Understandability and Transparency of the Financial Statements of ...

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funds by limiting their unrestricted funds to three times the size of the past year‟s expenses (BBB Wise Giving Alliance, 2003). Whilst, the previous two rating agencies are based in the USA the third rating agency, GuideStar since 2003 also operates in England and Wales (http://www.guidestar.org.uk) where it contains details of 169,000 registered charities. In England and Wales the base information about each charity is provided from the records of the Charity Commission. Unlike the previous two rating agencies GuideStar UK does not evaluate charities or comment on their performance but they focus on reporting basic information such as: how the charity spends its money and the charity‟s activities and recent achievements. By contrast Australia and New Zealand currently have no rating agencies although their merits have been highlighted in Australia where the Senate Standing Committee on Economics recommended an investigation on the merits of a rating system‟s publishing information on the aims and activities of NFPs (Senate Standing Committee on Economics, 2008). In New Zealand the advantages of a rating agency‟s providing detailed information was highlighted by Philanthropy New Zealand in their submission to the Tax and Charitable Giving Project (Philanthropy New Zealand, 2006). However, at the time of writing the researcher is not aware of any more developments regarding setting up a rating agency in Australia and New Zealand Ratings agencies could provide a forum for donors to access information that may help them in their decision as to which charity to donate to. However, for rating agencies to be successful in comparing charities financial statements, they need a common conceptual framework in which all charities operate. 2.7 Summary This chapter has reviewed the issues caused by the myriad of definitions and legal structures that beset the charities sector in order to gain an appreciation of what constitutes the charities sector. As well, an appreciation of the regulatory and conceptual frameworks was developed of the charities sector in New Zealand, as well as our nearest neighbour Australia and two countries with a similar regulatory body, England and Wales. With regards to the regulatory and conceptual frameworks, two key problems were identified that impair the ability of regulators to facilitate transparency and accountability of the monies received from donations or tax concessions. This study will 40
seek to identify whether a lack of knowledgeable people impacts on the financial statements of charities and whether there is a need for reporting that clearly shows the activities of the charity and lessens the ability for charities to be used to fund terrorism and other illicit activities. Next, the role monitoring by charities‟ regulatory bodies, taxation agencies, funders and rating agencies, plays in ensuring compliance with regulatory and compliance frameworks is considered. The effectiveness, or otherwise, of the monitoring will potentially impact on the research and will be discussed in subsequent chapters. The next chapter highlights some key issues impacting transparency and understandability of the conceptual framework. 41
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Understandability and Transparency
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CHAPTER 2: REGULATORY & CONCEPTUAL
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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 and 28: March 1999. Further, a study by the
Page 29 and 30: those by: Vatter (1947); Anthony (1
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: statements in different documents t
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
Page 83 and 84: the amount of money spent on admini
Page 85 and 86: This research seeks to identify wha
Page 87 and 88: As a result of the literature revie
Page 89 and 90: the elements of the world, or rathe
Page 91 and 92: come about through the mutually sim
Page 93 and 94: Research reports from other organis
Page 95 and 96: clearer picture of the interviewee
Page 97 and 98: In England, Palmer and Randall (200
Page 99 and 100: APPROACHING PARTICIPANTS Within the
Page 101 and 102: availability of charities‟ financ
Page 103 and 104: As credibility was usually achieved
Page 105 and 106: clarifications. This approach was u
Page 107 and 108: 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
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general public (Charity Commission,
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assumes the other is monitoring the
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performance reporting rather than f
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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
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the organisation pay to have those
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contributors twice - first to fund
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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
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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
Page 201 and 202:
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
Page 213 and 214:
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
Page 261 and 262:
http://www.nzica.com/AM/Template.cf
Page 263 and 264:
O'Sullivan, N., & O'Dwyer, B. (2009
Page 265 and 266:
Robson, C. (1993). Real World Resea
Page 267 and 268:
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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