The charity sector is experiencing one of its most significant reporting shifts in a decade.
The new Statement of Recommended Practice (SORP) 2026, effective for accounting periods beginning on or after 1 January 2026, introduces a more proportionate, transparent and modern framework for how charities report their financial and non financial performance.
As the regulatory landscape evolves, procurement plays an increasingly strategic role in ensuring compliance, governance and operational resilience.
What Is SORP 2026?
SORP 2026 is the updated reporting standard charities must follow if they prepare accruals accounts. It aligns charity reporting with the latest revisions to FRS 102 (Financial Reporting Standard) incorporates feedback from regulators and the sector, and aims to improve clarity, accountability and proportionality.
Key Changes Charities Need to Know
1. A New Tiered Reporting Structure
SORP 2026 introduces a three tier system to ensure reporting reflects organisational size and complexity:
• Tier 1: Income up to £500,000 – simplified reporting
• Tier 2: £500,001 to £15m – more detailed disclosures
• Tier 3: Over £15m – the most comprehensive reporting, including mandatory ESG and impact disclosures
This proportional approach aims to reduce unnecessary administrative burden for smaller charities while ensuring larger organisations disclose the level of detail stakeholders expect.
2. Expanded Trustees’ Annual Report (TAR)SORP 2026 strengthens narrative reporting requirements:
• Clearer guidance on reserves, risk management and future plans
• Greater emphasis on sustainability and public benefit
• Mandatory ESG and impact reporting for Tier 3 charities, with Tier 1 and 2 encouraged to follow emerging best practice This shift signals a growing expectation for charities to demonstrate not only what they spend but the difference they make.
3. Modernised Income & Lease Accounting SORP 2026 aligns with updated FRS 102 rules:
• Most leases must be capitalised as right of use assets with corresponding liabilities
• A clearer framework for distinguishing exchange vs non exchange income, including grant classification
These updates require stronger contract visibility and coordination across finance, procurement, and service department.
4. Clearer Reporting for Provisions & Social Investments
Revised modules simplify how charities report provisions, contingencies and social
investments, making disclosures more consistent and easier to understand.
5. Reporting Simplification for Smaller Charities
In parallel with SORP 2026, charities will benefit from government approved threshold changes, including:
• Receipts and payments accounts allowed up to £500,000 (for non company charities)
• Independent examination threshold rising from £25,000 to £40,000
This will lower compliance burdens for small organisations-but only if internal processes are aligned.
What Charities Need to Do to Prepare
To get ready for SORP 2026, charities should begin preparing now in the following areas:
- Strengthen governance and narrative reporting
Ensure Trustees’ Annual Reports cover risk, reserves, ESG and forward plans. - Review contracts and leases
A complete, accurate contract register is essential for the new lease accounting requirements. - Improve data collection
SORP 2026 requires stronger evidence behind ESG and impact statements-much of which sits in the supply chain. - Align procurement with reporting requirements
Procurement policies, supplier onboarding and due diligence processes may need updating to support SORP compliant reporting. - Assess tier positioning and cost drivers
Charities near a reporting threshold should understand how spend patterns may impact their tier and reporting obligations.
How ERA Group Supports Charities Through SORP 2026
As specialist procurement consultants, ERA Group provides the governance, visibility and cost control foundations charities need to thrive under SORP 2026.
We ensure procurement frameworks align with the enhanced governance and reporting expectations built into the new TAR, including ethical sourcing, ESG due diligence and robust audit trails.
SORP 2026 represents a major evolution in charity reporting – demanding better governance, improved data quality and greater transparency. With procurement now central to demonstrating value, impact and risk management, charities that take early action will be best positioned to comply and to thrive.
ERA Group is ready to support you at every stage, from governance reform and contract visibility to ESG data collection and tier aligned cost optimisation.
Download the resource
