Charities and non-profit organisations based in Ireland could soon face sector-specific mandatory guidelines on how accounts and financial reports are prepared and submitted under proposals being considered in the Oireachtas.
The Charities (Amendment) Bill 2023, which is expected to be passed into law by the end of 2024, is set to make a number of significant changes to regulations for charitable organisations in Ireland. Included in the proposals are changes to the definition and duties of charity trustees, as well as a raft of new powers for the Charities Regulator, especially around reporting and registration requirements.
The Bill also outlines changes to the financial reporting regime for charities. Significantly, hundreds of organisations will be lifted out of the compulsory reporting regime altogether, as the gross income and expenditure threshold for having to file a full set of accounts each year will increase from €100,000 to €250,000. This will bring the charitable sector in line with the Companies Act 2014.
The second major proposal relating to financial reporting, however, outlines that the government is in favour of a Statement of Recommended Practice (SORP) being introduced for the not-for-profit sector. This would introduce new standardised accounting requirements for all organisations that pass the reporting threshold.
What is a SORP?
A SORP is a set of accounting guidelines that goes above and beyond normal accounting standards. A key difference is that a SORP is sector-specific, and so sets out reporting requirements that reflect the unique financial characteristics of an industry. These requirements are layered on top of usual accounting standards.
For example, a SORP was introduced for the charity sector in the UK in 2005. It places a number of additional obligations on UK-based charities, including:
- More detailed income statements, including more in-depth analysis of different income streams such as donations, charitable and trading activities.
- More in-depth analysis of costs as per above.
- Specific guidance for the reporting and treatment of different funds, with charities required to distinguish between restricted and unrestricted funds, endowment funds and more in their reporting. This is to provide oversight of how funds are used.
- Directors’ or trustees’ reports that accompany financial statements must include a statement of the organisation’s objectives and aims, along with an evaluation of the activities it undertakes and their performance over the accounting period in lieu of those objectives.
Many charities and non-profit organisations in Ireland are already familiar with the UK charity sector SORP, and have either adopted it because they work crossborder in Northern Ireland and/or the rest of the UK, or have voluntarily extended it to the rest of their operations.
There is no clear indication as yet that an Irish version, if and when it is introduced, will follow the UK SORP in detail. But it is likely that charities will be obliged to disclose information in far greater detail than has been previously required in Irish law, and in a very clear and fixed format.
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