Understandability and Transparency of the Financial Statements of ...

The important aspect of the proposed performance framework is that all three facets are
needed, i.e. outcomes, financial viability and outputs. As can be seen from the
Afghanistan and East Timor examples, charities may be financially healthy but that
doesn‟t necessarily mean their donations are being spent wisely to aid the beneficiaries
(Social Solutions, 2009).
Finally, the possible future impacts of the proposed performance framework will be
considered, including the potential impacts on funders and the need for rating agencies
to interpret the additional information provided by charities.
8.4 Possible future impacts
The possible future impacts of a broadening of performance accountability to
encompass both output, outcomes and financial viability reporting could see many
impacts. This includes the impact on funders‟ reporting requirements and the need for
the Charities Commission to adjust its Annual Return form to better reflect the impact
the charity has had on its beneficiaries. There may also be a need for rating agencies to
interpret all the information for donors to enable them to make an informed decision.
Other potential impacts could be a broadening of the Charities Commission‟s
registration requirements beyond the current focus on whether the organisation has a
charitable purpose, to one of sustainability. However, the success of any proposed
broadening of performance accountability will only be possible if there is uniformity in
measurement. Prescribed performance reporting standards will be necessary to achieve
this. First this section will look at funders‟ current and potential future reporting
requirements.
8.4.1 Funders
As discussed in Chapter Two section 2.6.3, there is a wide variety of funders, both
governmental and non-governmental, providing funding to New Zealand charities. This
section looks first at the current reporting requirements of funders to the charities they
fund. For the broadening of performance accountability to be successful there is a need
for funders to broaden their future reporting requirements to incorporate the three facets
of future performance accountability. First, funders‟ current reporting requirements are
considered.
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