Not for Profits dealing with significant governance challenges - new report 

Nearly eighty percent (80%) of Australian Not for Profit organisations rate the complexity of current financial reporting issues in the sector as moderate or extreme, according to a survey just released by governance experts Enterprise Care.

The survey of nearly 250 Not for Profit organisations found that they were struggling to cope with the burden of financial reporting, with many finding the systems currently in place were “ever-changing”, “complex”, “costly”, “excessive”, “unclear”, “time consuming”, “inconsistent” and “not fully developed”.

Of major concern to many organisations was the increasing complexity and obligation for reporting to funding bodies, which in many cases differed to the requirements set out in Australian Accounting Standards.

Enterprise Care Managing Director Damien Smith believes that greater focus on the efficiencies and effectiveness of financial reporting, both for the funding body and Not for Profit body, is essential.

“A more robust justification for why the reporting is required, and the particular format the reporting is required in, should be the focus of any review of the sector” Mr Smith said.

The survey, conducted in March by Enterprise Care and Accounting firm Moore Stephens, asked Not for Profit organisations with Finance and/or Audit Committees a range of questions regarding the major issues and challenges facing their organisation.

Overwhelmingly, finance issues were of greatest concern, with budgeting, funding, increasing revenue, risk management, reducing expenses and the declining value of organisation’s assets all major challenges facing organisations in the sector.

“The Global Financial Crisis has hit some Not for Profits hard, with reduced funding forcing many organisations to question their financial sustainability and viability.  It’s integral that we do not unnecessarily add to the burden and cost of operating the Not for Profit, particularly as they work their way through this challenging period”.

Worryingly, some organisations reported that the skill levels of their Directors was an issue, with some Directors not financially literate or able to read and analyse finance reports adequately.

“Directors should undertake their role as governors of an organisation as they would their paid employment” Mr Smith said. 

“For organisations to gain the most value from their Directors, there needs to be continuing professional development and ongoing education – especially in the critical area of finance.  Being a Director today is about being a part of a profession”.

The survey also found that females made up only 31% of Finance and/or Audit committee members, with the worst performing industries being Art, Philanthropic, Industry/Trade, Youth and Sporting.  In only one industry did female representation on the committee exceed 50%, which was Community, with 50.5% female representation.

“This survey confirms that there is a gender imbalance in Not for Profit Boards that requires immediate attention.  With an average of only 31% women on Finance and/or Audit committees, we cannot guarantee the diversity needed for effective functioning committees” said Smith.

To download a copy of the Report, visit the Enterprise Care website HERE.

Enterprise Care is the premier governance advisory service for both the Not for Profit and corporate sectors in Australia.  Moore Stephens is a leading national network of eight independent firms of business advisors and chartered accountants in all mainland capital cities of Australia.