Understandability and Transparency of the Financial Statements of ...

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1.6.5 Non-Governmental Organisation The term non-governmental organisation (NGO) is a term more commonly used with reference to international aid organisations and the United Nations. Also used in academic literature (Agyemang, Awumbila, Unerman, & O'Dwyer, 2009; Gray, Bebbington, & Collison, 2006; Mueller, Williams, Higgins, & Tou, 2005; O'Dwyer & Unerman, 2008; Unerman & O'Dwyer, 2006b). Unerman and O‟Dwyer (2006a) define NGOs as organisations which are neither public sector organisations nor private for- profit commercial organisations - quite a poorly defined term. Unerman & O‟Dwyer (2006a) specifically mention that not all charities will be NGOs and give the example of private schools that are registered as charities “ we would not regard most of the activities of an expensive private school as falling within any reasonable conception of the activities of an NGO” (Unerman & O'Dwyer, 2006a, p. 309). An example of this can be seen in New Zealand with Diocesan School for Girls that is registered as a charity but would not be considered an NGO as whilst it is non-governmental it is private and thus does not meet the definition of NGOs. 1.7 Delimitations of scope This section considers delimitations of scope which are within the researcher‟s control. 1.7.1 Countries included The decision, in Chapter Three, was made to compare New Zealand‟s generally accepted accounting practice with that found in English and Welsh registered charities. England and Wales are treated as one jurisdiction and have a well established Charity Commission and Charities Register whereas New Zealand‟s Charities Commission and Charities Register are in their infancy. It was hoped that by focusing on what has happened in England and Wales an indication of possible impacts could be found for the New Zealand charities sector. The decision was made to exclude from this study the Generally Accepted Accounting Practice (GAAP) of Australia who does not have specific GAAP relating to charities. Whilst the United States (US) has GAAP relating to NFP it does not have charities‟ specific GAAP as England and Wales does so the decision was made to also exclude US GAAP (Charity Commission, 2005; Financial Accounting Standards Board, 1980, 2008a, 2008b). While GAAP was not included studies from these two countries were incorporated where relevant including United States studies impacting the charities sector such as 10
those by: Vatter (1947); Anthony (1978, 1989, 1993, 1995) ; Herzlinger & Sherman (1980) and Blasch, Folpe & Weiss (1994). Also included was the more recent research in Australia including work done by the Australian Government (Productivity Commission, 2009; Senate Standing Committee on Economics, 2008); the Institute of Chartered Accountants in Australia (2006, 2007, 2009a) and Kilcullen, Hancock & Izan (2006, 2007a, 2007b). However, Australia was included, in Chapter Two, when comparing regulatory frameworks as there is a move towards closer ties between New Zealand and Australia‟s charities‟ regulatory framework (Ministry of Economic Development, 2009b, 2009c). 1.7.2 Beneficiaries The focus of this research is on investigating why charities act as they do in terms of their accounting practices. Thus, the research questions are not directly aimed at charities‟ beneficiaries. Rather this study examines the extent to which charities discharge accountability by communicating the success of their outcomes and outputs to donors. While beneficiaries were not directly investigated in this research Connolly & Dhanani (2009) consider that discharging accountability enables charities to achieve legitimacy with their beneficiaries which goes some way towards implicitly ensuring accountability is discharged to charities‟ beneficiaries. 1.8 Outline of thesis The remainder of this thesis is organised into eight chapters. The next two chapters review the literature. Chapter Two considers the regulatory frameworks within New Zealand and two other jurisdictions; Australia and England and Wales, and any problems within these frameworks. Chapter Three focuses on the research question and identifies the gaps in knowledge that established the research questions under investigation in this thesis. Chapter Four explains the methodological approach and the methods used in collecting and analysing the research evidence before Chapter Five discusses accountability theory and considers the rationale for its appropriateness for this study. The three findings chapters are framed around the accountability theoretical framework. Professional accountability is considered in Chapter Six by focusing on three of the 11
Page 1 and 2: Understandability and Transparency
Page 3 and 4: CHAPTER 2: REGULATORY & CONCEPTUAL
Page 5 and 6: 4.3.3 Axiom 3 - The possibility of
Page 7 and 8: 6.6 Summary .......................
