Submission to the Department of Finance and Deregulation

Transcription

1 Submission to the Department of Finance and Deregulation Commonwealth Financial Accountability Review Is Less More? Towards Better Commonwealth Performance. STREET: 2 GEORGE STREET BRISBANE POSTAL: GPO BOX 2434, BRISBANE, Q, 4001 CRISCOS NO 00213J

2 Overview This submission from the Australian Centre for Philanthropy and Nonprofit Studies [ACPNS] at QUT Business School will focus on the improved accountability and performance that is open for Commonwealth Departments to achieve in their administration of funding transactions with non-profit organisations. Improvements can be gained from a greater and more comprehensive use of the national standard chart of accounts endorsed by the Council of Australian Governments in April Improvements in the reporting obligations imposed on grant recipients are likely to assist the government agencies in responding to their own reporting requirements. Background Commonwealth Departments provide significant funding to non-government organisations to achieve a range of policy objectives. Each of the grants programs have financial reporting and accountability requirements which may have been developed in isolation from other funding programs. The Discussion Paper notes: There has also been a build-up in the stock of legacy systems and processes, most evident in the multitude of reporting obligations. There is a view that over time there has been a shift in emphasis towards controls and compliance at the expense of flexibility and performance. There has been a tendency to respond to perceived risks and failure with more rules and tighter controls, including the reimposition of some prior controls. [page 7] While this comment may relate to the broad reporting obligations for agencies, it is also apparent in the interaction between departments and non-government entities. 1 The Discussion Paper also notes: The introduction of the CGGs in July 2009 was a significant step in improving arrangements. There is potential to simplify the requirement, which would benefit government entities, grant applicants and recipients. It may be necessary to examine the interaction of the CGGs with the FFR Act to remove any inconsistencies and improve governance. 2 [page 82] Entities can determine their own specific grants administration practices within the grants policy framework established by the CGGs. This means grant applicants and recipients can face inconsistent requirements when they draw grant funding from different government programs. This can place unnecessary burdens on them, be administratively burdensome and have cost implications. It seems that there are many factors, such as responding to a parliamentary or audit report, that drive additional reporting requirements, but there is no effective way to remove requirements once they are in place. The cumulative impact of imposing additional reporting requirements on entities needs to be considered. While individual requirements may appear reasonable on their own, they can impose a large burden collectively. 1 McGregor-Lowndes, M. And Ryan, C. (2009) Reducing the compliance burden of non-profit organisations: Cutting red tape The Australian Journal of Public Administration 68(1) Joint Committee of Public Accounts and Audit, Report 427: Inquiry into National Funding Agreements, November 2011, Canberra, p

3 A more focused approach to reporting should be used to reduce the burden on organisations and managers. The benefits of reporting should justify the cost. [page 83] Differential reporting for entities would allow the Commonwealth to allocate resources for reporting more effectively where it has the greatest risk exposure, and would be of particular benefit to smaller, low-risk entities. Differential reporting could also be considered in the context of obligations imposed on external stakeholders, such as grant recipients. [page84] The impact on government departments and non-government organisations from an absence of standardised accounting terms and financial reporting arrangements is not new. In 2002 researchers at the School of Accountancy and the Australian Centre for Philanthropy and Nonprofit Studies at QUT believed that the development of standardised accounting terms that were agreed by government and the non-government sector would provide a solution to this lack of consistency in these funding relationships. 3 A Standard Chart of Accounts was developed by ACPNS in consultation with the representatives from non-government organisations and government departments in Queensland. 4 Subsequent discussions with departments and representatives from the non-government sector in other States followed with charts of accounts subsequently being developed for these other jurisdictions. The State based charts have now been migrated into a National Standard Chart of Accounts [NSCOA] 5 The current position The Council of Australian Governments [COAG] has taken action to address the issue of the multiple accountability and financial classification requirements being imposed on grant recipients for their reporting to Australian Government agencies. In early 2009, the COAG Business Regulation and Competition Working group agreed that the Commonwealth, States and Territories would work together on the practical measures of implementing a Standard Chart of Accounts (among other issues). After a series of consultations, a national SCOA [NSCOA] was collated and the communiqué from COAG meeting April 2010 included the following: COAG also agreed to additional reforms for the not-for-profit sector, including an implementation plan and governance structure to develop a nationally consistent approach to fundraising regulation, and the adoption of a standard chart of accounts where possible by 1 July This will further reduce the regulatory burden and improve public confidence in the not-for-profit sector. The use of the NSCOA by government departments in the development and implementation of funding programs and the related funding agreements is increasing over time. However the implementation of the NSCOA by not-for-profit entities and within several States and Territories appears to be progressing at a faster rate than its implementation by Commonwealth departments. 3 Flack, T., & Ryan, C. (2005). Financial reporting by Australian nonprofit organisations; dilemmas posed by Government funders Australian Journal of Public Administration, 64(3), See Attachment 1 5 SCOA Web site is at 3

