THE Australian Council of Social Service has developed a Standard Chart of Accounts (SCoA) to streamline the financial reporting process for not-for-profit organisations.
To be introduced in July, SCoA was designed to reduce the reporting requirements of NFP sector over the long term by providing a standard format of reporting.
It is a tool designed primarily for small to medium not for profits, which typically do not have an accounting department or a sophisticated accounting system.
While it will be compulsory for all state and federal government departments to use SCoA, not-for-profit organisations and benevolent institutions can decide whether to adopt the tool or not.
The SCoA is a tool to be used in the management of financial information for NFPs seeking government funds.
It will define the way government funders ask for financial information from not-for-profit organisations, and sets out account numbers, names and definitions for the line items on which social services and community organisations might be required to report on funding from governments at the federal, state and territory levels.
“Therefore, it is up to NFPs how they provide this information; and the SCoA is one tool they might consider using. If they have already developed their own financial instruments, they might prefer to use those,” ACOSS spokesperson Clare Cameron said.
She said SCoA would make it easier for state and federal governments to assess a not-for-profit organisation’s financial status when deciding whether to provide funding or issue grants.
The NFP sector has long sought a standardised approach to accounting, the spokesperson said.
Research evidence has found little consistency between government departments in the financial treatment and accounting terms used in grant and tender reporting, which creates a heavy compliance burden on NFPs when acquitting grants.
To date, ACOSS has received positive feedback from many not-for-profit organisations that support the idea to standardise the reporting requirement, with those to have already used the tool agreeing it was effective.
“While there has been a period of adjustment during the implementation process, our governing committee, executive director and the staff have found SCoA simple and easy to use,” an ACOSS member said.
“As intended, it has streamlined our processes and we have found it to be effective, efficient and suited to our needs.
“Overall, thus far we have had a positive experience with SCoA and will continue to use it.”
Arthritis Western Australia executive director Ric Forlano welcomed the introduction of the accounting tool. He said, however, a standard chart of accounts would benefit smaller not-for-profit organisations but not larger charities or benevolent institutions.
“A standard chart certainly would be appropriate for smaller charities where they struggle with the accounting process, but it’s hard to imagine it being for one size fits all,” Mr Forlano told WA Business News.
He said larger organisations such as Arthritis WA, which has 14 paid full-time employees, usually had experienced accountants with their own charts.
Breast Cancer Foundation of Western Australia general manager, Donna Rendell, said tax and accounting issues were sometimes too complex for smaller organisations that could not afford to employ a full-time accountant or bookkeeper.
She welcomed measures such as SCoA that aimed to reduce the administrative burden on NFPs that do not have the time or expertise to ensure their accounts reporting met compliance criteria.
The announcement of SCoA’s implementation came after a recent report by the state government’s Economic Audit Committee found administrative tasks such as accounting to be burdensome on government agencies and community sector organisations.
In its ‘Putting the Public First’ report, which was published after a wide-ranging review into the operational and financial performance of WA’s public sector, the committee, among other things, recommended streamlining the administration of grants.
