Research horizons for public and private not‐for‐profit sector reporting: moving the bar in the right direction

Abstract

The examination of public and private not-for-profit sector financial reporting has been a topic of interest on a cyclical basis in Australia over the last 30 years. Traditional topics have included examinations of the intended and unintended consequences of specific standards, the accountability value of financial reports, transaction neutrality, compliance with the accounting standards, and more recently, the prospective implications of new, differently focused reporting standards considering such issues as income measurement and outcomes reporting. With increased recent attention from standard setters and regulators, and greater data availability, the opportunities for undertaking impactful research in these and related areas are increasing. In this paper, we focus on research that has examined the following questions: (i) Which private and public NFPOs lodge financial reports and what is reported; (ii) Who are the users and what are their information needs? (iii) Which private and public NFPs should lodge financial reports and what should be included in them; and (iv) How should the accounting frameworks for NFP sector reporting be set? For each of these issues, we identify the research gaps and opportunities for further research.

Transparency as a Key Element in Accountability in Non-Profit Organizations: A Systematic Literature Review

“…Additionally, it is convenient to keep in mind that the academic interest in the transparency of NPOs comes from the widespread development of the third sector over recent years [1,47]. Taking these definitions into account and assuming the importance of the role of transparency in the third sector, whenever we refer to "transparency in NPOs" in this document, we mean the moral practice of accountability by which these organizations have to disclose information on the activities they carry out and the resources they use to achieve their social purpose; i.e., their mission [42,48].…”

How Do We Measure Social Management in Non-profit Organizations? A Scale Design Based on the Once Case

“…Non-profit organizations are included within the so-called third sector, which is distinguished from the commercial sector by its social functions. The solidarity component makes the third sector unique, with profit maximization being irrelevant ( Hofmann and McSwain, 2013 ) and the main objective being the achievement of a social mission ( Gilchrist and Simnett, 2019 ). Surplus funds or residual income generated through NPO activity are dedicated to additional activities by the entity itself ( Thorne and Venable, 2008 ).…”

Financial Reporting by Charities: Why Do Some Choose to Report Under a More Extensive Reporting Framework?

“…In the context of charities, the most representative capital providers are public donors and grant providers 15 . We expect that there would be different financial information needs for these two groups of stakeholders, with it being more important to signal to those contributing through donations, as grant providers can potentially demand financial information specific to the accounting for the grant (Adams, 2016; Gilchrist and Simnett, 2019). Regarding the NFP literature, Behn et al .…”

“…Within this body of literature, profit‐oriented firms are incentivized to unveil more private information if the expected market value will increase as a result of this voluntary disclosure. For charities, however, their organizational goal is broader, including ensuring accountability for use of resources and achievement of social mission (Gilchrist and Simnett, 2019). Given the differences in organizational structures, financial needs and operational objectives between profit‐oriented companies and charities, the roles and incentives for financial reporting, and choosing to disclose in accordance with a more comprehensive financial reporting framework than is the minimum required, could vary significantly across these sectors.…”

“…In summary, this study contributes to the voluntary disclosure literature by examining a unique financial reporting framework choice currently available in Australia for charities, in order to better understand the incentives for a charity to report in accordance with a more comprehensive financial reporting framework than that which is the minimum permissible. The examination of the differential reporting framework as well as the effects of regulatory change is also a timely issue that is of interest to charities, accounting firms, regulators, and academics (Carey et al ., 2014a, 2014b; ACNC, 2015; Linnenluecke et al ., 2017; AASB, 2017, 2019a, 2019b; ACNC, 2018b; Gilchrist and Simnett, 2019; Potter et al ., 2019). In particular, the results from this study have direct implications for regulators and standard‐setters in Australia, principally the ACNC and the AASB, which are both proposing changes to the financial reporting frameworks for not‐for‐profit (NFP) entities.…”