Since 2010, the AICD has shone a light onto governance in the not-for-profit (NFP) sector through its annual NFP Governance and Performance Study. The 2018 study starts soon with a survey to all AICD members alongside focus groups being held in locations across Australia.
Recent versions of the study have explored key themes facing the NFP sector as well as monitoring broader governance issues over time. A key focus of the 2017 study was around culture. The study noted that directors recognised the imperative for an appropriate culture and that the vast majority of organisations appeared to have a good culture. However, the study also found that culture was not high on the board agenda and many were not measuring it in a formal way.
In 2016, the study noted the challenges of NFPs in building financial strength. While many organisations recognised the need to make a profit to build sustainable organisations, there were about 40 per cent that barely broke even or made a loss. This was reiterated in 2017 with over half of respondents having profit margins of less than two per cent.
Directors in 2017 recognised that “reputation is a showstopper”, with an almost unanimous response to the importance of a good reputation. Yet the Edelman Trust Barometer noted the considerable drop in trust in Non-Government Organisations (NGOs) in Australia and across the globe. It will be interesting to see the results when this is again investigated in the 2018 study.
NFP sector leader Phil Butler (firstname.lastname@example.org) can be contacted for further information — and keep an eye out for the survey.
#PressforProgress on International Women’s Day
While the groundswell towards gender parity continues to gather global momentum, fuelled by movements like #MeToo and #TimesUp, the World Economic Forum’s Global Gender Gap Report 2017 states that gender parity remains more than 200 years away.
The AICD’s own target of reaching 30 per cent female representation on ASX 200 boards by the end of this year remains frustratingly out of reach. While we are buoyed by the continued growth since we launched the goal in 2015, the past 12 months produced a marginal growth rate of only 0.9 per cent year-on-year.
”While there are many reasons for the stall in gender parity progress, there are no good reasons.” Tony Johnson, CEO EY Oceania
With International Women’s Day 2018 imminent (8 March), the AICD is taking inspiration from the IWD theme #PressforProgress and calling on boards to take action by ensuring all appointments this year have at least a 50/50 candidate list. As Tony Johnson, EY Oceania managing partner and CEO, says in this month’s 30% by 2018: AICD Quarterly Diversity Report, “While there are many reasons for the stall in gender parity progress, there are no good reasons — and we’re all responsible for pressing for progress this year”. Read about what #PressforProgress means to EY, a global sponsor of the IWD theme, in the latest AICD Gender Diversity Progress Report here.
Special purpose accounts
The Australian Accounting Standards Board (AASB) has flagged changes that may see special purpose financial statements phased out of the Australian reporting landscape.
Special purpose accounts allow directors to select the accounting standards they will apply. These statements are prepared and lodged with the companies regulator (ASIC) by nearly 80 per cent of proprietary companies, and commonly lodged by associations and other not-for-profits, including charities.
In the AASB’s quest for transaction neutrality with International Financial Reporting Standards (IFRS), it has indicated it will be removing the current “reporting entity” concept — which supports the ability of companies to prepare special purpose financial statements to meet their public reporting obligations. This is because, under IFRS, a different definition of “reporting entity” exists, and the AASB is committed to incorporating this new definition into the Australian Conceptual Framework. The IFRS definition is used to determine the boundary for what needs to be reported, whereas the current Australian definition effectively allows self-assessment of reporting requirements for certain types of entities.
The AASB will introduce the changes in a two-stage process. The first will only be applicable to publicly accountable, for-profit, private-sector entities and will have little impact on their reporting activities. The second stage will begin consultations in the second half of 2018. It will apply to all other entities, many of which will be impacted by the change. As part of this second stage, the AASB has indicated it may develop and consult on another tier of general purpose financial reporting to effectively replace special purpose financial reporting. Hopefully, a new tier will be simpler than the current requirements for general purpose financial reporting.
The AICD looks forward to participating in these consultations in due course.