Page 9 and 10: Appendix One - Statement of Financi
Page 11 and 12: Abbreviations AASB Australian Accou
Page 13 and 14: Related Research Outputs The follow
Page 15 and 16: Acknowledgements My journey through
Page 17 and 18: Abstract Access to charities‟ fin
Page 19 and 20: CHAPTER 1: INTRODUCTION 1.1 Introdu
Page 21 and 22: More importantly the study will loo
Page 23 and 24: Unerman and O‟Dwyer (2008, p. 801
Page 25 and 26: adopted here is clarified, as the l
Page 27: March 1999. Further, a study by the
Page 31 and 32: CHAPTER 2: REGULATORY & CONCEPTUAL
Page 33 and 34: (k) The erection, laying out, maint
Page 35 and 36: Before looking at the legal structu
Page 37 and 38: 2.3.4 Problems As with charity nome
Page 39 and 40: yet to be determined. This ensures
Page 41 and 42: per annum (Charities Commission, 20
Page 43 and 44: certain cases there will be concept
Page 45 and 46: The focus of the Charities Commissi
Page 47 and 48: Unlike incorporated societies, the
Page 49 and 50: 2.4.4.4 Future conceptual framework
Page 51 and 52: problems with New Zealand‟s regul
Page 53 and 54: This research seeks to identify if
Page 55 and 56: charities” (Charity Commission, 2
Page 57 and 58: statements in different documents t
Page 59 and 60: seek to identify whether a lack of
Page 61 and 62: In the international arena transpar
Page 63 and 64: elevance is compromised. The link b
Page 65 and 66: 3.2 Complexities in Charities’ Fi
Page 67 and 68: 3.2.1 Accounting basis The „Accou
Page 69 and 70: application of the appropriate GAAP
Page 71 and 72: length transaction”. This definit
Page 73 and 74: There are four arguments against de
Page 75 and 76: Financial Accounting Standards Boar
Page 77 and 78: al., 2008; Newberry, 1992; Rees & D
Page 79 and 80:
However, the notion of control is a
Page 81 and 82:
Kilcullen et al., 2007b). Charities
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the amount of money spent on admini
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This research seeks to identify wha
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As a result of the literature revie
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the elements of the world, or rathe
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come about through the mutually sim
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Research reports from other organis
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clearer picture of the interviewee
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In England, Palmer and Randall (200
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APPROACHING PARTICIPANTS Within the
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availability of charities‟ financ
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As credibility was usually achieved
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clarifications. This approach was u
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to understand the meaning behind an
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analysis is both complete and impar
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subjective realities (Chua, 1986).
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To assure the study was dependable
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CHAPTER 5: ACCOUNTABILITY 5.1 Intro
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emphasis on the definition of accou
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supposition was that a lack of resp
Page 121 and 122:
general public (Charity Commission,
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assumes the other is monitoring the
Page 125 and 126:
performance reporting rather than f
Page 127 and 128:
appropriate performance information
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examiners and the Charities‟ Boar
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which was set up in 2003. Charity a
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Western Australia, all financial st
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The fourth level of independent exa
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What are the major areas of concern
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subset of good accountability pract
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Programme refers to a meeting of ob
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ecording property, plant and equipm
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Figure 6-2 Dimensions of Financial
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Because the [charity‟s] finances
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„selling a story‟ makes them fo
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that you can use it [the stove] for
Page 153 and 154:
the organisation pay to have those
Page 155 and 156:
contributors twice - first to fund
Page 157 and 158:
There is a need to record restricte
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charity will have control of a seco
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of accountants involved in Charitie
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their decision making. One auditor
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Whilst the sample in this thesis is
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Another problem my study found was
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framework funders would not be able
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The lack of professionalism must be
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New Zealand‟s charitable purpose
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We have since February of last year
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analysis was done of the first comp
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Also the idea of members „taking
Page 181 and 182:
The transparency of their organisat
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7.3 Monitoring As discussed in Chap
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Zealand] Statistics Department poin
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There was a sub-committee running [
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useful for smaller organisation and
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change and they‟re doing a good j
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problem that you‟ve [pause] we‟
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legislation and monitoring. Of part
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CHAPTER 8: PERFORMANCE ACCOUNTABILI
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In New Zealand both the Controller
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what proportion of their charitable
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None of the above reasons includes
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Charities Commission publication
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achieve an appropriate level of per
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more effectively in order to increa
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eneficiaries‟ needs are met is an
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As well as setting aside reserves,
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The important aspect of the propose
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Mostly they [the funders] are worki
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eyond financial health to include
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8.4.4 Prescribed performance report
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impact they have on their beneficia
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statements, but also other mechanis
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compare different charitable organi
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shock when their accounts are eithe
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9.4 Academic Contribution This rese
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Outcomes (Effectiveness) Figure 9-1
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Charities Register, of which thirty
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success in their activities. For as
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Ahrens, T., & Chapman, C. S. (2006)
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Australian Accounting Standards Boa
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Bradbury, M. E., & Baskerville, R.
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Charities Commission. (2009f). A sn
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commission.gov.uk/Our_regulatory_ac
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Cordery, C. J., & Baskerville, R. (
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Eisenberg, P. (Ed.). (2005). Challe
Page 253 and 254:
Fremont-Smith, M. R. (2004). Pillag
Page 255 and 256:
Hui, D. (2006). Financial Reporting
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http://www.ifac.org/Members/DownLoa
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Maxwell, J. A. (1992). Understandin
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http://www.nzica.com/AM/Template.cf
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O'Sullivan, N., & O'Dwyer, B. (2009
Page 265 and 266:
Robson, C. (1993). Real World Resea
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Television New Zealand (Writer) (27
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Appendix One - Statement of Financi
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Appendix Three - Semi-structured in
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Appendix Five - Participant informa
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Appendix Six - Transcriber’s Conf
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Heading 1 Heading 2 Heading 3 Prope
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