Queensland University of Technology CRICOS No J Moving closer to a sector specific regulatory framework – solving the Australian not-for-profit accounting muddle. Julie-Anne Mee The Australian Centre for Philanthropy and Nonprofit Studies 13 November, 2008 Perth CPA Not-for-profit Conference

CRICOS No J a university for the world real R Today … Apples and Pears - Standard Chart of Accounts Cutting to the Core - Reducing the Costs of Government imposed paperwork

CRICOS No J a university for the world real R Standardisation best described by its benefits Ω Consistency Ω Comparability Ω Sectoral coordination Ω Communication and discussion Ω Better info for decision makers Ω Simpler reporting (by preparers) Ω Accountability Ω Robustness Standardisation

CRICOS No J a university for the world real R Accounting Template 2002 – 2004: collation of data from Queensland government agencies about grants – 2006: collaborative development of a Standard Chart of Accounts (SCOA) for Queensland 2 nd – 3 rd ¼ 2006: training and implementation of SCOA in QLD government funders and nonprofit recipient organisations

CRICOS No J a university for the world real R Accounting Template 1 st – 2 nd ¼ 2007: collation of data from New South Wales government agencies about grants and collaborative development of SCOA (using QLD as base platform) 3 rd ¼ 2007: training and implementation of SCOA in NSW funders and recipient organisations : discussions with Federal agencies with FaCSIA as lead agency.

CRICOS No J a university for the world real R 2007: discussions with Western Australian human services departments 2007: participation in the Victorian Review of Not- for-Profit Regulation activities and report issued Late 2007: initial discussions with Tasmanian, South Australian and New Zealand human services departments Late 2007: updated Queensland SCOA using learnings from New South Wales implementation Accounting Template

CRICOS No J a university for the world real R 2008: Victorian Action Plan developed after review with project team being assembled during final quarter to implement during early - mid : Western Australia Human Services Roundtable endorsement for the Department for Communities to undertake a SCOA project with implementation being recommended during 2009/10 – currently in the middle of this Senate Economic Committee Inquiry – contributions and review. Accounting Template

CRICOS No J a university for the world real R Advantages of a Standard Chart of Accounts Consistent and uniform reporting; True financial performance can be ascertained; Assists auditors in the annual audit; Clear guidelines for account names; Incoming treasurers and bookkeepers have a framework; and Enables benchmarking and development of KPI’s

CRICOS No J a university for the world real R In Australia – sector or transaction neutrality – AASB Senate Economic Enquiry review National approach Funding acquittals align with standards Accounting and auditing profession engage with nonprofit sector Appropriate financial literacy training for nonprofit boards and staff rolls out Research is supported about impact of nonprofit financial performance (eg benchmarking and KPIs) Financial Reporting Standards and Next Phases

CRICOS No J a university for the world real R Sample page in SCOA EXPENSES MYOB Account Number Suggested Account Names Data Dictionary/Description of Account IFRS Accounting Standards References Other Comments Expenses Expenses are outflows or depletions of assets or incurrences of liabilities that result in decreases in equity other than those relating to equity. Expense accounts may elect to record "in kind" transactions and should have an equal and opposite Income account for the value for a nil result. Generally small to medium organisations will not recognise these items in their accounts. Framework par 70(b) Accounting Fees This account represents accounting and bookkeeping fees. It excludes audit fees (which is its own separate account). Includes GST, FBT and Financial Business advice Advertising & Promotion This account covers all advertising, marketing and promotion fees paid by nonprofits in the course of marketing, advertising and promotion of events and services, etc. It also includes all printing relating to promotional material Agency Temp Staff This account includes the costs of temporary staff employed for whatever reason from an agency. This account excludes consultancy staff Amortisation Expense Amortisation expense for the current year relating to intangible assets. AASB (d)

CRICOS No J a university for the world real R Sample page in SCOA Assets Purchased <$5,000 The amount of $5,000 is arbitrary; the limit may be set by the organisation. This account shows all assets (including computers) purchased by the nonprofit organisation that have an individual value of less than $5,000 each. Any asset above $5,000 is to be capitalised and shown as an asset in the Balance Sheet. Some items that are expensed may still need to be recorded in the Fixed Asset Register Audit Fees This account includes fees associated with an audit of financial statements. It excludes accounting or bookkeeping fees (these are included in accounting fees above). AASB 101.AUS 126(a) Auspicing Fees This account represents fees paid by a non-profit organisation to another organisation for providing auspicing support. The auspicing organisation signs agreements, carries financial risk and legal responsibility for activities of the auspiced organisation. It also includes internal auspicing fees. These are true auspicing rather than recoupment of administrative and project expenses Bank Charges This account represents all charges associated with the various bank accounts held by a nonprofit. * It includes State Government Tax, account keeping fees, EFTPOS fees, etc. * It excludes credit card fees (which are recorded in a separate account) Bad Debts These are debts which have been written off due to non- recovery.

CRICOS No J a university for the world real R CPNS website: CPNS wiki space: WIKI space – Develop Your Organisation (DYO): WIKI space - DYO – Standard Chart of Accounts (SCOA): WA Wiki specific: Links for use

CRICOS No J a university for the world real R CPNS web site –Summary aperworkReportingCostsofGovtGrants.pdf –Full Paper Electronic copies of CPNS Working Paper 39: How Long is a Piece of Red Tape? The Paperwork Reporting Costs of Government Grants is available from Cutting to the Core - Reducing Red Tape

CRICOS No J a university for the world real R Compliance Pilot Survey For a one year period, the project surveyed 20 nonprofit organisations on their compliance costs in formulating submissions, reporting, and other government paperwork. Variations in size, purpose & multiple funders  NPOs kept a log of all government documentation and further 2 page survey.  14 NPOs remained for the whole 12 months. Compliance Costs

CRICOS No J a university for the world real R Summary Over the 12 months: An average of hours (median of 95 hours) to complete government generated paperwork. Average time taken per form was 5.05 hours, but with a median of 1.00 hour. Pre Survey views: Estimates were much higher and this has implications for government red tape review

CRICOS No J a university for the world real R The fourteen NPOs completed: –46 grant submissions (on average taking hours to prepare); –157 grant acquittals (average 6.04 hours per acquittal); –90 tax forms (average 1.87 hours per form); and –111 ‘other’ forms, e.g. database information on client services for Health or Disability departments (average 1.88 hours). Grant submissions and acquittals, together made up just over 50% of all compliance paperwork for NPOs.

CRICOS No J a university for the world real R Form Issues Less than 50% of forms had instructions/guides Only one third provided a contact point Limited use of external advisors to complete forms Time constraints in appln. & external audit issues

CRICOS No J a university for the world real R Department Analysis Type of Organisation Average time for compliance Average Cost per form Health21.5 hours$1, Culture & Recreation 15.7 hours$ Communities4.6 hours$ Housing2.9 hours$ DSQ1.9 hours$

CRICOS No J a university for the world real R Some Suggestions…. 1.Whole of Government data dictionary 2.Collect data once 3.Data collected should be either useful or returned as useful information 4.Communication about the fate and reasons of failed submissions needs improvement 5.Include adequate instructions and a contact point. 6.One size does not fit all 7.Government should examine its funding submission processes 8.Further research on benefits of red tape reduction measures 9.Further quantitative research is required into the burdens and benefits of statutory mandated quality accreditation processes 10.Further research into the non-paperwork burden of government regulation.