Charities Statement of Recommended Practice

Uptake and impact: an Irish perspective

Dr. Karen-Ann Dwyer, Dr. Erica Harris and Dr. Bríd Murphy examine the voluntary uptake of Charities SORP in Ireland’s vibrant nonprofit sector

With mandatory adoption of the Charities Statement of Recommended Practice (Charities SORP) now potentially on the horizon, it is an opportune time to examine the existing uptake and impact of this framework on Ireland’s nonprofit sector today.

By examining voluntary Charities SORP adoption ahead of its anticipated mandatory introduction, we can better understand the benefits of greater disclosure for charities.

Our findings suggest that Charities SORP adoption boosts funding critical to the survival of charities.

We examined the voluntary adoption of Charities SORP by Irish nonprofit organisations over a five-year period, from 2015 to 2020, as part of a wider study on the nonprofit sector in Ireland.

This study was conducted against the backdrop of the exponential rise in the activity and influence of nonprofits in recent years in almost every country in the world.

According to The Wheel—Ireland’s association of community and voluntary organisations, charities and social enterprises—there are close to 10,000 registered charities in Ireland alone, and a further 20,000-plus organisations in our wider nonprofit sector.

The sector has a combined annual turnover of over €14.5 billion, employs some 190,000 people and relies on the work of more than 50,000 volunteer board members and directors, and over 500,000 operational volunteers.

Legislative and reporting reform

The regulation of nonprofits and associated reporting frameworks varies dramatically from country to country.

The US operates a mandatory and detailed reporting system for nonprofits (Form 990), for example, while the nonprofit financial reporting system in Mexico is completely voluntary.

In Ireland, a system of regulation that is balanced and proportionate, but also responsive to the concerns of charities, funders, donors, beneficiaries, volunteers and the wider public, has evolved over the past decade.

Established in 2014, the Irish Charities Regulator (the Charities Regulator) plays a key role.

The Charities Regulator encourages greater accountability and seeks to protect against fraudulent abuse of charity status to enhance public trust, confidence and transparency in charities and their trustees.

The past decade has also seen increased legislative and reporting reform in Ireland’s nonprofit sector.

The Charities (Amendment) Act 2024 (the Amendment Act) was enacted in Ireland in July 2024 and amends sections of the Charities Act 2009.

The Amendment Act increases the financial reporting threshold, requiring incorporated and unincorporated charities with gross income or gross expenditure exceeding €250,000 to prepare an annual statement of account rather than a simplified income and expenditure account.

The Charities SORP provides reporting guidance for charity organisations.

The first Charities SORP was issued in 1988 by the Accounting Standards Board, the predecessor to the Financial Reporting Council.

The most recent Charities SORP was published in 2019 and prescribes additional disclosures beyond Financial Reporting Standard 102/105.

Nonprofits adopting Charities SORP must, for example, disclose restricted and unrestricted assets and a breakdown of expenses between programs and fundraising.

The purpose of these additional disclosures as set out in the Charities SORP is to provide “a high level of accountability and transparency to donors, funders, financial supporters and other stakeholders”.

Ireland has endured a number of scandals in recent years involving nonprofit organisations such as Bóthar, the Central Remedial Clinic, Console and the Peter McVerry Trust.

These scandals have damaged public confidence in the sector. In an effort to rebuild stakeholder trust, the Charities Regulator is encouraging adoption of the expanded reporting framework provided by Charities SORP.

Potential move to obligatory reporting

While adoption of the Charities SORP is mandatory for UK charities, adoption in Ireland to date has been on a voluntary basis.

The Minister of State with responsibility for Community Development and Charities has the power to introduce Charities SORP regulations. However, as of December 2024, Charities SORP remains “recommended” in Ireland.

Looking ahead, the provisions in the 2024 Amendment Act suggest that Charities SORP adoption may soon be a requirement for incorporated and unincorporated charities with gross income or gross expenditure of more than €250,000.

According to the Charities Regulator, the updated Charities SORP, or similar, is expected to be published later this year, potentially coming into effect from January 2026.

The regulator is encouraging charities operating as companies to publish unabridged accounts in the interim and contribute to the current public consultation on the updated Charities SORP, open until 20 June 2025, to help shape a standard that is clear, practical and supportive of the charity sector’s needs.

We examined the voluntary adoption of Charities SORP by Irish nonprofit organisations using data obtained in the Benefacts database, comprising 6,593 Irish nonprofit organisations across 12 industries over a five-year period, from 2015 to 2020.

On average, we found 14 percent of nonprofits voluntarily adopted Charities SORP over the course of the study’s timeframe, with adoption steadily increasing and more than doubling between 2015 and 2020.

The rise in adoption coincided with the commencement in 2016 of the Charities Regulator’s public consultation on draft charity reporting.