4 Comments on key proposals The key propositions for simplifying requirements in Chapter 10 [page 87] are generally supported. A framework which is principles based and focussed on areas of high risk should provide the capacity for departments to tailor their interaction with the not-for-profit sector to reduce unnecessary reporting and compliance requirements. However the paper highlights that these aspirations have been sought from previous accountability and reporting reform initiatives, only to see the detail and prescription reintroduced at an agency level. The proposals to flow from this paper should include measures to address the potential for re-growth of more detailed and diverse accountability requirements within departments and by departments in their interaction with the not-for-profit sector. One initiative that would assist in reducing the tendency for re-growth would be the adoption of a clear policy requirement for the use of the NSCOA by departments in their grant and funding guidelines as accepted by the 2010 COAG decision. This requirement could be embedded in the policies and Better Practice Guides for the description and classification of financial data used in the development and implementation of grants programs. The use of the NSCOA in the determination of the classification of financial data used as the basis of accountability and reporting requirements is consistent with the adoption of a risk based approach as outlined in the key propositions in Chapter 10. A greater use of the NSCOA would assist departments in their analysis of data received from not-for-profit sector entities as the data will be based on a consistently applied data dictionary. The creation of the Australian Charities and Not-for-profits Commission will provide Commonwealth Departments with a source of financial accountability data from charities lodging financial information as part of their reporting obligations. Access to the ACNC data will provide an efficient source of reliable and consistent data for use by departments in their internal reporting requirements. Recommendations It is recommended: 1. In the adoption of the key proposals outlined in Chapter 10 Commonwealth Agencies be required to use the financial and accounting data definitions established in the NSCOA and as endorsed by the ACNC. 2. The implementation of a principles based approach for the arrangements between Commonwealth Agencies and the not-for-profit sector include monitoring and review mechanisms to limit the potential for a re-growth of the detailed and diverse frameworks currently adopted by some agencies. 4

5 Contacts Professor Myles McGregor Lowndes Phone: Glenn Poole Phone: Australian Centre for Philanthropy and Nonprofit Studies Queensland University of Technology Website: Standard Chart of Accounts (SCOA): Standard Chart of Accounts Blog: Date: June

6 STANDARD CHART OF ACCOUNTS January 2012 The QUT Standard Chart of Accounts for nonprofit organisations provides an example of what can be achieved when evidence based research is used as a basis to provide an inexpensive solution to reduce red tape and improve the regulatory framework for nonprofit organisations, government departments and the public. The Problem The lack of consistency in accounting categories and terms used by state and federal government departments in their funding relationships with nonprofit organisations causes: Significant compliance costs to nonprofits, Significant administration costs for government agencies, and An inability to aggregate and compare financial data for any purposes, such as public policy development, benchmarking of performance and indications of financial effectiveness or efficiency to funders; The effects of variation in terminology and treatment - especially in terms of implications for cost compliance - are quite profound for nonprofit organisations. These effects are exacerbated for nonprofit organisations who receive grants from more than one source that require different reporting definitions. Since a nonprofit organisation s accounting system is designed to capture financial transactions just once, an imposed requirement to report similar transactions in incompatible ways means that nonprofit organisations often have to manually recalculate financial transactions from the vouchers, thus adding significantly to their costs of compliance. Unlike other OECD countries, Australia does not provide specific national accounting standards for nonprofit organisations which have been developed in consultation with a national regulator and the sector. There is a need to improve the reliability and comparability of the financial data (in particular) across the nonprofit sector for use by government, organisations and the public. The extent of the problem has been rigorously researched, quantified and published in the leading journal: Journal of Public Administration. 6 Grant documentation from 24 Queensland government departments was collected and analysed by the researchers. Flack and Ryan (2005) found that there was no consistency between government departments in the financial treatment and accounting terms for grant and tender acquittals. There was also a wide range of incompatible financial reporting requirements across departments and, in some cases, between different programs within the same department. 6 Flack, T., & Ryan, C. (2005). Financial reporting by Australian nonprofit organisations: dilemmas posed by Government funders Australian Journal of Public Administration, 64(3),

