Providing non-financial information to Charity Services should be of huge benefit to our sector – yet why is it causing so much concern?

“From 1 January 2022, Tier 1 and Tier 2* charities [in New Zealand] will need to include non-financial information alongside the financial statements they file with Charity Services”.

The standard has been introduced because non-financial information is important for accountability and decision making as well as telling the story of the charity. In some cases, the non-financial information may be considered to be more important than the financial results.

For these reasons the standard has been written to provide readers the information they need to get a full picture of what a charity has been able to achieve in the past year with the resources available to it.”                                                                                                              

                                                                                                                       charities.govt.net

From my perspective, this seems perfectly reasonable, and this is information we should all have to hand anyway.

Apparently not. 

Over the past year, and even up until just last week I’ve been involved in conversations where charities are concerned about being able to provide this information, and in some cases even taking on extra resources to manage this. I’m not often lost for words, but I find this truly gobsmacking!

As a sector we strive to do the best we possibly can for our beneficiaries, however we know from experience that there are the occasional bad apples, and unfortunately in a sector where we are highly scrutinised, one bad apple reflects on us all. As such providing non-financial information as part of our legal annual return becomes a deterrent and a way to weed out the bad apples. Providing financial information only shows funds coming in and out, whereas providing non-financial accountability information ensures that the funds are actually being used for the purpose they were donated. This provides protection for us all. 

But getting back to why I’m so gobsmacked…….. This non-financial information is exactly what we should all be sharing with our donors EVERY. SINGLE. DAY. The statistics, facts and importantly the stories of the difference they are making with their donations. This isn’t something new to us. If we are delivering the absolute best donor care, we already have this information in bucket loads and in every conceivable format under the sun!

From the conversations I’ve had, I don’t believe this information is missing, certainly not from the Tier 1 and 2 Charities – the fact they are at this tier level means they are doing something right with their donors – I think however there has been a significant amount of overthinking, predominantly in two areas:

Firstly, how the information is presented. There seems to be a lot of concern about making the non-financial information quantitative, despite the absolute clarity from Charity Services that they are welcoming and encouraging of qualitative information.

In addition, NO framework has been put in place as to how this information should be presented, in fact to the contrary, it is clearly stated that “information can be presented in whatever format a charity thinks is best”. Alongside this, it is clear that information should be kept concise, "A charity should report enough information to understand what it has done overall, but not so much that the reader is overwhelmed with detail".

I strongly suspect Charities Services are looking forward to receiving a wide and varied range of submissions so that they can make informed future decisions around what constitutes effective non-financial information.

The second and most prevalent area of overthinking seems to be in the breadth of accountability each charity is responsible for. By way of example, I had a conversation with a charity who raises funds for optometry equipment which is then donated to hospitals and clinics. They were concerned that it would be difficult to ensure that those who were treated using this equipment would have better health outcomes. Indeed, it would. However, as I pointed out, this was not within their breadth of accountability. Simply put, in this scenario charities can only be accountable for what is directly within their control, which in this instance is the donation of high-quality medical equipment and holding the hospitals/clinics accountable for meeting any terms and/or agreed reporting around the use of that equipment. The health outcomes themselves are the responsibility of the clinicians, not the charity.

One final point as to why this reporting has the potential to be so beneficial to our sector. In addition to being able to clearly articulate how we spend funds supporting our beneficiaries, it also gives us the opportunity to drive the narrative around how we spend money to raise funds. As a sector we are tired of the reputation of our organisations being based on how little we spend on fundraising; we all know this metric is wrong. The opportunity to including narrative in relation to fundraising spend as part of our legal requirements provides a platform to help steer and change perceptions, one that people can trust when making informed decisions as to which charities to support, as very clearly articulated above, by Charities Services themselves.

If you'd like to have a chat about how to present your accountability, to donors or Charities Services, please get in touch [email protected]

www.yourphilanthropycoach.com

*Charities are classed as Tier two when their expenditure is over $2 million per annum.

The following document from Charities Services provides clear guidance on what is required. https://www.charities.govt.nz/reporting-standards/tier-1-and-tier-2/service-performance-reporting/