Good reporting gives donors confidence their money is going to where they expect, writes Simon Mumme.

Earlier this year, $20,000 was awarded to the winner of an inaugural award for transparency in non-profit reporting. But the prize, handed out in the PricewaterhouseCoopers (PwC) Transparency Awards, is not the only reward the winning non-profit organisation, the Juvenile Diabetes Research Foundation ( JDRF), has garnered for its diligent record-keeping. It had previously signed a four-year partnership with the Macquarie Group Foundation, securing $2 million in funding.

The chief operating officer of the JDRF, William Bonney, says comprehensive financial reporting helped win support from the Macquarie Foundation.

“Donors are becoming increasingly discerning about the direction and impact of their contributions, so transparency is extremely important for the not-for-profit sector,” Bonney says.

In compliance with the terms of the competition, the PwC prize money will be spent on professional development, while the Macquarie grant will fund research into eyelet transplantation (injecting insulin cells from the pancreas into the portal vein of the liver) and the improvement of administration systems. According to Bonney, transparency “can be achieved by most non-profits – even if it’s one person running MYOB”.

But the JDRF’s resources are a little more extensive: its financial reporting committee is independent of the board, and its treasurer is an ex-PwC partner. According to the jury of the PwC awards, the JDRF’s reporting was clear and presented the opinions of its stakeholders, while a five-year plan indicated how its performance would be measured.

Bonney says the non-profit’s activity reporting – direct mail-outs and quarterly newsletters – is equally important.

“We were awarded for this as much as our financial reporting,” he says. Bonney believes that more emphasis on transparency in reporting would force the whole sector to lift its game.

“Any effort to improve transparency and get simplicity across non-profits is good for the sector. You could compare one charity to the next,” he says.

Partner with the PwC Foundation, Rick Miller, says the awards aim to encourage a consistent standard of reporting among the 700,000 non-profits in Australia, since the quality of this reporting is “highly variable”.

“Some organisations produce good quality, transparent reporting, but the general standard needs improvement in order to meet the information needs and expectations of stakeholders,” Miller says.

To enter the PwC awards, non-profits were first required to disclose their mission; how they met community needs and engaged with stakeholders; and how they attained, managed and used human and financial resources to achieve their aims. In this, an explanation of their strategy and operational structures should include targets and milestones, before covering organisational structures, governance and risk management. Next, their reports were appraised.

These should list financial expenditure, outcomes and impacts, and how they correspond with the expectations of stakeholders. Such performance-based information “demonstrates how well they have understood the community need for their services, executed their strategy, and managed resources and relationships”, the PwC Transparency Awards website says. The so-called jury examining the submissions found that while the non-profits communicated their missions clearly, many did not provide enough information about their strategic goals and how they measured their performance.

The jury said that governance policies generally require “greater articulation” – in particular, better disclosure of the structure and processes of boards, including pathways to board membership, and an assessment of the performance of board members. The jury also found that most non-profits displayed “little insight” regarding the risks involved in their daily operations. If they are addressed, such “disclosure tends to be generic”.

The number of employees, their roles, and the activities in which they are involved, should also be disclosed, in addition to whether they have undertaken professional development. The rate of staff retention, and succession plans for key staff, should be disclosed. The jurors also suggest that “stakeholder maps” be used to clearly distinguish stakeholders, the respective importance of their relationships with the non-profit, and how they are managed.

Also, returns from any investments held by the organisations – which are typically allocations to cash accounts or unit trusts, or to direct shares – are rarely reported. The return targets and performance of these holdings should be disclosed, in addition to the management of any surplus funds or reserves.

Interestingly, the JDRF saw the value of such work before the PwC awards were announced. Their reporting, which satisfied the jurors, was completed without the impetus of gunning for prize money:

“We’d finished our reports before the call for entries was made,” Bonney says

Join the discussion