7 For example, a total of 129 different revenue line items and 836 different expense line items were identified in the departments forms or instruction documents. Differences occurred both in the line descriptions and in the accounting treatment for the same types of expenses. The major variations occurred around the material expense item for labour costs. Analysis revealed a total of 113 different line descriptions in the documents that related to direct labour costs; e.g. in the expenses category, departments included different items: for some, salaries covered salaries only; others included salaries and direct on-costs; for others, wages and salaries included costs of employment, such as staff training and protective clothing ; others included staff transport; and some departments required workers compensation insurance to be treated as a salary and wages on-cost, instead of aggregating this with general insurance. 7 Further, Flack and Ryan (2005) found that data could not be aggregated usefully. Since evaluations of performance rely to some extent on comparisons between the activities being evaluated, government departments are unable to use this financial information to develop comparable data on financial performance or to build efficiency benchmarks of similar activities by different nonprofit organisations. The Solution In 2002, researchers in the School of Accountancy and the Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) believed that a standardisation of accounting terms agreed to by government and the sector would provide a solution to the problem. The development of agreed standard reporting definitions or a data dictionary which government funders only use in their transactions with the sector (grant applications, acquittals and reporting) would radically streamline administrative process and slash compliance costs. For full benefit, the standardisation depends on grant-making departments having the disciplines in place to request only information specified in the Standard Chart of Accounts (SCOA), but nonprofit organisations are not compelled to use the SCOA. However, it is likely that most will convert to using the SCOA over time, as the SCOA provides significant ongoing benefits to adopting organisations. The alignment of existing charts of accounts (particularly, for larger organisations) and their definitions is part of a growing solution that has occurred over time. The Queensland nonprofit sector and Queensland Treasury welcomed the proposal and ACPNS worked to develop the proposal into a reality. After development of the Queensland SCOA, the Centre worked with New South Wales, Victoria and Western Australia to develop similar SCOAs. This is a similar solution to that proposed by the Committee of Australian Governments (COAG) Standard Business Reporting Program for business reporting to government. 8 The COAG Business Regulation and Competition Working group (BRCWG) agreed that the Commonwealth, States and Territories would work together on the practical measures of implementing a Standard Chart of Accounts (among other issues). A sub-committee of BRCWG was formed in mid-2009 culminating in a recommendation to implement a SCOA from 1 July 2010 considered at the 7 December COAG meeting in Brisbane. 9 A consultation draft of a national SCOA was distributed to state and federal agencies for comment in late December The draft National SCOA (NSCOA) is a combination document using the SCOA for each of New South Wales (May 2007), Queensland (October 2007), Western Australia (November 2008) and Victoria (October 2009). At the April 2010 Council of Australian Governments (COAG) meeting in Canberra: COAG also agreed to additional reforms for the not-forprofit sector, including an implementation plan and governance structure to develop a nationally consistent approach to fundraising regulation, and the adoption of a standard chart of accounts where 7 Ibid 8 Refer 9 Refer 10 Refer 7

