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Charity SORP 2015: Trustees Annual Report

Trustees should be aware and take note of the increased disclosures that are now required. charity

The new SORPS state that the Trustees Annual Report (TAR) must provide a fair, balanced and understandable review of the charity’s structure, legal purposes, objectives, activities, financial performance and position.

The 7 main headings that existed in the 2005 SORP are retained, however to improve the quality of the TAR certain changes have been brought in for all charities – regardless of size.

These relate to:

  • Reserves policy now needs to be explained and linked to the value of the reserves. Furthermore an explanation as to why reserves are held has to be given. If the trustees decide that holding reserves is in fact unnecessary the TAR needs to disclose the fact and provide their reasons.
  • If trustees’ number are greater than 50, then the old exemption which limited disclosure to a max of 50 has now been removed.

In addition for those charities with income in excess of £500,000 the following are some of the changes that will need to be reflected in the TAR for accounting periods that begin on or after 1/1/2015.

  • Additional risk disclosure, Trustees must identify the principal risks and uncertainties impacting on the charity and their plans and strategies to mitigate those risks.
  • Trustees need to disclose the charity’s  social investment policy basically identifying how its programme related investments contribute to the achievement of its charitable aims and objectives.
  • It must also detail the financial impact of significant events and significant charitable activities throughout the year.
  • In a new development Trustees in the Structure, Governance & Management section of the TAR need to provide the arrangements for setting pay and remuneration of the charities key management personnel and any benchmarks  or criteria used in this exercise.

Some of the disclosure changes such as the remuneration basis are going to cause concern amongst Trustees, serving to further fuel some of the negative commentary in the press re Executive pay. However charities must embrace the increased transparency that the new SORPs are aiming to bring about.

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