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It’s never been more crucial for everyone to stand up for standards
From now until 30 November, we have the chance to persuade the IASB to extend their remit to cover financial reporting for NGOs. In just a few clicks, you can add your voice to an international campaign to improve transparency and accountability, and cut out a lot of confusion and waste.
Most of us think accounting standards are boring – but they could have a really big impact
Chances are if you’re reading this, you’re one of millions of people working every day to change lives for the better. Whether you work for an NGO, volunteer or provide funds, you know that NGOs need to make the most of their money to have the biggest impact. But you also know it’s not easy.
In Mango’s view, it would be an awful lot easier if there were internationally agreed standards covering financial management in NGOs. Standards ensure quality and inspire trust. Without reliable standards, funders have to carry out extensive checks on organisations they give money to. Unfortunately, the lack of harmonisation between funders is confusing and means there is a lot of wasted time and resource meeting different requirements.
We believe introducing an internationally recognised set of accounting standards for NGOs will create the basis for much more harmonisation of funders’ requirements. It will also reduce confusion and set a clear benchmark of what good financial reporting for NGOs looks like. That will enable more people to be confident that NGOs are making the most of their money.
And we’re not alone.
There is a growing body of evidence and consensus that international standards for not-for profit organisations are needed
CAAB, which is a joint platform of the UK and Ireland’s accounting bodies, funded independent research into the need for international accounting standards for not for profit organisations (NPOs) in 2012. This found that:
- 72% of 605 respondents involved in NPO reporting in 179 countries agreed that: “It would be useful to have international standards for NPO accounting”.
- There are several key issues affecting NPO financial reporting which are not consistently addressed by available standards. These include: non-exchange transactions; fund accounting issues; narrative reporting; and the valuation of NPO-specific assets.
- 82% of respondents from Africa wanted a standard and reported the highest level of difficulty with current arrangements.
The international accounting institutions are starting to listen
In 2015 ACCA and the UK’s Charity Commission collaborated to publish a Companion guide for not-for-profits to the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). On 5 October 2015, CIPFA hosted a key seminar for national accounting standard setters from jurisdictions including Australia, Canada, Japan, Ireland, the Netherlands, Norway, Sierra Leone, South Africa, Turkey, UK, USA, and Zimbabwe.
It also involved representatives of the International Accounting Standards Board (IASB) (which deals with the corporate for-profit world) and the International Public Sector Accounting Standards Board (IPSASB).
The key conclusion from the seminar appeared to be that international guidance or standards for NPOs are needed.
But there remains a real risk that the IASB will not take action – we need you to add your voice, too
The IASB is now consulting on whether it should extend its remit to develop standards for the not-for-profit sector. The consultation closes on 30 November 2015. However, there is a real risk that they won't decide to back development of new guidance or standards for the not-for-profit sector.
The International Federation of Accountants (IFAC) is a highly influential stakeholder for IASB. In their response to the consultation they raise concerns about whether IASB has the membership and competencies to address not-for-profit issues, and that addressing this might detract from IASB’s core role of regulating the for-profit sector. IFAC then go on to say:
“Furthermore, it is currently unclear to IFAC that there is strong demand internationally for standards for the private, not-for-profit sector; it is possible that it might be a specific jurisdictional or regional issue. That demand would need to be further assessed before making a decision. Therefore, IFAC is of the view that the IASB should not extend its remit to develop standards for this sector.”
Mango shares IFAC’s concern about whether IASB currently has the membership and competencies to address not-for-profit issues, but this should not be used as an excuse not to take action on this important need. A more appropriate response would be for IASB to work with IPSASB, (which has experience already of including consideration of public benefit and organisations whose purpose is not about profit).
Were IASB and IPSASB to collaborate in creating a new standard, they would also need to involve stakeholders with extensive experience of the not-for-profit sector.
IFAC’s lack of awareness about the strong demand for international standards for not-for-profits may well be for a similar reason. IFAC also has little current engagement with the not-for-profit sector. It is the comparative lack of awareness that IASB and IFAC have of not-for-profit organisations that probably best explains why they think that the reasons for international standards somehow don’t apply to organisations if their primary purpose is not making profit.
Here’s how you can get involved and make sure the IASB hears from those working with NGOs
Submit a letter of comment by 30 November
The IASB is now consulting on whether it should extend its remit to develop standards for the not-for-profit sector. The consultation closes on 30 November 2015.
- We strongly urge everyone working in or with NPOs to submit a letter of comment in favour of extending the remit and to call for the involvement of IPSASB and the not-for-profit sector in developing new standards. Take a look at our one below for inspiration, and feel free to copy/paste content from this Word version to support yours. Submit it to IFRS either via their website or email.
Voice your support on Twitter with messages aimed at key influencers- copy and paste this tweet:
We need #standards4NGOs. @IFRSFoundation should work with @IPSASB_News, @IFAC_update & NGOs to create intnl standards for not-for-profits
Follow us on Twitter for more updates on this campaign @mango4NGOs