In addition, organisations with more assets, more employees and greater external oversight from regulators, auditors and funders, were more likely to adopt Charities SORP.

“WHILE SORP ADOPTION MAY INVOLVE SOME ADDITIONAL COSTS, OUR RESULTS REVEAL THAT IT ALSO BRINGS FINANCIAL BENEFITS, BY WAY OF INCREASED FUNDING SUPPORT FROM BOTH DONORS AND GOVERNMENT GRANTORS”

Sectors with the highest levels of adoption included international (51%), philanthropy/voluntarism (37%) and health (27%).

Meanwhile, our study found the industry with the lowest level of Charities SORP adoption to be local development/ housing, at just six percent. This is unsurprising given there is a separate Charities SORP for housing associations.

Adoption levels across counties varied significantly. Twenty-four percent of nonprofits in Dublin adopted Charities SORP, higher than the 14 percent national average.

Impact of Charities SORP in Ireland

Given recent scandals in the sector and the potential introduction of mandatory Charities SORP reporting, we wanted to conduct a study that would provide a clear picture of the impact of Charities SORP reporting in Ireland as it stands.

Counties surrounding Dublin (e.g. Louth, Meath, Kildare and Wicklow) reported adoption levels of 15 percent, also above the national average.

The counties with the lowest adoption rates were Carlow, Cavan, Clare, Laois, Mayo, Roscommon and Sligo at less than five percent.

Additionally, we found Charities SORP adoption was more likely when peer organisations in the same industry and county had already adopted Charities SORP.

Essential role of accountants

An essential part of Irish society, the charity sector is underpinned by public trust and confidence driven by transparency and accountability, writes Madeleine Delaney.

Accountants play an important role as trusted professional advisers to charities and are also often among the volunteers who take on additional responsibilities as charity trustees.

Accountants will be able to advise charities in relation to any changes that may apply to the preparation of financial statements under The Charities (Amendment) Act 2024.

As it stands, all charities in Ireland have a legal obligation to keep their record on the Register of Charities accurate and up-to-date, and to submit an annual return to us within ten months of their financial year-end.

Accountants can support charities in meeting these obligations. Some charities may also rely on and expect their accountant to file, or help them file, this report.

The Charities (Amendment) Act 2024 incorporates a series of revisions and updates to the Charities Act 2009, including provisions for greater financial transparency, which will be introduced on a phased basis.

It is our view that the preparation and publication of financial information demonstrating how money and resources in a charity have been spent, and the outcomes achieved, will greatly improve the information available to the public, donors, other funders and policy makers.

Accountants can help charities prepare for the introduction of these new regulations by demystifying the process and providing reassurance.

They can encourage the inclusion of as much information as possible in accounts, regardless of legal obligation, to help a charity tell its story.

Madeleine Delaney is Chief Executive of the Charities Regulator

Funding sources and funding effects

Irish nonprofits have a unique funding structure compared to other countries, attracting about five percent of their revenue from donors versus 42 percent from government sources.

In contrast, the majority of funding among US nonprofits is generated from program service revenues as well as individual and corporate donations.

Ultimately, higher funding was received by Irish organisations that have adopted Charities SORP.

While Charities SORP adoption may involve some additional costs, our results reveal that it also brings financial benefits, by way of increased funding support from both donors and government grantors.

This indicates that the potential benefits outweigh the costs of additional reporting and disclosure.

Moreover, we found that that the Irish organisations that adopted Charities SORP, while also spending more to advertise their mission, were rewarded with bigger donations.

What do these findings tell us?

The results of our study reveal important insights for Irish nonprofits and charity regulators in jurisdictions that have yet to establish financial reporting requirements or recommended practices.

Our results support the amendments proposed in the 2024 Charities (Amendment) Act, which may soon require larger Irish nonprofit organisations to adopt Charities SORP as standard.

Given the recent history of persistent charity scandals in Ireland, our results suggest that such increased reporting requirements may help to mitigate undesirable behaviours and consequences while increasing trust in the sector.

The Charities Regulator also welcomes the signing into law of the Charities (Amendment) Act 2024 as a means to help improve financial transparency in the sector and standardise the preparation of accounts.

The move is expected to improve consistency and transparency across the sector and make charity accounts easier to understand for donors, beneficiaries and the public alike.

Looking ahead, it will be particularly interesting to see whether charity scandals in Ireland will rise or fall following the proposed mandatory Charities SORP adoption.

Dr. Karen-Ann Dwyer, FCA, is Assistant Professor in Accounting at Dublin City University

Dr. Erica Harris, CPA, is Associate Professor in Accounting at Florida International University

Dr. Bríd Murphy, FCA, is Associate Professor in Accounting at Dublin City University