A major transformation in international charity accounting standards is coming – Are you ready?
A significant change to accounting regulations for the global nonprofit sector is ahead. The five-year project to develop more standardized international rules for charity accounting was launched in September 2019. The project, entitled International Financial Reporting for Non-Profit Organisations (IFR4NPO), is backed by the Chartered Institute of Public Finance and Accountancy (CIPFA) and Humentum, a global not-for-profit organization working with humanitarian and development organizations.
A consultation on the issues involved ran from January to September 2021, and IFR4NPO has now published its summary of responses to the first part of the consultation. Currently, there are no global standards for nonprofit organizations in place, and these changes could come into force as early as January 2024. However, you need to review your capabilities to meet these changing standards, and prepare your organization to deliver on this requirement.
The aims and objectives of IFR4NPO
The production of financial statements is essential for accountability, decision-making, transparency and trust and confidence in nonprofit organizations (NPOs). However, until now, there have been no common international accounting standards for NPOs, unlike in the private and public sectors. The need for donors to understand the finances of NPOs and the lack of a single accepted international accounting framework has resulted in a variety of financial reporting requirements, and together with the different laws and regulations that apply in various countries and regions, these different financial reporting requirements have created a heavy burden for NPOs.
The IFR4NPO project aims to respond to these issues by strengthening NPO governance and financial management through the development of internationally applicable financial reporting guidance for non-profit organizations, making financial reports more transparent, more credible, and easier to compare.
Simplification of complex processes underpins the proposals
All NPO stakeholders need financial reporting information that shows whether an NPO is achieving its objectives in a way that maximizes efficiency and effectiveness in the use of resources while complying with restrictions and regulations for the long-term financial health of the organization.
Financial planning and analysis
Poor transparency, a lack of understanding of finances, and cash flow problems can all be addressed with the right financial planning and analysis tools. These standards are anticipated to be for guidance, but NPOs across the world will need to now look at their financial planning and reporting processes to make sure they are in line with the guidance, reduce their compliance costs, and increase trust and confidence in their financial statements and with the public.
When it comes to reporting and financial statements, many nonprofit finance departments are saddled with out-of-date legacy systems and cumbersome manual paper-based processes. FP&A professionals at nonprofit organizations are tasked with juggling multiple funding sources and reporting requirements while trying to deliver maximum ROI with less than sophisticated tools and resources.
If NPOs are going to align their practices with these new standards, those that haven’t already will need to invest just a bit of time and energy into leveling up their processes. The right FP&A solution will allow for stronger cross-team collaboration, more agility to respond to change and avoid risks, and most importantly, streamlined reporting and better, more transparent financial statements.
Transforming charity accounting
Post-pandemic, charities responded swiftly and creatively to the challenges they faced with a massive uptake in the use of digital technology. This has been evident in both frontline service delivery and back-office operations, such as finance, where many organizations have used the crisis as a catalyst to develop better and more efficient processes. The forthcoming new standards seem to be having a similar effect, with many NPOs looking to get ahead of the game and ramp up their digital transformation to enable them to improve the quality, transparency, and credibility of their financial reports.
The new standards also aim to appeal to internal funding communities in the hope that funding organizations increasingly use the guidance in their compliance and due diligence processes and request that grantee financial reports are prepared on a basis consistent with the new standards. Transforming charity accounting in this way will create transparency and trust, which given the current squeeze on NPOs’ finances, is going to be key for all stakeholders going forward.
How Unit4 can help your organization
With Unit4’s ERP software systems, you can adapt and optimize the way your people work to help you manage complexity and focus on the things that matter. Unit4’s next-generation smart ERP software solutions are built for people in the business of helping people. With us, you can ‘Experience Real Purpose’ with an adaptable solution that’s right for you, now and in the future.
Unit4 FP&A helps nonprofit organizations respond more confidently to changing opportunities, regulations, and market conditions. Gain deeper financial insight, reduce manual effort, and better connect operational data such as grant funding to intelligently drive service provision. Free your team to spend time creating value with smarter financial planning, budgeting, forecasting, reporting, and analytics capabilities, all while remaining compliant with evolving regulations.
Access reliable and actionable financial insight for a clearer view of your organization’s financial health. Grow collaborative working partnerships with other teams to maximize efficiencies and optimize service provision. Establish relationships between financial and non-financial data linked to actuals, budget, plan, variance, and forecasts to support decision-making.
Unit4 FP&A is a natural extension to ERP. The static and transactional records of business in areas such as procurement, projects, HR, and finance are now integrated on a scalable enterprise platform with powerful forward-looking, dynamic planning for a more insightful view of organizational performance. The Unit4 People Experience Suite seamlessly helps you elevate your business with an agile ERP, engage people through HCM, and plan your future with FP&A. Boost your productivity with Unit4’s integrated platform and make use of the latest innovations so your technology grows with your business.
Future proof with Unit4
Unit4 Industry Mesh is a specifically developed bundle of industry-fit data flows to commonly used apps available out of the box. It delivers a modern enterprise-wide service that connects your finance, project, and HR teams with up-to-date information that is right for them. Mid-market organizations need the agility of cloud and SaaS solutions to adapt to market disruption. All are faced with managing a growing portfolio of cloud apps but find themselves constrained by endless integration challenges and the inability to free up core data and cope with rapid change.
Unlike typical industry solutions that simply offer templated best practices or an integration toolkit that leaves the burden of development with the customer, Unit4 Industry Mesh does the work for you, delivering the pre-built integrations as a service.
Unit4 Industry Mesh utilizes the Unit4 Extension Kit to build and maintain data flows to the most commonly used applications.
Key Benefits
- Optimize the business application ecosystem - Ensure data efficiency with connectors tailor-made for your specific industry.
- Reduce the burden of maintaining data flows - Eliminate the cost and time for professional services and manual data work
- Enable strategic advantage - Guarantee the most comprehensive and accurate data can empower strategic decision-making.
What our customers have to say
“The powerful budgeting and forecasting functionality enables our team of management accountants to plan and manage risk much more effectively” NHS East of England Ambulance Service, NHS Trust. Their solution was implemented in just two months, and they have achieved a 33% time saving in financial budgeting and forecasting.
“It’s no exaggeration to say that, thanks to Unit4, we can now track the pound someone donates through a television appeal right through to it being used to improve literacy in Rwanda,” Julie McGovern, Chief Information Officer, Save the Children International.
To discover more, click here to book a demo and see what our ERP solution can do for your nonprofit organization yourself.
