Understandability and Transparency of the Financial Statements of ...

appropriate performance information to monitor programme performance, facilitate
resource allocation, and improve the efficiency and quality of service delivery.
At the same time as Lee & Fisher‟s (2007) article, the New Zealand Institute of
Chartered Accountants released a technical practice aid on performance reporting called
„Service Performance Reporting‟ (New Zealand Institute of Chartered Accountants,
2007b) which encourages charities to report on their service performance usually via
non-financial information (paragraph 1.4). However, with no legislative requirement
for charities to produce annual reports, let alone performance reports, it is perhaps
hardly surprising that this standard has had little impact in the New Zealand charities
sector.
This contrasts with the public sector in New Zealand, which has a strong emphasis on
performance reporting. In fact the New Zealand Controller and Auditor-General (2008)
considers the primary document for the discharge of accountability to be the
performance reports included in the annual report.
Unlike the charities sector, the public sector has a legislative requirement under the
Crown Entities Act 2004 to produce not only an annual report but performance reports.
Section 150 imposes an obligation for public sector organisations to prepare and publish
annual reports. Under section 151 this annual report must include a statement of service
performance. Section 151(2) further stipulates that the annual report must provide
information on the organisation‟s operation and performance, which must include an
assessment against the intentions and measures set out in the statement of intent. The
purpose of the Statement of Intent is to promote the public accountability of public
sector organisations (section 138).
Australia is in a state of flux at the moment with regards to performance whilst the
recommendations of the Senate Standing Committee on Economics (2008) are
considered by the Australian Government. One priority recommendation is to
implement a standard chart of accounts for use by all government departments and Not-
For-Profit Organisations. Whilst this has focused on financial information, the
Committee further recommends that a new disclosure regime be introduced, which
contains elements of non-financial and financial reporting. One of the concerns that the
writer has with the standard chart of accounts is that the use of a „one-size fits all‟
scenario might not reflect the complex and diverse charities sector.
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