8 possible by 1 July This will further reduce the regulatory burden and improve public confidence in the not-for-profit sector. 11 The Agreed National SCOA April 2010 is accessible at NSCOA. The other jurisdictions of South Australia, Tasmania, Northern Territory and Australian Capital Territory have all worked with the Centre to be amalgamated into a more inclusive NSCOA dated May 2011 Draft. This is in draft because it is yet to be agreed through the BRCWG and COAG. The May 2011 Draft is also accessible at: May 2011 NSCOA. With ongoing consultation during 2011, there have been a number of harmonisation items and general jurisdictional specifics that are to be included in the next version but an addendum will be created for these and added to the same access point. Implementation Consultation has been a key to the completeness and veracity of the QUT developed NSCOA with input from all groups. The input has been from sector participants, large and small; community bookkeepers; voluntary and paid treasurers; accountants; auditors; grant makers; all levels of government; grant acquitters; peak body representatives at both the coal face and on committees, and the research project team. For a listing of the groups, departments and activities with whom the ACPNS/School of Accountancy team has engaged, refer to Appendix B. The culmination of the NSCOA May 2011 Draft is the basis for any changes to be made in future. NSCOA are now freely available from the ACPNS wiki site. 12 This includes value adding material such as: Template data files for free download over the Internet in Microsoft Excel, MYOB and QuickBooks by the 4 early jurisdictions; Streamed on demand video (in broadband and compressed dial up modes) of conversion instructions to the SCOA and best practice book keeping for volunteer treasurers and book keepers 4 hours; Step by Step downloadable manuals for MYOB, QuickBooks and other accounting packages on implementing the SCOA and best practice bookkeeping; A link to the SCOA Blog discussion group for nonprofit treasurers, accountants and bookkeepers. An FAQ and ask the expert service; Useful links and assistance for nonprofit treasurers, accountants, bookkeepers and management committees and boards. The NSCOA has included the different state based legislative requirements. For example, Gaming and Fundraising are defined by jurisdiction based legislation and the requirements are slightly different in each state. While the NSCOA accommodates and defines these activities, implementation at a local level will vary. The NSCOA has been aligned in all aspects and improved with new information, clarification and examples for inclusion and exclusion with each jurisdiction s working groups. The Productivity Commission final Research Report on the Contribution of the Not-for-Profit Sector, 13 released on the 11 February 2010 in recommendation 6.6 supported implementation of the SCOA. In Chapter Three of the Economics References Committee report: Investing for good: the development of a capital market for the not-for-profit sector in Australia, urges all Australian governments to remember the COAG agreement to implement the NSCOA in funding agreements with the not-for-profit sector. The full report can be found on the website as Investing for good: Report P 14 of the full document at:

9 Even though the Australian Accounting Standards (AASB) has transaction and sector neutrality, the accounts have been cross referenced with the relevant standards for ease of use. The Australian Accounting Standards Board has announced its work plan which it suggests: As the independent national accounting standard setter, the Australian Accounting Standards Board (AASB) is investigating ways to improve, from a cost/benefit perspective, the quality of general purpose financial reports prepared by charities and other not-for-profit (NFP) entities, " 15 In the May 2011 Federal Budget, the announcement of the establishment of the Australian Charities and Not-for-Profits Commission (ACNC) was made and the Implementation Taskforce was set up 16. On 9 December 2011, the Implementation Taskforce issued a Discussion Paper outlining and seeking feedback on the propose design and implementation of the new reporting framework for charities that will be administered by the ACNC. The proposed design and implementation of a new reporting framework includes implementing the NSCOA as part of the process. A full copy of the discussion paper can be downloaded from the ACNC website. Review and Results With the implementation of the SCOA in Queensland, New South Wales and Victoria, the anecdotal evidence is that: For Nonprofit Organisations: Organisations have taken the opportunity when converting to the SCOA to upgrade their accounting systems (early in the implementation process, we discovered some organisations using pre-gst accounting software) and come into line with generally accepted accounting protocols; Organisations have revamped their financial reporting to their boards and begin rudimentary benchmarking with other like organisations now that they are using similar SCOA; Organisations have invested in greater accounting staff training and financial literacy for staff and boards; Auditors have welcomed the standardisation which makes their task easier and contains otherwise rising audit costs; Implementation has resulted in portability for new treasurers and bookkeepers, especially in the rural communities; SCOA has been of great assistance for responding to state government moves to introduce unit cost funding by permitting more reliable analysis of actual unit costs of service delivery and benchmarking; Even though the initial intention is for small to medium nonprofit organisations, the larger organisations are adapting their charts of accounts to reflect the same general structure and adopting the definitions. Typically, they have a wider variety of accounts due to their nature and size. However, the flexibility of such a tool as the SCOA is that organisations can add specifics to accommodate their specific requirements without compromising the general intent or design of the tool. The SCOA is a tool to assist nonprofits in common language reporting and not is a reporting creation tool that is pre-formatted this ensures the flexibility for all sizes of nonprofit organisations. Different stakeholders may require varying formats and details of information depending on their level of financial literacy and knowledge of each organisation. For Government: Departments have generally moved voluntarily to adopt the SCOA, particularly where they have been engaged in the consultation process;

