DYO – Three questions nonprofits should be asking themselves in 2019

Thank you to ACPNS Executive in Residence, Dr Glenn Poole for this article.

Three issues to think about at the start of 2019

Before we rush headlong into a new year, it may be useful to stop and reflect on what we can learn from 2018 and the challenges for 2019 that we are already aware of. We may then be better prepared for the journey ahead.

1. What can we learn about good governance from 2018?

Although many of the poor governance examples exposed in Royal Commissions and other inquiries in 2018 related to private sector entities, there are lessons also for nonprofit leaders. For example some of the conclusions from the APRA inquiry of practises at the Commonwealth Bank were:

  • An over-confidence in the operation of the Board and its committees and a lack of benchmarking to assess effectiveness
  • Weaknesses in how issues, incidents and risks were identified and escalated through the organisation
  • Inadequate reporting of customer complaints to the executive committee and the board, and
  • An operational risk framework that worked better on paper than in real practice.

Thankfully, many nonprofit organisations have a better focus on their operating culture than our business sector friends. But we can all benefit from a deep discussion of the issues identified by the various inquiries. And there is more to think about now the banking inquiry report has been released.

2. Are our Board members financially literate and able to make sound financial decisions?

My experience is that accounting professionals are often seen as the main people around a board or committee table who have responsibility for the financial health of the organisation. Fortunately, this view is changing as we see the outcomes of regulatory action in cases of organisational failure.

All board and committee members need financial literacy skills to ensure that they adequately understand the financial health of their organisation.

As accounting professionals, we can assist our board members in increasing their financial skills. We can also assist them by ensuring that our financial statements and reports not only comply with the standards and regulatory requirements but are also able to be understood by our organisation’s leaders.

3. Are we ready to comply with new accounting and reporting standards?

All accountants will be only too aware of the changes that occur to the accounting standards and pronouncements by the Australian Accounting Standards Board [AASB]. The new year will again bring new reporting requirements for nonprofits and other entities.

In 2019 we have the introduction of changes from:

  • The new standard AASB 16 Leases
  • The new standard AASB 15 Revenue and AASB 1058 Income for nonprofit entities.

These standards are applicable for reporting from 1 January 2019. The new provisions have been available for some time. So finance managers should have strategies in place to ensure compliance in the preparation of this year’s financial statements. If this is not the case, urgent action is required now.

However, there can be last minute changes. The AASB announced in November 2018 a possible change to the application of the new lease standard [AASB 16]. This change may provide for a deferral of the requirement in AASB 16 for nonprofit organisations to value right of use assets under peppercorn leases at fair value. A final determination of the approach is expected shortly. Though it is likely to be a deferral of the requirement rather than a complete abandonment of the requirement.

This reinforces the need for accounting professionals to stay in touch with the changing reporting standards.

Thanks for reading! We hope you’ve gleaned some great pointers for the year ahead! There’s heaps more so visit our site at www.qut.edu.au/business/acpns

Did you know …..

ACPNS offer courses for staff, board and other volunteer professionals who work, or are entering the philanthropy, nonprofit or social enterprise sectors. There are units that deal specifically with governance and accounting and financial issues.

Read more of the Developing Your Organisation series

Three Great Resources Grantseekers and Fundraisers Should be Tapping Into by Eleni Gill

Three Key Questions to Ask Before Starting a Social Enterprise by Dr Craig Furneaux

Three Ways Nonprofit Boards Can Improve Its Team by Dr Ruth Knight


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