Standardised finance system promises to cut charity red tape

International Financial Reporting for Non-Profit Organisations, developed by Humentum and the Chartered Institute of Public Finance and Accountancy (CIPFA), was launched last week in Washington DC.

The organisations involved said the project aimed to bring clarity and consistency to the sector and reduce the burden for charities and funders in meeting multiple and conflicting financial reporting requirements.  The project’s objectives include setting a clear consistent benchmark of what good financial reporting looks like for NFPs, supporting greater harmonisation of funders’ financial reporting requirements to save time and administrative costs, and providing a basis for comparison between NFPs across jurisdictions.

David Gilchrist, professor at the University Western Australia business school, said the initiative would spark a debate about the need for a standardised system in Australia.

“We have a transaction-neutral set of accounting standards, which really means that they’re not designed for any particular sector,” Gilchrist told Pro Bono Australia.

“This project will reinforce the need for a set of accounting standards that are fit for purpose for the charitable and not-for-profit sector.”

Gilchrist said under the current system, it was often costly for charities to apply all the different accounting standards in financial reports, and the information in them often wasn’t helpful for charities or funders.

“Accounting standards often principally look at the financial aspects of the organisation, whereas a lot of stakeholders are more interested in effectiveness of the charity and not for profit as opposed to the financial management of that organisation,” he said.

To view the ProBono article in full, click here.

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