Understandability and Transparency of the Financial Statements of ...

framework funders would not be able to distinguish between those charities that
were doing their best to comply and those who were trying to hide something.
(Connolly et al., 2009, p. 17)
It is hoped that future developments in charities‟ GAAP lead to financial statements that
are understandable and transparent to all key stakeholders of charities rather than the
opaque view that currently exists, as highlighted by the following interviewee:
The statements should be understandable but often this opportunity is not taken
up… Financial reporting can hinder communication. … Reporting should be
appropriate to the audience. There is myth or mystique around the readability of
information. (Interviewee 24 B/E)
Next, the last key reason for choosing particular accounting methods is addressed – the
desire to appear poor.
6.5.3 Looking poor
In this study those interviewees that were aware of the matching concept tended to
utilise it to „smooth their income‟. When the matching concept was explained to several
interviewees they were also very keen to utilise this tool to lower their surplus where
possible. This emphasis on „looking poor‟ is a result of funders preferring to fund
charities that „need‟ the funds rather than charities that are financially sustainable. [The
issue of the financial viability of charities will be further considered in Chapter Eight].
This attitude can be illustrated from the following interviewees who have actively
lowered their assets or income so that their charity looks poorer than it actually is:
There was a balance sheet but it didn‟t have any fixed assets on it. Because the
[charity] is worth like $2 million. I think it was absolutely stupid. Because they
think oh, people think that you know we‟ve got lots of money. (Interviewee 3
T/A)
We got rumours that people had their eye on that money. And I don‟t know if
you know but it‟s really easy to take over an incorporated society. So we moved
very, very quickly to get that asset. So we said well, we don‟t want to attract
people to our organisation because they think they‟re going to get a finger in
dealing with this money. We put it into a trust with the same objectives as the
incorporated society. (Interviewee 15 M/B)
When our bank account gets big, we move it off and then we bring it back.
(Interviewee 20 B)
So it looks like, it means I can keep control of it [Grants Held until used], I know
exactly how much more money is coming up and also it looks like we‟re not
showing a surplus because otherwise the funder looks at that and says oh,
you‟ve got too much money. I‟ve got a separate grants spreadsheet and I know
precisely what they‟ve done. (Interviewee 23 T)
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