Understandability and Transparency of the Financial Statements of ...

CHAPTER 8: PERFORMANCE ACCOUNTABILITY
8.1 Introduction
The profusion of charities being established means there is a need for the donor to be
able to distinguish between them to determine which ones to support. This is not only a
New Zealand problem, but an international one. As Linda Polman notes in Anthony‟s
(2010) article, there has been a large increase in charities involved in major
humanitarian efforts, in 1980 40 charities were dealing with Cambodian refugees; by
2004. 2,500 charities were involved in Afghanistan. How can donors then choose which
charity to support?
One way of informing this decision is through an assessment of charities‟ performance
accountability. This chapter focuses on this issue, in contrast to Chapter Six and
Chapter Seven which focused on the impact of financial accountability on charities
(Figure 8-1).
Financial
Accountability
Figure 8-1 Dimensions of Accountability
Performance accountability for the „for-profit‟ sector focuses on value creation, i.e.
creating money for its stakeholders, particularly its owners (International Federation of
Accountants, 2009b). This relationship does not exist in charitable organisations where
donors and funders do not usually receive the benefit of the services the organisation
provides. However, Connolly and Hyndman (2004) consider that there is a need for
performance accountability in the charities sector to allow charities to justify their
existence. They considered that unless performance measures are in place to achieve
performance accountability, it is difficult for charities to counter criticisms of poor
management and ineffectiveness. They went further in an earlier article (Connolly &
Hyndman, 2003, p. 99) by saying that:
Accountability
Performance
Accountability
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