keep abreast of their on-going financial position. This means producing timely, accurate and understandable financial information. However, charities also need to prepare annual statutory accounts which are compliant with charity law. In particular, this means complying with the Statement of Recommended Practice for Charities (Charity SORP). These two objectives can sometimes be at odds with each other.

Checklist for month 3:

  • Speak to your auditor: They will have a unique perspective on the extent your financial systems adhere to the Charity SORP and because they work with similar organisations they may be able to advise pragmatic ways of bringing the systems in line.
  • Understand the differences: There are situations where it may be beneficial to have differences between the statutory accounts and the numbers reported internally. If it is decided that internal information should deviate from SORP policies, the decisions should be recorded and made collectively.
  • Understand the work involved: Although it may be attractive to have fully SORP compliant reporting throughout the year, it may not be practical with the resources available. Some numbers may require third-party input which could incur additional cost.
  • Consider if other stakeholders need to be informed: If there are other users of your internal financial information who may be confused by differences between statutory and management accounts, consider proactively discussing differences with them.
  • Regularly review the position: Consider revisiting the position in regular intervals (perhaps annually). This will keep new Trustees abreast and ensure that the internal information adapts to the changing needs of the organisation.
Read month 3


If you missed them you can also read month 1 (Is your Board Effective?) and month 2 (Reporting to the Board) in the series.

If you have any questions arising from this article or would like to speak to a member of our team about how we can help, please contact us on 01903 234094.