10 Adherence to the SCOA can breakdown in a department when there is a turnover of staff at senior or coal face levels who have not been briefed about the SCOA; Most departments prefer to incrementally adopt the SCOA as new funding rounds are announced (often in 3 year cycles); Many departments still have not taken advantage of the standardised financial information to benefit from its aggregation for policy development; and Federal funders impose requirements on states through macro funding agreements and those requirements could be rationalise and streamlined. This would reduce the present length of the SCOA. To test these assertions more rigorously, in early 2008, ACPNS completed research quantifying the time and cost of government generated paperwork for Queensland nonprofit organisations, prior to the introduction of the SCOA. It is intended to return after the implementation of the SCOA to measure any compliance reduction, with the findings to be published in a peer reviewed journal. 17 Further details of this and other reviews until 2011 are included in Appendix C. A recent review has been undertaken by the Victorian Government in the form of a Post-Implementation Review 18 where the benefits delivered by the Victorian SCOA to the Victorian Not-for-Profit sector and a qualitative assessment of the process. Benefits have been quantified as over $3.1m savings per year in the Victorian not-for-profit sector. The South Australian Government has issued a Reducing Red Tape for Business in South Australia 2010/2011 booklet outlining various red tape reductions with two key activities for the Not-for-Profit sector being... a Standard Chart of Accounts agreed by COAG and Standardised Grant Agreements across State Government. 19 There are yet to be valuation assessments of these initiatives; however it is useful to note that Ernst & Young prepare these reports every six (6) months. 20 The Future It is anticipated that significant compliance cost reduction could occur through the reduction of the number of line items in the national SCOA that could be achieved by federal agencies examining whether they really need all information gathered from nonprofits through state and territory agencies. It appears that federal-state macro funding agreements often require states and territories to collect and report on certain financial matters. These financial matters are gathered from each jurisdiction s grants management areas by nonprofit organisations. When working through each jurisdiction s SCOA or inclusion into the NSCOA, although states and territories could see little need for such information, apart from satisfying federal grant conditions, the line items had to remain until the federal agreements were altered. Entry into the full SCOA process by the federal departments would be beneficial as it would: Streamline federal grants to individual organisations; Remove barriers to further state government adoption by aligning their financial data requirements to existing SCOA; Allow the option of embedding the SCOA financial definitions into state/federal grant agreements, further driving alignment pressures to non-adopting state governments; and Allow the formation of a national governance body of all relevant stake- holders to consult and decide on changes to the SCOA as necessary. 17 McGregor-Lowndes, M. and C. Ryan (2009) Reducing the compliance burden of non-profit organisations: Cutting red tape The Australian Journal of Public Administration 68(1) see bottom heading: SCOA Post Implementation Review 19 p 20 Reducing Red Tap for Business in South Australia p ibid 10

11 QUT remains focussed on transferring ownership of the NSCOA to an appropriate governance mechanism with sector and QUT representation for maintenance and ongoing support. This could be a body such as the ACNC through one of its working groups or the Treasurer s meetings, or SBR through one of its working groups. The group would be participating in relation to funding and technical updates. It is expected that some decisions relating to this will occur in the first half of The SCOA project is an illustration of the significant benefits that could flow from evidence based reform of regulatory and administrative frameworks that engage nonprofit organisations as demonstrated in the Victorian post implementation review. 21 The adoption of the SCOA by small, medium and large organisations in the nonprofit sector (despite its only being intended for small and medium organisations) is a clear indicator of the current vacuum existing in the regulation of the disclosure regimes of nonprofit organisations in Australia. The SCOA pulls together the disclosure requirements of the AASB and various other pieces of regulation. Nothing new is proposed in the SCOA, but the fact that it is sector specific, contained in one place and has the necessary educative tools attached has attracted both small and large nonprofits to adoption. The key is that government departments discipline themselves to only require information in terms of the agreed database

