• Read ‘The legacy question – what is wrong with accounting for legacies?’

Dealing with legacies is a complex and specialist area of law. When I read the relevant sections of the Charity SORP, I feel that I am reading what an accountant thinks about legacies rather than an authoritative account of how the legacy process works. We need to make sure that charity legacy professionals are involved with the process of developing the requirements of the Charity SORP.

The Charity SORP has a section, ‘Recognising income from legacies’ (5.29 to 5.37). In a few paragraphs this sets out the only directly applicable guidance on how legacy income should be accounted for.

What is certain is that more information is needed to set out how the legacy process works. This is especially so for those charities that do not have access to a charity legacy professional. For example, the Charity SORP:

• Assumes that the reader understands the legal process when a person leaves a gift in their will to a charity. For example, in England & Wales not every will goes through a probate process. But the current Charity SORP seems to suggest that it does.
• Makes no reference to how a charity may be aware of its entitlement to a legacy in England & Wales using a notification service such as Smee and Ford.
• Does not make reference to the difference between a pecuniary legacy and a residuary legacy.
• Does not refer to the different legal process for legacies in the various jurisdictions covered by the Charity SORP (England & Wales, Scotland, Northern Ireland and the Republic of Ireland). For example, in Scotland there is a process of legal ‘Confirmation’ for a will.

More information could be made available through the development of a Charity SORP Information Sheet on legacy income recognition. An information sheet is the authoritative view of the Charity SORP making body and its advisory SORP Committee but does not form part of the Charity SORP. It would allow the intricacies of the legacy process to be considered in more detail. This would be of particular benefit for smaller charities with limited knowledge of this area of law.

This is only one idea. But what is most important is ensuring there is any easy and accessible way for those preparing charity accounts to obtain succinct guidance about how the legacy process works in their jurisdiction.

Whenever there is a new iteration of the Charity SORP, as we are expecting shortly, it goes through a period of public consultation. This has to be a for a minimum period of three months. This consultation process is a meaningful one and will allow views to be expressed about the content of the new Charity SORP. This provides the perfect opportunity to raise the issues covered in this article. The more the need for reform is highlighted the more difficult it will be to ignore.

This is of special importance when the resources available to The Charity SORP making body are likely to be limited and when there will be a number of competing issues that will need to be addressed in the new Charity SORP. These competing issues include lease accounting and the recognition of income.

Could your charity respond to the consultation?

Let me finish where I began. I mentioned the Irish Question. Many of us will have lived through times that have made us realise, like Gladstone, that the Irish Question has no simple answers. Yet we have seen that where there is a will (forgive the pun when discussing legacies!) significant progress can still be made. A partial solution is better than no solution at all.

I hope that when facing the difficult question of improving accounting for legacy income we will not bury our heads in our hands but show a similar determination to Gladstone to make it better. We should not settle for a compromised status quo. We can begin to answer the ‘legacy question’.