Imagine trying to do your job without the Charities SORP. At first you might be tempted to relish the freedom? But globally, non-profit organisations (NPOs) that operate without sector-specific guidance, are calling out for just that. A study commissioned by CFG and others in 2014 had respondents from 179 countries, with 72% agreeing or strongly agreeing that an international standard would be useful.
This is not surprising, because the benefits would be profound for NPOs, funders, regulators, and beneficiaries. If done well, consistent high-quality financial reporting could have a positive impact on grant-making, regulation, due diligence, consolidation, audit, fraud, software, fundraising, and recovery of indirect costs.
Both the IASB and IPSASB acknowledged the need for sector-specific guidance but conceded they had neither the mandate nor the capacity to take it on. So Humentum (formally Mango) partnered with the Chartered Institute of Public Finance and Accountancy (CIPFA) to develop a proposal, and last year two US-based foundations provided funding to launch the IFR4NPO project to develop the world’s first internationally applicable financial reporting guidance for NPOs.
The ultimate aim is to transform the accounting and regulatory landscape for the non-profit sector. This should lead to greater trust in the sector globally and put it on a par with the private and public sectors, which should in turn also increase access to resources for social justice.
Once developed, the Guidance can be adopted by jurisdictions at their discretion and recognised as best practice by funders. Countries with existing national guidance (the UK and about 20 others) will have the option to adopt or align to it in time, thereby creating greater international consistency.
But with so much variation in types of NPOs, donor reporting requirements, and jurisdictional regulation, who should decide what the best accounting treatments are? The project has convened Advisory Groups to support the guidance development process:
- The Technical Advisory Group brings the rigour of ~13 national standard setters (including the UK’s Financial Reporting Council), and has an official observer from the IASB.
- The Practitioner Advisory Group draws on the experience and perspectives of a diverse range of sector stakeholders (NPOs, donors, auditors and academics) from all over the world.
- A Donor Reference Group is also being convened to ensure their needs are heard, and also minimising possible conflicts between donor project reports and entity-wide financial statements.
Beyond these groups, the 3-phase project design includes a broad and deep consultation process to make sure everyone with a stake gets a voice.
We are delighted that CFG have accepted to be ‘IFR4NPO Country Champions’ in the UK, with the role of encouraging stakeholders to contribute so that their views are reflected. We look forward to partnering to offer an introductory webinar on 6 October 2020, and a more in-depth online meeting on 4 November 2020 for those interested in participating in the consultation process.
Check out the project website www.ifr4npo.org and subscribe to the newsletter for more information.
Update: View the introductory webinar held on 6 October 2020
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