Trustees’ Week is a good moment to look at the part of the annual report you are most likely to read and sign: the trustees’ annual report. The updated Charities SORP has largely rewritten it. The aim is to help trustees understand what they need to say, and to link the narrative more closely to the numbers in the accounts.
In this blog, Michael Jones, Partner at Bevan Buckland, explains when the new requirements apply, what changes for every charity and for larger ones, and what trustees can do now to prepare.
When Does It Apply?
The new SORP applies to reporting periods beginning on or after 1 January 2026. For a charity with a December year-end, that means the year ending 31 December 2026.
What Are the Tiers?
The report’s requirements now depend on your gross income:
- Tier 1: not more than £500,000
- Tier 2: above £500,000 and not more than £15 million
- Tier 3: above £15 million
Each tier builds on the one below. Tier 1 charities are also encouraged to include tier 2 or 3 information where it would be useful to readers.
What Changes for Every Charity
These four changes apply to charities of every size:
- Reserves: every charity must explain its reserves policy, the amount held and why. It must also compare the amount with its policy and, where relevant, explain what it is doing to close any gap. Material designated or committed funds, and when they are likely to be spent, must be explained. The reserves figure must agree to the accounts, with a reconciliation where that isn’t obvious. The definition of reserves has also been updated to refer to leased assets and lease liabilities.
- Going concern: if a charity has no reserves, or negative net assets, it must explain why it is still a going concern. Where there are material uncertainties, the report must explain them. This is now a firm requirement rather than a “should”.
- Plans for the future: all charities must summarise their plans, and the SORP suggests considering reserves and going concern when doing so.
- Volunteers: all charities must explain the scale and nature of what different volunteer roles do and the input they provide. This was previously a larger-charity requirement in the report, so smaller charities will notice it.
What Changes for Tier 2 and 3 Charities
The report must explain the impact the charity is making, including the long-term effect on beneficiaries and society. To help, the SORP sets five questions that trustees must consider and answer in the report (paragraph 1.24 of Module 1):
- What aims and objectives have trustees set for the charity this reporting period and how has the charity performed against the stated aims and objectives?
- What significant activities does the charity undertake (including its main programmes, projects or services provided) and how do these contribute to the achievement of the charity’s stated aims and objectives?
- What are the changes or differences the charity seeks to make through its activities?
- What are the charity’s strategies for achieving its stated aims and objectives?
- What criteria or measures does the charity use to assess success in the reporting period?
These questions are there to help trustees decide what to say. They are not a checklist, and trustees can include other information too.
Other changes for tier 2 and 3 charities:
- Risks: principal risks must now expressly include environmental and cyber risks.
- Legacies: where material legacy income is recognised before the money is received, the report must explain the effect of that timing.
- Volunteers: the SORP expects the number of volunteers, and hours or full-time equivalents where practicable.
- Sustainability: tier 1 and 2 charities may explain how they respond to environmental, governance and social matters, while tier 3 charities must.
What About Tier 1 Charities?
Tier 1 charities don’t have the five questions. Instead, the SORP asks trustees to consider two questions when summarising the charity’s main achievements (paragraph 1.27 of Module 1):
- In what way has the charity’s work made a difference to the circumstances of its beneficiaries?
- Has the charity’s work provided any wider benefits to society as a whole?
For tier 1 charities, these are questions trustees should consider rather than ones they must answer. The SORP adds that other relevant information can be included, and suggests that infographics, statistics and beneficiary or volunteer testimonials may help communicate achievements.
Likely Impact for Trustees
The SORP-making body expects most of this information to be available to trustees already, and describes the new requirements as proportionate. Our view is that the practical effects will be tighter links between narrative and numbers, more trustee input, a heavier first year and earlier data gathering.
Reserves, going concern, plans and activity spend must all agree to, and be consistent with, the accounts. Trustees must approve the final text, and the reserves, going concern and plans sections need their judgement rather than just a finance team’s drafting. For tier 2 and 3 charities, the five questions are a good starting point for that conversation.
Expect the first report under the new SORP to take longer, particularly for tier 1 charities meeting requirements that are new to them. Volunteer information, impact measures and risk assessments are easier to collect during the year than at the end of it, so it helps to start gathering them earlier.
What to Do Now
It is worth working through the following:
- Confirm which tier you fall into
- Check that you have a current reserves policy and can compare your reserves to it
- Make sure your going concern assessment and your plans for the future tell a consistent story
- Start recording volunteer numbers and roles
- Review your risk register for cyber and environmental risks
- Compare last year’s report with the new requirements to see where the gaps are
- If you’re in tier 2 or 3, try answering the five questions now and see where the evidence is thin
How We Can Help
If you would like to talk any of this through, Michael and our charity team will be happy to help. Please get in touch by emailing mail@bevanbuckland.co.uk or calling 01792 410100 to find out more.
