accounting for "fundraising" in australia
DESCRIPTION
Report on “Defining and Accounting for Fundraising Income and Expenses” by Dr Ted Flack (co-authors Professor Myles McGregor-Lowndes, Dr Glenn Poole and Stephen Marsden). (Prepared for Australian audiences)TRANSCRIPT
Defining and Accounting for “Fundraising” Income and Expenses
McGregor-Lowndes M, Flack T, Marsden S, Poole G.
Demand for greater public accountability
• Regulation by “transparency” • ACNC Register - publication of
annual financial statements• Media interest in comparing
charities• Public demand for “ratios” as proxy
for “worthiness”
Gugerty, M. K. (2009). Signaling virtue: voluntary accountability programs among nonprofit organizations. Policy Sciences, 42(3), 243–273. Cordery, C. (2013). Regulating Small and Medium Charities: Does It Improve Transparency and Accountability? VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 24(3), 831–851.
Use of
“League Tables”
Rating Agencies
Rating Agencies
“The charities willing gave Choice their financial info…however… … info is structured in different ways, so that it becomes impossible to compare.”
(Choice 2008)
Summary of findings
• AFRs of 13 award-winning charities in 4 States
• No two charities reported fundraising in the same way
• In the 11 AFRs that did contain references to revenue transactions that could reasonably be identified as “fundraising”-– 45 different terms or combination of terms were used;
– 5 disclosed revenue from “Trusts/Foundations/Grants;
– 4 disclosed revenue from “Fundraising Appeals
– 4 disclosed revenue from “Bequests”
Effects -Non-comparability
“Corporate”“Bequests”“Masses donations”“Gifts in kind”“Op shop sales”
“Gross proceeds from donations and fundraising”
International comparisons
• Five comparable jurisdictions were examined(England and Wales, USA, Canada, Singapore and NZ)
– Four of the five have well documented problems with financial reporting of “fundraising”
(Aldrich, 2009; Breen, 2009; Connelly et al, 2013; Cordery, 2013; Froelich and Knoepfle, 1996, Morgan, 2011, 2013; Phillips, 2013)
• Australia has accounting standards that do not specifically address “fundraising” transactions
Lack of a definition of “fundraising”
State regulators use different definitions
QLD NSW ACT VIC TAS
Donations *1 *2
Membership X X X X
Bequests X X
Trusts & Fnd X X
Raffles X X X
CorporateSponsorship
X X
Sales of articles
X
Note 1. Except from Local Councils, Congregations, Common place of employment.Note 2. Except from a corporation
Multiple types of “fundraising” transactions
Sales of goods, Sale of services or transfers?
• Donations?• Fetes, Fairs, Stalls, Markets?• Charity Balls, Dinners, Auctions?• Opportunity shops, Merchandising?• Sponsorships, Cause-related marketing?• Trusts and Foundations?, • Grants from local councils?• Raffles, Bingo, Lotteries?• Bequests?
Alternative solutions?
• “By nature” - Revenue from – “sale of goods”– “provision of services”– “interest, royalties and dividends” (AASB 118)
– “contributions” (donations) (AASB1004)
• separate disclosure of expenses from sale of goods (AASB102)
- all other expenses as general expenses
• “By function” – Revenue from (para 99 of AASB101)
– “Fundraising”
• Direct costs + reasonable share of joint costs, or• Direct costs only
Joint cost allocation
• “reasonable share of costs” ?
= Direct costs + share of overheads
e.g. Rent, power, insurances, telephone, stationery, IT services, cleaning, etc?
- Share of Accounts Department costs?
- Portion of Receptionist’s time?
- Share of the costs of the annual report?
- Share of the costs of the membership newsletter?
Joint cost allocation
• Direct costs only method– Convert cash donors to in-kind
donors of direct costs
– Hire casual staff to key fundraising transactions
– Obtain in-kind sponsorships for direct costs
– Redirect service volunteers to assist with mailings
– Use all staff working bees
Findings
• The way in which fundraising is reported in the financial statements of fundraising charities in Australia makes their reports non-comparable.
• Any comparisons or “league tables” generated from published accounts (particularly accrossjurisdictions) are unreliable and likely to mislead users.
• In the absence of any detailed guidance, preparers tend to collect financial information about fundraising to suit their local State/Territory regulations.
Recommendations
• “Fundraising” should be treated as a “whole of entity” activity
• Major classess of fundraising income should be disclosed where material
• Cost of goods sold as a part of fundraising activities should be disclosed
• All other fundraising expenses should be disclosed as general expenses.
Questions?
Thank you