NFP Reports Need To Satisfy Key Stakeholders- ICAA
Thursday, 19th June 2003 at 1:06 pm
A review by the Institute of Chartered Accountants in Australia (ICAA) has revealed the Not for Profit sector needs to adopt a tailored financial reporting framework that better reflects the activities they undertake.
Whilst meeting the requirements imposed by Federal and State legislation the ICAA review found the reports of most NFP organisations did not satisfy the needs of two of their key stakeholder groups, the donor and the funding provider.
The ICAA Convenor of the Not for Profit Review Group, Stewart Leslie says the detailed review of 22 reports highlights that NFPs can use their annual and financial reports to better effect. As it becomes more competitive for the donor and funding dollar, NFPs need to tell their story more effectively.
Following the review the ICAA has developed a ‘Checklist’ to assist NFPs prepare their annual reports in line with legislative requirements and public expectation for information and transparency.
Stuart Leslie says donors and funding providers need to know how much of the dollar they give to a NFP is spent meeting the aims and objectives of the organisation.
The Institute has called on NFPs to go further than they are legally required in preparing their Annual and Financial reports.
Stuart Leslie says NFPs need to better tell the story of their organisation using a combination of financial, non-financial and narrative in the one report.
As well, he says annual and financial reports need to explain what the NFP is trying to do, how it is going about it, whether it has achieved its objectives during the year and its plans for the future. It should also help the reader understand the organisational structure and activities of the NFP.
In relation to the information provided in annual reports the ICA review indicated that most focussed strongly on reporting developments, achievements, and significant changes in activities, usually in narrative form.
Leslie says that this is understandable, however the ICA believes a reader of the report would be better informed about the NFP if these reports paid more attention to a number of areas.
– providing an outline of the organisation’s objectives in more detail
than simply outlining the mission statement;
– explaining the NFP’s organisational structure and decision making
– a greater use of statistical information.
Commenting on the limited reporting of statistical information, he says a picture is worth a thousand words. Some of the annual reports the ICAA read exceeded 40 pages. Only a small number used a ‘highlights’ page to summarise significant events and achievements.
The ICAA recommends NFPs also develop key performance indicators to measure and report on the effectiveness of the NFP’s activities.