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Not-for-profit Law made a short submission in response to the Exposure Draft 270, that proposes to require mandatory service performance reporting in addition to financial performance reporting for charities and not-for-profits (NFPs) required to undertake audits.
Not-for-profit Law broadly accepts the policy intention of ED 270: to provide for reporting on activities, outcomes and impacts by those charities and NFPs required to meet accounting standards in the preparation of annual reporting. We acknowledge that reliable data and reporting on outcomes of NFPs is critical to demonstrating transparency and accountability, and that financial data alone does not provide a complete picture of an organisation’s performance. We also acknowledge that data not only assists an organisation to better understand its impact, but also helps to communicate its impact to the public and its stakeholders.
However, in our view the responsibility for communicating an NFP organisation’s outcomes (to give ‘life’ to its financial data) best lies with the organisation, rather than being mandated by the AASB through the proposed standard.
Some of Not-for-profit Law's submissions include:
- We do not agree that the principles set out in paragraph 20 of ED 270 should be mandatory. Mandatory reporting of service performance information introduces further regulatory complexity and administrative burden to NFPs already subject to a multitude of reporting obligations (to both government and funders). Mandatory reporting would further stretch already limited resources, and create unnecessary confusion for the sector.
- Although they may fall into a reporting tier above ‘small’, many Tier 2 organisations have very few employees (if any) and struggle to pay for technical and professional advice. We routinely advise these organisations on a pro bono basis and see first-hand the burden any additional reporting can create. While just a few extra dot points does not seem much to add (see below), it is the cumulative amount of the reporting to a multiplicity of stakeholders and regulators that creates the red tape burden.
- ED 270 notes that companies limited by guarantee must already provide similar information through annual reporting. It is important to note that only a small fraction of NFPs are companies limited by guarantee (around 12,000 from a sector that numbers 600,000 organisations across Australia). Therefore, reporting service performance information will be a new requirement for many organisations affected by the proposed standard.
- The proposed standard will create uncertainty about whether service performance reporting should or should not be included in reviewed/audited materials, and will result in further accounting and auditing costs for organisations that do include their service performance information in their reviewed/audited reports.
Read our submission