Changes to charity auditing and reporting arrangements have been revealed.

The changes will see the threshold for auditing of accounts for large charities and group accounts rise from £1m to £1.5m.

In addition, the threshold for submitting accounts for lower income charities is rising from £250,000 to £500,000.

A raft of thresholds from smaller charities remain the same, including the £5,000 registration threshold.

The £10,000 threshold for submitting a statement in official publications and annual returns also remains, as does the £25,000 threshold for submitting annual reports.

However, the independent examination requirements will rise from £25,000 to £40,000 “in order to reduce burdens on the smallest charities”, says the government.

SORP Changes

The threshold changes have been announced by the Department for Culture, Media and Sport (DCMS) at the same time as the charity regulators for England and Wales, Scotland and Northern Ireland announce changes to the Statement of Recommended Practice: Accounting and Reporting by Charities (SORP).

This is the first major revision of the SORP for a decade.

This will see three new tiers created:

• Tier 1 – for charities with income up to £500,000
• Tier 2 – for charities with income between £500,000 - £15 million
• Tier 3 – for charities with income above £15 million

Also trustees annual report requirements have been refreshed with further guidance on how to report financial reserves and future plans.

“Areas of particular public and donor interest – including impact reporting, environmental, social and governance issues – now have dedicated sections, with associated guidance on reporting,” say the regulators.

The three charity regulators will work with professional advisory bodies “over the coming months” as the sector moves to the new framework.

A consultation over changes to the SORP took place earlier this year and attracted 150 responses from charities and associated professionals and independent bodies.

“Clear and transparent reporting is essential to maintaining public trust in charities,” said Charity Commission for England and Wales chief executive David Holdsworth.

“People want reassurance that their donations are being used effectively to support good causes. We hope the updated SORP helps charities achieve this by enabling them to communicate both their financial position and the impact of their work more effectively.”

He added: “As we move forward, we look forward to continuing conversations with charities across England and Wales, and we’re grateful to everyone who contributed to the consultation on the updated SORP.”

‘Prepare not panic’

The Charity Finance Group has urged charities “to prepare not panic” amid the changes.

It’s head of policy Richard Sagar said: “With the arrival of the new SORP, we anticipate that many charities will be worried about implementing the new requirements and, though we do welcome many of the measures the SORP Making Body introduced, we share the concerns that some will have.

“All charities following the SORP will be impacted by the changes, and charities at the bottom end of Tier 2 (£500,000 to £15m) will be particularly affected because of the scale of the changes for them.

“We also understand that organisations will not have long to prepare before implementation.

“We recognise that the SORP Making Body has committed to ongoing dialogue around the tiering levels, and we will continue to advocate for the tiers to be adjusted in line with the audit thresholds.

“Additionally, we will also be open to working with the SORP Making Body to help improve the development process in future years.”

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