January is of course the time of year for looking forward and thinking through what the coming year has in store.
We asked a number of our specialists for their views on what charities should expect in 2023. Here’s what they had to say:
SV partner Jonathan Orchard commented ‘Permacrisis was word of the year for 2022, and given that by definition a permacrisis extends for a long period of time, one can safely assume we will face similar levels of uncertainty in 2023. Much of the guidance we issued last year therefore still applies including the importance of the concepts for building resilience and more specifically on managing financial uncertainty.’
Additional uncertainty looms on the horizon due to the end of the energy support in March 2023.
What are the key challenges for charities from a governance perspective? Judith Miller, our governance expert, commented that the Charity Code of Governance had prompted many charities to review their governance processes and that many had made improvements in this area. The focus for 2023 should move more towards the quality of governance and the softer aspects of the Code. Does the board reflect a diverse range of views, are all those views heard, do they all contribute to decision-making? Linked to governance quality is the practical format of board and committee meetings going forwards. How to balance the quality of discussion and intangible benefits of meeting in person with the convenience of online meetings?
Finance directors will be relieved to hear that no new accounting changes are on the immediate horizon. Jo Pittman, SV audit partner and member of the SORP committee commented that the next iteration of the Charities SORP will be effective from January 2025 at the earliest and so discussions on that are on-going. If you want an advance steer as to what the updated SORP might cover then see Jo’s blog from last year.
The SORP though is not immune from changes in the wider accounting standards (specifically FRS 102). An exposure draft on changes to FRS102 has just been released for consultation. The biggest change for charities is likely to be focus on lease accounting and a move to bring operating leases (for property, vehicles etc) on to the balance sheet.
Arlene Clapham – SV’s risk and assurance manager – reflected on the key risks that should be featuring on charity internal audit plans. The tight recruitment market is placing an ever increasing focus on talent management. Are you doing enough to keep the good people that you have? And charities should be walking the walk when it comes to environmental sustainability. This cuts across all of a charity’s operations including how it delivers its services, procurement and relationships with third party suppliers, investment decisions and property management. We are encouraging our clients to include this on their audit plan.
Arlene also flagged how economic downturns result in greater motivations for fraud and the on-going need for charities to understand its fraud risks.
And finally on taxation. After the political to-ing and fro-ing in 2022 are we in for a period of relative calm in the world of tax? Ross Palmer, one of our senior tax managers, thinks we probably are. But reflecting on recent conversations he’s had with clients, he is expecting charities to come to final decisions around the structure of hybrid working. The Office for Tax Simplification released their final report on hybrid and distance working in December 2022, which contained a number of recommendations regarding the challenges and complexities of hybrid and distance working. It is up to the Government to decide whether it takes any of these forward, but it could be an area to keep an eye on for developments.
And on a positive note, there is a challenge in the pipeline to HMRC’s policy that the charity zero rating relief for advertising does not apply to adverts on social media. If successful this could have significant financial benefit for organisations who advertise on social media and are unable to reclaim the VAT incurred.