12 Appendix A The Centre The Australian Centre for Philanthropy and Nonprofit Studies is located in the School of Accountancy, QUT School of Business and succeeds The Program on Nonprofit Corporations which was established at QUT in It conducts postgraduate courses and research degrees in philanthropy and nonprofit studies, research and community service activities that contribute to the development of philanthropy, volunteerism and management of nonprofit organisations. The Centre is the first centre outside North America to be a fully accredited member of the Nonprofit Academic Centres Council, the Centre has a website, 22 produces a monthly Podcast, 23 and maintains a wiki 24 as a resource for nonprofit organisations http://

13 Appendix B The ACPNS/School of Accountancy team has engaged with a number of agencies and organisations in the process of consultation over time. 25 Queensland Treasury and five Queensland government departments to develop a SCOA (July 2006 and October 2007) and data dictionary for nonprofit organisations that receive government funding: The Queensland Rugby Union (QRU) to develop a SCOA for its clubs, accompanying financial manual for volunteer bookkeepers and a financial benchmarking of such clubs. This has been included in the QRU s Club Rugby Admin Kiosk which is designed to improve the lives of volunteer club rugby administrators. 26 The New South Wales Department of Communities (DoCs) as the lead agency in the Human Services Cluster to implement a SCOA for nonprofit organisations in New South Wales (May 2007): The Western Australian Department of Communities completed a project to review the Queensland SCOA and modified it to suit the Western Australian landscape in December 2008 with proposed training of sector and departmental stakeholders to commence in the first part of 2010 for a 1 July 2010 implementation: The Victorian Department of Planning and Community Development has led a number of Victorian Government Departments with nonprofit organisations with the view to modifying and implementing a SCOA to suit the Victorian landscape. The Victorian government has adopted the NSCOA as mandatory for all agencies from implementation with legacy systems modified to enable Not-forprofits to submit information in any form. The consultation was completed by the end of October 2009 with sector training scheduled for March and April 2010 with a 1 July 2010 implementation: The South Australian government worked with ACPNS from June 2010 culminating in a draft update for consideration dated October 2010 and included in the May 2011 Draft: The Tasmanian Department of Premier and Cabinet and Northern Territory Department of Health have engaged ACPNS to assist in a grants acquittal review process to include legislation and processes into the National SCOA by the end of May 2011 and is included in the May 2011 Draft: The Directorate of Community Services in the Australian Capital Territory has undertaken a consultation with the sector in the form of workshops in November Further consultation on the grants management system in the Northern Territory was undertaken with Department of Health and Department of Children staff in November Minor updates to the May 2011 draft have arisen with some changes in legislation and items raised in the consultations in the latter part of these will be added to the ACPNS wiki site. Appendix C Research and Review Results A number of recommendations 27 have come from the research with a key recommendation from the ACPNS research being that a whole of government data dictionary that standardises financial, client data and other reporting terms be collated and that data duplication should be minimised. 25 All web sites and wiki spaces are updated regularly and may have extra information from time to time. External sites are maintained by those organisations and information may be unavailable as their needs change and adapt. 26 A copy of the Club Rugby Admin Kiosk is available to rugby clubs throughout the state at no cost on application to the QRU 27 Refer to Working Paper CPNS No. 39 How Long is a Piece of Red Tape? The Paperwork Reporting Cost of Government Grants 13

