NPFs Need National Accounting Standards
4 June 2007 at 1:41 pm
Philanthropy Australia’s submission to the Review of Not for Profit Regulation in Victoria has called for national accounting standards for the Not for Profit sector to improve efficiency and transparency.
The submission says the absence of agreed standards and consistent reporting obligations means that Not for Profit organisations can define their costs in different ways, which may not accurately reflect their activities.
It says that this actively hampers the useful collection and aggregation of financial data for the sector, and makes accurate comparisons between organisations impossible; there is no way to assess the financial efficiency of an individual organisation, and there are no benchmarks of efficiency for the sector.
Philanthropy Australia says the current situation does not ensure transparency or assist in effectively monitoring the performance of NFP organisations. A lack of effective monitoring also leaves the sector vulnerable to fraud and deception.
The submission says the adoption of standard terminology would also make collection and analysis of data easy, and would assist grantmakers to assess the efficiency of individual organisations, streamlining the process for the grant- maker.
The submission points out that a lack of acceptable standards substantially increases the compliance costs for Not for Profits, particularly the large number which receive funding from more than one source.
Philanthropy Australia’s submission makes three recommendations:
1. That the Victorian Government implement the Standard Chart of Accounts and data dictionary for Not for Profit reporting developed by the Centre for Philanthropy and Nonprofit Studies at Queensland University of Technology, in association with the Queensland Treasury and adopted by the Queensland State Government across departments and agencies.
2. That the Victorian Government encourage the Australian Accounting Standards Board to develop appropriate accounting standards for the Not for Profit sector.
The Australian Accounting Standards Board (AASB) has adopted International Accounting Standards, with one series of sector-neutral standards applicable to both for-profit and Not for Profit entities. However, NFPs have very different characteristics to profit-making entities, including different objectives, stakeholders, budgetary considerations and operating environments. The same standards that are applied to businesses are not entirely suitable for NFP entities.
3. That the Victorian Government consider prioritising best practice knowledge management techniques for continuing understanding of the Not for Profit and philanthropic sectors.
Philanthropy Australia’s CEP Gina Anderson says adopting a standard chart of accounts would make significant progress towards streamlining accounting practices, giving guidance to Not for Profit organisations in the development and transparency of their financial statements. This in turn would assist funders, both private and government.
In September 2006, the Victorian Treasurer requested that the State Services Authority undertake a Review of Not-for-Profit Regulation. The Review is to examine the impact of government regulation and other reporting requirements on the Not for Profit sector. A final report with detailed findings and recommendations is due by 30 September 2007.