accountability, financial reporting, standards and disclosure presentation by: dr ted...
TRANSCRIPT
Accountability, Financial Reporting, Standards and
Disclosure
Presentation by:Dr Ted Flack Julie-Anne Mee
State Manager Communications and Fundraising The Australian Centre of Philanthropy and
St Vincent de Paul Society Nonprofit Studies
School of Accountancy
Queensland University of Technology
Today?
Senate Economic Committee status
Standardisation and the Standard Chart of Accounts
The role of the Annual Report
Senate Economic Committee
Enquiry on disclosure
Submissions
Process/position/results
Standardisation best described by its benefitsΩ ConsistencyΩ ComparabilityΩ Sectoral coordinationΩ Communication and discussionΩ Better info for decision makersΩ Simpler reporting (by preparers)Ω AccountabilityΩ Robustness
Standardisation
Accounting Template
2002 – 2004: collation of data from Queensland government agencies about grants.2004 – 2006: collaborative development of a Standard Chart of Accounts (SCOA) for Queensland2nd – 3rd ¼ 2006: training and implementation of SCOA in QLD government funders and nonprofit recipient organisations1st – 2nd ¼ 2007: collation of data from New South Wales government agencies about grants and collaborative development of SCOA (using QLD as base platform)3rd ¼ 2007: training and implementation of SCOA in NSW funders and recipient organisations
2006 - 2007: discussions with Federal agencies with FaCSIA as lead agency.2007: discussions with Western Australian human services departments2007: participation in the Victorian Review of Not-for-Profit Regulation activities and reportLate 2007: initial discussions with Tasmanian, South Australian and New Zealand human services departmentsLate 2007: updated Queensland SCOA using learnings from New South Wales implementation
Accounting Template
Advantages of a Standard Chart of Accounts
Consistent and uniform reporting;True financial performance can be ascertained;Assists auditors in the annual audit;Clear guidelines for account names;Incoming treasurers and bookkeepers have a framework; andEnables benchmarking and developnment of KPI’s
Sample page in SCOAEXPENSES 6-0000
MYOB Account Number
SuggestedAccount Names Data Dictionary/Description of Account
IFRS Accounting Standards References
OtherComments
6-0000 Expenses Expenses are outflows or depletions of assets or incurrences of liabilities that result in decreases in equity other than those relating to equity. Expense accounts may elect to record "in kind" transactions and should have an equal and opposite Income account for the value for a nil result. Generally small to medium organisations will not recognise these items in their accounts.
Framework par 70(b)
6-0010 Accounting Fees
This account represents accounting and bookkeeping fees. It excludes audit fees (which is its own separate account). Includes GST, FBT and Financial Business advice.
6-0020 Advertising & Promotion
This account covers all advertising, marketing and promotion fees paid by nonprofits in the course of marketing, advertising and promotion of events and services, etc. It also includes all printing relating to promotional material.
6-0025 Agency Temp Staff
This account includes the costs of temporary staff employed for whatever reason from an agency. This account excludes consultancy staff.
6-0030 Amortisation Expense
Amortisation expense for the current year relating to intangible assets.
AASB 138.118(d)
Sample page in SCOA6-0040 Assets
Purchased <$5,000
The amount of $5,000 is arbitrary; the limit may be set by the organisation. This account shows all assets (including computers) purchased by the nonprofit organisation that have an individual value of less than $5,000 each. Any asset above $5,000 is to be capitalised and shown as an asset in the Balance Sheet. Some items that are expensed may still need to be recorded in the Fixed Asset Register.
6-0050 Audit Fees This account includes fees associated with an audit of financial statements. It excludes accounting or bookkeeping fees (these are included in accounting fees above).
AASB 101.AUS 126(a)
6-0060 Auspicing Fees
This account represents fees paid by a non-profit organisation to another organisation for providing auspicing support. The auspicing organisation signs agreements, carries financial risk and legal responsibility for activities of the auspiced organisation. It also includes internal auspicing fees. These are true auspicing rather than recoupment of administrative and project expenses.
6-0070 Bank Charges
This account represents all charges associated with the various bank accounts held by a nonprofit.* It includes State Government Tax, account keeping fees, EFTPOS fees, etc. * It excludes credit card fees (which are recorded in a separate account).
6-0080 Bad Debts These are debts which have been written off due to non-recovery.
Next Phases
National approachFunding acquittals align with standardsAccounting and auditing profession engage with nonprofit sectorAppropriate financial literacy training for nonprofit boards and staff rolls outResearch is supported about impact of nonprofit financial performance (eg benchmarking and KPIs)
In Australia – sector or transaction neutrality - AASB
Financial Reporting Standards
Part 2
Senate Inquiry into disclosure regimes for charities and not-for-profit organisations.
To provide interested parties with the ability to obtain useable information about the operations and finances of
nonprofit organisations
What is the underlying policy objective of the Inquiry?
What information do interested parties want?
Types of annual report disclosures nominated and valued by stakeholders in stratified sample of Australian public fundraising charities (in descending order)
Information preferences of stakeholders in the stratified sample (in descending order)
Representatives of Stakeholder Groups
M B M E P V D G R P M P F
Total numbers of stakeholders 8 11 19 6 5 10 6 2 1 3 3 2 2 79
Financial statements 8 7 17 3 6 5 2 1 3 3 2 2 59
Board reports (inc. Office bearers' reports) 8 7 19 6 1 7 5 53
Description of activities 8 9 3 1 7 4 32
Profile of board members 5 7 3 1 4 20
Progress against plans 2 6 6 5 19
Recognition of volunteers, donors and pioneers 5 7 1 3 1 1 18
Human interest stories 4 2 6 1 4 1 18
Financial health trends (or treasurer's commentary) 9 5 2 16
Stakeholder preferences
Although a large majority of stakeholders said they wanted to be provided with financial statements, most also said they did not use them or did not understand them. The research found that the value of financial statement lies in their symbolic value in that they signal that proper financial oversight is in place.Stakeholders who have a personal interest in these organisations tend to want to be provided with “soft” information about the organisation. Preferred disclosures include board reports, descriptions of activities, profiles of board members and human interest stories about the organisation.
How “useable” is the financial information?
“Inside” stakeholders can command further information - membership rights– Annual General Meetings– Elections of office bearers– Day-to-day involvement– Donor rights?
Outside stakeholders need standardised information– Audited financial statements– Sector-specific accounting standards– Standard chart of accounts
Size and “publicness” matter!
Small npos that are really only the concern of the participants, should not be over regulated.Large npos, that rely on the support of the general public, should be required to be publicly accountable
One way to organise these ideas
Financial reportingClass of organisation
Regulatory approach Regulation
Small private not-for-profits
a simple legal form suitable for regulation by the participants
National model Associations Incorporation Act with minimum reporting requirements
Small public not-for-profits
Stakeholder regulation Level 1 differential public reporting requirements under existing forms of incorporation with increased ‘subscribing member’ rights
Large private not-for-profits
Stakeholder regulation Level 2 differential reporting under existing forms of incorporation
Large public not-for-profits
Public accountability Public disclosure of level 2 differential reporting under existing forms of incorporation
Non-financial reporting
Annual reports published on the web– Regulate for minimum disclosures
• Objectives, achievements and plans• Office bearers’ reports
– Encourage high quality (industry awards etc)
Any Questions ???
Thank You !!!