Do you want to have an award-winning non-profit financial report?
Article reposted from IFR4NPO website
Did you know there are many events around the world to celebrate excellence in non-profit financial reporting? The Institutes of Certified Public Accountants of Rwanda and Kenya recently won an honour for their ‘FiRe’ (Financial Reporting) awards programme from the UN Body International Standards of Accounting and Reporting (UNCTAD-ISAR)!
The winner in the charity category of PwC UK’s Building Public Trust award was Age UK whose report was singled out for its innovative question-and-answer format and compelling case studies on how it had supported its beneficiaries. The winner of the New Zealand Charity Reporting Awards (Tier 2) was Zealandia/Karori Sanctuary Trust whose report was simply a pleasure to read.
In Ireland, the Good Governance Awards recognise and encourage good practice by non-profits, including an award for the annual report and financial statements in different categories. The Children’s Rights Alliance was the deserving winner in the €250,000 – €1m bracket.
Here are some top tips if you want your non-profit to be an award winner! The readers of your (ideally audited) financial statements and accompanying narrative report should be able to easily find the answers to these 10 questions about you, your activities and your finances.
Top Tips: 10 key questions
Who are you?
How are you registered, including your tax status? Which other organisations are you connected or related to? Where do you operate? How many staff do you have and what are your values?
Why do you exist?
What’s your vision, mission and purpose? What are your overall strategic objectives?
How are you governed and managed?
How does your governing body fulfil its responsibilities? Who are the members of the board and senior management?
What did you set out to do this year?
What were your goals or objectives?
What did you achieve?
Depending on your context, what impact, outputs and activities were achieved? How did that compare to your targets?
What did your clients, beneficiaries or other stakeholders say?
Share stories, quotes or photos to help bring the numbers and data to life and give your stakeholders a voice.
What challenges did you face and what risks were there?
These might be operational, political, environmental or financial. How did you mitigate COVID and lockdown related problems? How did you combat or prevent fraud? What about exchange rates, or safeguarding? Focus on what is relevant and be objective.
What's the context for the financial information?
Make sure the basics are not left out! Include your accounting policies and make sure there are notes to provide a more detailed breakdown of significant figures. Other important questions to answer here are: What currency are your financial statements presented in? What’s the year-end exchange rate to relevant other currencies? Which reporting framework are you using?
How financially sustainable are you?
How dependent are you on institutional donor funding? What unrestricted income do you have? How many months-worth or unrestricted reserves do you have? What’s your liquidity situation?
Where did your funds come from and how were they spent?
And, in case you have restricted grants, how much remained unspent at the year end?
How does your spending link to your social purpose?
There is no formulaic approach here but your report should help us to see the link between what you spent and how it supported your activities. You might split expenditure by programmatic area, or in some cases calculate unit costs. How much was spent on administration? Use graphs and charts to help communicate the key messages.
Overall, the report needs to tell your story as objectively and compellingly as you can. Aim for your report to be readable, concise and integrated. This doesn’t happen by accident and your auditors can’t do it for you; submitting your accounts for an award is a great way to motivate people within the organisation. Whether you win first time or not, you will receive feedback and learn from others in the sector.
In the for-profit world, high quality financial reporting is codified in the International Financial Reporting Standards. In the absence of an international equivalent that is tailored to the unique needs of non-profit organisations, the Chartered Institute of Public Finance & Accountancy and Humentum have partnered in the IFR4NPO Project, to develop much needed guidance for the sector.