Charity reporting – The bigger picture
Posted on 14 September 2016
Today I’m writing a different type of blog. Up until now, I’ve been focussing on disseminating information and trying to offer support to charities trying to get their heads around the new reporting standards. In fact for nearly 6 months I’ve been working on this. Every day I get to talk to people from different charities. Some people have technical accounting questions; some just want a bit of assurance they are on the right track and some actually aren’t that happy and want their frustrations to be heard. That’s fine with me. That’s my job and I love it.
As we near the end of the first 6 months since the new reporting standards came into effect and as some charities realise – “oh dear, I’d better get on to this!”, we’ve seen an increase in communications to us and more people needing help and guidance. As the pressures of an impending deadline loom, I think it’s a good time to pause, and remember why we are doing this. Why are we, as a community, putting ourselves through this immense process of change which can be stressful and confusing at times? What is the end goal, what is the bigger picture?
The reason I am so enthusiastic and invested in the new reporting standards for charities, is that for me, it signifies that financial reporting for Charities in New Zealand is finally being given the attention it deserves. Back in 2008, I was doing my Honours degree in Accounting at Victoria University. I took a ‘History of Accounting’ paper, and in that course, I wrote an essay called “The History of Charity Financial Reporting”. This was an investigation into why we had ended up with such a mish-mash of accounting standards for charities. The crux of it was, when legislation was passed in 1908 and 1957 for the Incorporated Societies Act and Charitable Trusts Act, barely any consideration was given to the financial reporting of these types of entities. I looked back at the Parliamentary debates at this time. What was drafted in terms of accounting wasn’t even discussed.
In the late 2000s, a review of the financial reporting framework was underway, but it wasn’t completed until after the Charities Act 2005 had been passed. New Zealand used to operate its financial reporting under a principle of “Sector Neutrality” which meant that the same set of accounting standards applied for both profit-oriented and non-profit-oriented organisations. This was like trying to fit a square peg into a round hole. Concepts that work well in the for-profit world just don’t make sense for charitable organisations. For example, how on earth would you assign a “fair value” to your entire stock of donated clothes for your op shop. How would you assign a value to an historical building that is, for want of another word, priceless.
The not-for-profit reporting standards represent the value that New Zealand places on these types of organisations and for me, gives the not-for-profit sector the respect it deserves. The reporting standards provide a mechanism by which charities can “lift their game” in terms of governance and accountability. The Performance Report is an ideal way for charities to put their best foot forward and show potential donors, volunteers and other stakeholders the amazing work they achieve.
It’s about improving the quality of reporting and actually makes charities think about what they are trying to achieve and how they have gone about meeting those goals. Building trust and confidence in the Charities Register improves the quality of life for New Zealanders. The better charities operate, and the more funds and support they attract, the less strain on the Government, the more resources for everyone, not just those who are the recipients of charity.
This change is bigger than any one charity. It’s about the sector as a whole and the commitment we, as a community, have made to moving forward as a nation. So yes, in this first year, it might be hard and we are all still learning. But think about that university student in 20, 50 or 100 years time, and how their research will uncover a paradigm shift in the way New Zealand charities operate. Your charity is part of this movement, so be proud of yourself and what you are achieving. I certainly am.