14 In addition to ACPNS research, the Queensland Government contracted an independent researcher (Lisa Kennedy of the University of Queensland) to evaluate the introduction of the QUT SCOA to departmental funded nonprofit organisations. The evaluation report 28 noted that: And, Survey respondents were asked whether they had adopted the Standard Chart of Accounts. The majority (62 of 104 respondents) had adopted all relevant aspects or done so in part. A further 10 respondents said they planned to adopt it in the future. 29 When asked how easy the SCOA is to use once you are familiar with it most people (90.5%, n=42) stated that it is easy: 38.1% (n=16) said it was very easy to use the SCOA, and 52.4% (n=22) said it was easy to use the SCOA. 30 The report concluded: As stated elsewhere in this report, it is difficult to draw conclusions about the impact of the SCOA on all not-for-profit organisations in Queensland from the survey data. However, there does not appear to be any systematic bias to indicate that the survey respondents are unlike those who did not answer the survey. Most of the indications for those answering the survey are reasonably positive and therefore, it is likely that the implementation of the SCOA will have beneficial long term benefits throughout not-for-profit organisations. 31 A Queensland Auditor-General s review of three human service departments notes the introduction of the SCOA. The review however also observes that SCOA requires greater embedding into departmental structures and processes. 32 A report by the Victorian State Services Authority which examined the impact of the Victorian Government regulation and other contractual and accountability requirements placed on nonprofit organisations devoted a chapter to a SCOA concept. 33 The report recommended: To streamline financial and accounting terms used in grant agreement reporting, DPCD and DTF should commit to adopting and implementing a standard Chart of Accounts and data dictionary across the Victorian Government, based on the model developed by Queensland University of Technology; and examine the potential to apply the same definitions to service agreements. 34 This report is now the subject of an action implementation plan within the Victorian government and as indicated earlier the Victorian SCOA will be implemented from 1 July In May 2009 the New South Wales Auditor-General released a performance report on grants administration. 36 The report noted that DoCs had adopted the Standard Chart of Accounts and provided training to the sector, but other departments had not followed this lead. The Auditor-General 28 Refer (59.6%) 29 Ibid p7 (9.6% - totaling 69.2%) 30 Ibid p9 31 Ibid p Report to Parliament No 2 of 2007: Results of Performance Management Systems Audit of Management of Funding to Non-Government Organisations: 33 Section 8.2 is headed Standard Chart of Accounts outlining the relationship between inconsistent financial terminology and suggesting the adoption of a standard chart of accounts in the progress towards streamlining accounting practices (Philanthropy Australia submission) and a summary of the Standard Chart of Accounts as developed by QUT (refer page 62) 34 Ibid, Recommendation 9.3 (p64) 35 Project overview : and Action Plan : s+action+plan:+strengthening+community+organisations/$file/sco+action+plan+web.pdf 36 New South Wales Auditor-General, Grants Administration, No. 186, May 2009 available at: 14

15 recommended that the Department of Premier and Cabinet should review the Guide and amend it to encourage all agencies to use a consistent, standard terminology when dealing with grant recipients. 37 In late March 2009, the Annual Report of the Queensland Compact was released and it contained a report on the implementation of the Standard Chart of Accounts in Queensland. It reads as follows: The Compact Governance Committee (CGC) strongly advocates the use of the SCOA and the data dictionary to standardise financial reporting and improve analysis. The CGC welcomed the move by the Council of Australian Governments (COAG) in 2009 to develop a National Standard Chart of Accounts, based on the existing Queensland Standard Chart of Accounts. The National Standard Chart of Accounts will be mandatory for all government agencies, and voluntary for non-government organisations, with implementation occurring in two stages beginning in July The Compact Governance Committee (CGC) encourages non-government organisations to use the standard definitions established within the Standard Chart of Accounts (SCOA) and includes links to the SCOA and associated tools on the Compact Knowledge Hub. The CGC acknowledges however, that the SCOA was initially developed for small to medium organisations and that for some, particularly very large organisations using highly sophisticated information management and reporting systems, switching to the standard chart is neither viable nor useful. Given this, and in light of the impending implementation of a National Standard Chart of Accounts, the CGC will continue to support and encourage streamlined financial reporting, though not recommend further strategies to support the full implementation of the SCOA by nongovernment organisations in Priorities for 2010 The CGC will continue to support both the Queensland Government and QUT contributors in the development of a National Standard Chart of Accounts and support its smooth introduction from July This will include supporting government and sector consultation on the draft National Standard Chart of Accounts. The CGC will also continue to advocate the use of the SCOA to facilitate financial reporting to minimise administrative duplication and compliance costs, and of the data dictionary to improve the reliability and consistency of financial data available to inform decision making. The Department of Communities will lead reforms to maximise the linkages between financial and performance reporting. These strategies are expected to improve the reliability and usefulness of information available to support better evaluation and planning of services and programs. 39 The Queensland Compact s 2010 Annual Report follows up with: The Council of Australian Governments (COAG) agreed on a national SCOA on 20 April 2010, based on the Queensland model. Queensland Government departments implemented this for new grants from 1 July 2010, and will progressively implement the SCOA for grants made on a calendar year or triennial basis. Adoption of the SCOA is mandatory for government agencies but voluntary for non-profit organisations and is expected to streamline and simplify the management of government funding to the sector. The Compact Governance Committee (CGC) will raise any issues or barriers to implementation which it observes with relevant Queensland Government departments ibid at p p Ibid p p 16 15

