1. Accountability, Financial Reporting, Standards and Disclosure Presentation by: Dr Ted FlackJulie-Anne Mee State Manager Communications and FundraisingThe Australian Centre of Philanthropy and St Vincent de Paul Society Nonprofit Studies School of Accountancy Queensland University of Technology

2. Today ? Senate Economic Committee status Standardisation and the Standard Chart of Accounts The role of the Annual Report

3. Senate Economic Committee Enquiry on disclosure Submissions Process/position/results

4. Standardisation best described by its benefits Consistency Comparability Sectoral coordination Communication and discussion Better info for decision makers Simpler reporting (by preparers) Accountability Robustness Standardisation

5. Accounting Template 2002 – 2004: collation of data from Queensland government agencies about grants. 2004 – 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 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

6. 2006 - 2007: discussions with Federal agencies with FaCSIA as lead agency. 2007: discussions with Western Australian human services departments 2007: participation in the Victorian Review of Not-for- Profit Regulation activities and report 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

7. 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 developnment of KPIs

8. Sample page in SCOA EXPENSES 6-0000 MYOB Account Number Suggested Account Names Data Dictionary/Description of Account IFRS Accounting Standards References Other Comments 6-0000 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) 6-0010Accounting 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. 6-0020Advertising & 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. 6-0025Agency Temp Staff This account includes the costs of temporary staff employed for whatever reason from an agency. This account excludes consultancy staff. 6-0030Amortisation Expense Amortisation expense for the current year relating to intangible assets. AASB 138.118(d)

9. Sample page in SCOA 6-0040Assets 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. 6-0050Audit 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) 6-0060Auspicing 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. 6-0070Bank 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). 6-0080Bad Debts These are debts which have been written off due to non-recovery.

10. Next Phases 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)

11. In Australia – sector or transaction neutrality - AASB Financial Reporting Standards

12. Part 2 Senate Inquiry into disclosure regimes for charities and not-for-profit organisations.

13. To provide interested parties with the ability to obtain useable information about the operations and finances of nonprofit organisations What is the underlying policy objective of the Inquiry?

14. What information do interested parties want? Types of annual report disclosures nominated and valued by stakeholders in stratified sample of Australian public fundraising charities (in descending order) Information preferences of stakeholders in the stratified sample (in descending order) Representatives of Stakeholder Groups MBMEPVDGRPMPF Total numbers of stakeholders811196510621332279 Financial statements87173 6521332259 Board reports (inc. Office bearers' reports)87196175 53 Description of activities 893174 32 Profile of board members573 14 20 Progress against plans266 5 19 Recognition of volunteers, donors and pioneers57 1 311 18 Human interest stories4261 41 18 Financial health trends (or treasurer's commentary) 9 52 16

15. Stakeholder preferences Although a large majority of stakeholders said they wanted to be provided with financial statements, most also said they did not use them or did not understand them. The research found that the value of financial statement lies in their symbolic value in that they signal that proper financial oversight is in place. Stakeholders who have a personal interest in these organisations tend to want to be provided with soft information about the organisation. Preferred disclosures include board reports, descriptions of activities, profiles of board members and human interest stories about the organisation.

16. How useable is the financial information? Inside stakeholders can command further information - membership rights –Annual General Meetings –Elections of office bearers –Day-to-day involvement –Donor rights? Outside stakeholders need standardised information –Audited financial statements –Sector-specific accounting standards –Standard chart of accounts

17. Size and publicness matter! Small npos that are really only the concern of the participants, should not be over regulated. Large npos, that rely on the support of the general public, should be required to be publicly accountable

18. One way to organise these ideas

19. Financial reporting Class of organisation Regulatory approachRegulation Small private not-for- profits a simple legal form suitable for regulation by the participants National model Associations Incorporation Act with minimum reporting requirements Small public not-for- profits Stakeholder regulationLevel 1 differential public reporting requirements under existing forms of incorporation with increased subscribing member rights Large private not-for- profits Stakeholder regulationLevel 2 differential reporting under existing forms of incorporation Large public not-for- profits Public accountabilityPublic disclosure of level 2 differential reporting under existing forms of incorporation

20. Non-financial reporting Annual reports published on the web –Regulate for minimum disclosures Objectives, achievements and plans Office bearers reports –Encourage high quality (industry awards etc)

21. Any Questions ??? Thank You !!!