Draft Non-Profit Accounting Guidance – potential danger for NPOs?

In November 2022 the IFR4NPO initiative released the first exposure draft (ED) of the proposed International Non-Profit Accounting Guidance – INPAG. This guidance, when issued, will have a significant impact on reporting in the not for profit (NPO) sector.

It has been pointed out that there is an aspect of this guidance which could present major and even personal dangers both for organisations and individuals implementing activities in a shrinking space and for their auditors.

This event is an opportunity for anyone who cares about safety and security in the NPO sector to discuss this crucial issue; to protect those connected with important work in difficult conditions and to suggest an alternative approach for INPAG.

The draft guidance includes an excellent framework for standardising financial reporting by NPOs in a way that will avoid the unworkable attempts to manipulate IFRS to fit the sector.  The ED also includes comprehensive requirements for providing a narrative report.

While it is recognised that narrative repots give valuable context for understanding the financial statements, the disclosure could be a serious threat to organisations undertaking sensitive activities in the shrinking space.  This threat could range from the forced cessation of activities to personal danger for employees and beneficiaries involved with the activities.

The draft guidance provides an exemption from the requirement to report in these circumstances, but the use of the exemption must also be reported.  Either option is a gift to an oppressive regime, inviting investigation and enforcement action.

Organisations might respond by presenting false or misleading narrative reports, but how could auditors respond safely to such failure to comply with laws, regulations and ISA 720?

The outcome from this event will inform EMPACTA’s response to the Exposure Draft.