Date posted: 27/03/2018 2 min read

Charities flex their business muscles

Mel Yates, talks about changes in the charity sector and how finance professionals, including auditors, play a key supportive role

In Brief

  • Charities are becoming more transparent, accountable and strategically led
  • More demand for finance professionals in the charity sector
  • Mel Yates, ACNC is a speaker at the Audit Conference 2018 Australia

Mel Yates, Director of Reporting and Red Tape Reduction at Australian Charities and Not-for-profits Commission (ACNC)

Mel Yates, Director of Reporting and Red Tape Reduction at Australian Charities and Not-for-profits Commission (ACNC)

Mel Yates, Director of Reporting and Red Tape Reduction at ACNC, talks about how changes to the charity sector mean the days where charities could rely on ongoing ‘block funding’ are long gone, and how finance professionals can add immense value to the charity sector.

Yates’ role at the ACNC is to collect reporting from all 55,000 charities registered with ACNC, as well as working with other government organisations to harmonise and streamline reporting, reduce red tape and implementing initiatives, such as charities providing all the information once to ACNC, rather than to multiple regulatory bodies.

The evolution and purpose of financial statements for charities

There’s been a shift in the financial statements prepared by charities. Charities were once producing financial statements that told a simple story about income and expenditure. However, that's just one part of the story. As charities exist to achieve a mission or purpose rather than to create wealth, and because tax payer funding is at stake, people are becoming more interested in how charities are performing. Also, there’s more diversity in who’s reading the statements. This means financial statements now need to tell a more complex story that provides a snapshot of the different facets of the entity, where the charity has come from and where it’s heading.

“There’s a slant on not-for-profit reporting. In profit, it’s about assessing risk, rewards, where to make investments, where to put my dollars to make most bang for buck.

“I prefer the term ‘for benefit’ or ‘for purpose’ rather than ‘not-for-profit’ because they exist to fulfil a need that’s been identified in the community, which the government doesn’t want to service or doesn’t have the resources for.”

What does the future look like for charities?

There’s a lot for accountants to consider in telling a charity’s story aside from the financials. The challenge is to convey how the organisation is being effective in fulfilling its charitable purpose and how the financials can convey the trust and credibility essential for the charity to lobby government and philanthropists for support.

The full public trust and confidence in Australian charities survey reveals people feel more comfortable that charities are held to account on reporting. Yates likened this to the analogy of the public feeling safer with knowing police are on the beat, even if they don’t see them.

The problem is there’s not necessarily an established framework to assess and monitor this type of performance. It’s a different paradigm for profit, where there’s a framework for professionals to understand.  Yates says “for impact reporting and performance reporting, it’s a more fluid environment, and it’s up to professionals to come up with systems to record and capture information, with which to tell the story.”

Key considerations for charities

Yates outlines three ways in which charities can become more efficient in a changing environment, with the help of finance professionals:

1.       Strategic and operational focus

The need for charities to become more transparent and accountable is having a dramatic impact on the way charities are operating. This will require more finance professionals to support the sector in the future. Finance professionals’ knowledge and expertise will be invaluable to educate clients about their reporting obligations, developing models, providing advice, ensuring strategies are based on evidence and data that the charity holds, and ensuring the difficult decisions being made are based on sound judgement.

2.       Funding changes require changes in delivery of services

Major policy shifts have occurred in consumer directed care, particularly in relation to aged care reforms and disability services. Funding has changed to a per-person or beneficiary basis.

“Changes to funding will require critical conversations about service delivery and what the organisation is capable of delivering,” says Yates. 

Funding changes to beneficiaries are necessitating charities to take a step back and clarify their understanding on what a program is offering. They need to ask themselves if they need to think about changing the way they deliver services, focusing on a different beneficiary. Yates cites as an example the willingness for corporate partnerships, amalgamation and the sharing of resources, all of which create efficiencies that can be put back into service delivery.

3.       Leverage technology

Exciting opportunities exist for charities to leverage technology, to help with issues and complexities that have manifested within the sector. Yates provides the initiative of Surf Life Saving as an example. The club launched an initiative to use card ‘tap-and-go’ technology to collect donations instead of cash. And charity workers out in the community can now operate remotely, using smartphones on the go to fill in timesheets and report on client visits.

Yates says that while advancements in technology are a positive, they come with a challenge. If charities invest in technology, that may mean less dollars towards the mission. In a constrained resource environment, this reinforces the need for charities to be more accountable for their performance.