16 The Victorian Government commissioned a Post-Implementation Review 41 (dated June 2011) where the benefits delivered by the Victorian SCOA to the Victorian Not-for-Profit sector and a qualitative assessment of the process. Benefits have been quantified as over $3.1m savings per year in the Victorian not-for-profit sector. In March 2011, the OCS engaged Strategic Project Partners (SPP) to conduct a Post-Implementation Review (the Review) of the Victorian SCOA implementation, entailing: Quantifying the benefits delivered by the Victorian SCOA to Victorian NFP community organisations Conducting a qualitative assessment of the implementation process to understand and identify key success factors and learnings that could be applied to future initiatives. Using the Regulatory Change Measurement (RCM) methodology, recommended by the Department of Treasury and Finance (DTF), the Review found that the Victorian SCOA will save the Victorian NFP sector in the order of $3.1m per year over the next 10 years from implementation (net of the costs to implement the Victorian SCOA). This saving represents the time saved by NFP community organisations using the Victorian SCOA when they perform a number of bookkeeping, grant application and financial reporting tasks. In addition, several non-quantifiable benefits have been identified, relating to the increased quality in financial information that should become available from the NFP community sector following this initiative. This Review found that the overwhelming majority of stakeholders, within both the Victorian Government and the NFP community sector, thought that the implementation of the Victorian SCOA has been well managed by the OCS. This was evidenced by the fact that 87 percent of the NFP community organisations surveyed for this Review were satisfied with the tools and level of support provided by the OCS to help them implement the Victorian SCOA. Similarly, all the Victorian Government stakeholders interviewed as part of this Review indicated that the OCS successfully engaged across the Whole-of- Victorian Government throughout the implementation of the Victorian SCOA. The Review found that the OCS was able to reach and provide the right level of support to a wide range of NFP community organisations. In particular, NFP community organisations appreciated: The range of training, tools and support programs The ability to cherry-pick tools and support programs that best suited their needs and The responsiveness of those involved in the delivery of the tools and support programs. As a result, more than 80 percent of the NFP community organisations who implemented the Victorian SCOA found the implementation easy. The Review highlighted some improvements that the OCS may want to consider in future implementations: 1. Victorian Government departments may require specific tools to implement initiatives 2. The benefits of any change programs should be clearly demonstrated at an operational level 3. Some NFP community organisations may benefit from more individualised support. Perhaps the best indication of the success of the Victorian SCOA is that 94 percent of the NFP community organisations who implemented it recommend that other organisations do so. 42 The South Australian Government has issued a Reducing Red Tape for Business in South Australia 2010/2011 booklet outlining various red tape reductions with two key activities for the Not-for-Profit sector being... a Standard Chart of Accounts agreed by COAG and Standardised Grant Agreements across State Government. 43 There are yet to be valuation assessments of these initiatives; however it is useful to note that Ernst & Young prepare these reports every six (6) months see bottom heading: SCOA Post Implementation Review 42 p 4 of 28 data/assets/pdf_file/0004/63958/doc-central_n _v1_victorian_scoa_post-implementation_review_final FOR_PUBLICATION.pdf 43 p 20 Reducing Red Tap for Business in South Australia p ibid 16