Last month, overseas finance body Humentum announced a project to develop an international accounting standard for not-for-profit organisations. Here, Tim Boyes-Watson of Humentum outlines what the project will mean in practice.
The International Financial Reporting for Non-Profit Organizations (#IFR4NPO) initiative is a five-year project coordinated by Humentum and CIPFA to develop the first-ever NPO international financial reporting guidance, which can command support from the accounting community and NPOs, as well as the funders and regulators of NPOs.
#IFR4NPO aims to bring clarity and consistency to the NPO sector which must win the trust of its many national and international stakeholders through consistent, high-quality financial reporting. The initiative also endeavours to reduce the current burden and duplication of effort for both NPOs and funders in meeting multiple and, at times, conflicting financial reporting requirements.
Objectives
The objectives of the project are to:
- Set a clear, consistent benchmark of what good financial reporting looks like
- Support stronger NPO financial management
- Support greater harmonization of funders’ requirements to save time and administrative costs for funders and NPOs
- Provide a basis for comparison between organizations and jurisdictions
- Satisfy demand amongst national standard setters
Guidance Development Process
Over the course of 5 years, NPO financial reporting guidance will be developed in a three-phase process. Phase one will see a consultation paper published in June next year. Phase two will be an exposure draft in January 2023, and phase three will be final guidance in June 2024.
Project Steering Group
The project steering group will have overall oversight and will consist of members from the International Federation of Accounting Standard Setters, Humentum, CIPFA, NPOs and key project funders.
Technical Advisory Group
CIPFA will chair a Technical Advisory Group (TAG) consisting of members from national standard setters to develop the international guidance. Meetings will be public and all formal minutes and communications available on the website. The TAG will approve the consultation paper and exposure drafts before issue, ensuring that all feedback and input from the stakeholder engagement process is duly considered.
Practitioner Advisory Group
Humentum will chair a Practitioner Advisory Group (PAG) and lead outreach to various stakeholders including NPOs, funders, regulators, governments, auditors and professional accountancy bodies. This is to ensure that a representative and diverse cross-section of key stakeholders are consulted in developing guidance that is relevant and meets the needs of key users of NPO audited accounts across the globe. Engaging and informing a wide spectrum of stakeholders throughout the development process will accelerate adoption of the guidance once finalized.
Outreach Strategy
Critical stakeholder engagement will be achieved through the following awareness-building activities:
- Provide a project website to register interest and provide feedback on guidance
- Produce content: 10 explainer videos, blogs, articles, newsletters
- Identify 20 country champions to facilitate roundtable meetings in Phases 1 & 2
- Hold 10 regional roundtable meetings in Phases 1 &2
- Hold PAG meetings in Phases 1 & 2
- Convene online stakeholder groups: funders, NPO, regulators & audit firms
- Host webinars
- Present at HQ level events
Long Term Sustainability
Long term adoption and continued relevance of the guidance will require the development of training materials at the end of Phase 3, and a body to be responsible for its ongoing availability and updates. Options for this ongoing governance will be actively sought and considered to ensure lasting and sustained impact.
Fundraising Plan
Project funds are expected to be raised through a combination of seed funders, other grants, sponsorship and in-kind support, and one-off and annual supporters. A project of this nature that impacts the entire sector globally requires support from a wide range of stakeholders. Apart from grants, the project will raise funds on an ongoing basis in a variety of ways by:
- Attracting sponsorship and in-kind contributions for roundtable events and explainer videos
- Seeking one-off $5k and $10k donations from Humentum members and industry partners
- Persuading a smaller number of key members and partners to become Sustaining Supporters, contributing $10k per year over four years.
We expect this ongoing fundraising activity to raise a total of $442,000 (almost 10 per cent) of the project costs. It also forms part of a broad engagement strategy which will be key to the overall project’s success.
Summary
We believe this initiative offers the opportunity of a generation to make a lasting contribution to improve the quality and consistency of financial reporting in NPOs internationally, thereby increasing accountability and transparency while reducing inefficiency in the current system. #IFR4NPO welcomes input from any interested parties.
For more information, contact sam.musoke@humentum.org.