25 February 2014

First authoritative study into international financial standards for charitable sector welcomed

A research team from the University of Dundee has co-led the first comprehensive global study into international financial reporting for not-for-profit organisations (NPOs).

The study, conducted for the Consultative Committee of Accountancy Bodies (CCAB), was led by Sheffield Hallam University (SHU) and Dundee's School of Business. The team examined key issues relating to international financial reporting standards in the not-for-profit sector. The report was officially launched at an event hosted by Catherine McKinnell MP, Shadow Economic Secretary to the Treasury, at the House of Commons on Tuesday, 25th February.

Many Charities and NPOs operating in many countries across the globe face regulatory, legislative and funder demands, often made more complex by the lack of an agreed approach to NPO-specific financial reporting. This report is the first step towards establishing whether or not there is a case for developing harmonised international standards for NPO financial reporting.

This is the first significant research of its kind and assessed the need and demand for stronger financial standards for NPOs internationally. The research was based upon a literature review and online survey, which received more than 600 responses from 179 countries across the world.

The study has shown an appetite among NPOs for an international standard for financial reporting, with 72 per cent of respondents agreeing that it would be useful.

Based upon the research, CCAB have called for further study in this area and for consideration to be given to what an international financial reporting standard for the NPO sector should look like. Convergence of financial reporting practice across the globe by developing international standards could create consistent expectations from donors, potentially reducing costs and avoiding duplication of individual standard development projects at the national level.

The Dundee team was led by Dr Louise Crawford, who said, 'This has been an incredibly exciting research project with significant potential impact. The responses received from the NPO global community have been remarkable, indicating the high level of engagement with reporting issues affecting the sector and a great deal of interest in developing the financial reporting landscape to facilitate NPOs achieving their goals.

'By considering the views from the international NPO community at the beginning of a standard setting process means that any such developed standards are more likely to integrate with existing national reporting regimes and be welcomed by NPOs operating in diverse jurisdictions across the world.'

The Dundee and Sheffield Hallam researchers were supported by colleagues from the University College Dublin and Victoria University in New Zealand.

Ian Carruthers, chair of the CCAB study and Director of Policy at the Chartered Institute of Public Finance and Accountancy (CIPFA) said, 'This report clearly demonstrates that there is desire for some kind of international standard for the not-for-profit sector, though further work is needed on what form this might take.

'Strengthening transparency and accountability, while potentially reducing costs through consistency in reporting requirements would go a long way in supporting NPOs, donors and those they serve around the world.'

CCAB Chairman Anthony Harbinson welcomed the report, saying, 'The CCAB promotes the highest standards in financial transparency and governance. This is why we are proud to have led the profession with this report and demonstrated the need for consistent high quality reporting in this increasingly important area globally.'

The full report and further information can be found at www.ccab.org.uk/documents/IFRNPO-FullReport-Final-07022014.pdf.

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