Nonprofit organizations (NPOs) worldwide face significant challenges in reporting to their funders, with each donor requiring their own unique classification, measurement basis, and template. According to a recent study, one NPO spends two weeks each month just reporting to donors. This problem arises from the lack of standardization in reporting frameworks, which can lead to inefficiencies and wasted resources. The study, conducted by researchers including Wayne van Zijl, interviewed 21 nonprofit stakeholders from South Africa, the UK, the US, Sweden, and Uganda to understand the reporting challenges they faced and potential solutions.
The current reporting system can distort the performance of NPOs, as financial metrics used for profit-making entities do not accurately reflect their social and environmental impact. For example, two identical NPOs with different spending patterns can appear to have vastly different performances based on financial returns alone. This highlights the need for non-financial information to be included in reporting, such as output, outcome, and impact metrics. Output refers to the effort exerted by an NPO, while outcome and impact assess the short-term and long-term changes resulting from their activities.
The International Non-Profit Accounting Standard, launched in 2025, is a significant step towards standardization but primarily focuses on financial accounting. As a result, many donors create their own templates, often requesting irrelevant information while omitting useful data. To address this issue, the researchers developed the Civil-Society Organisations Reporting Practice (CORP) framework, which aims to integrate financial and non-financial information into a common reporting structure. This framework can reduce the need for donors to develop their own templates and alleviate stress and anxiety for NPOs.
The CORP framework consists of five elements, including a report from the CEO or trustee explaining the NPO's theory of change, strategy, and performance. It also includes a flash report providing key historical financial and non-financial information, a statement of credibility addressing legitimacy risks, and a statement of activities integrating financial and non-financial information. The goal is to create a universally accepted and adopted NPO integrated reporting framework that allows users to find the information they need without decoding unfamiliar documents.
Accountability in both directions is crucial for NPOs, with donors dominating what nonprofits report through upward accountability. However, this can risk letting donors define what "good" and "bad" NPO performance looks like, potentially driving undesirable behavior. Downward accountability, where beneficiaries can evaluate NPO performance and influence service delivery, is necessary to balance this power relationship. For instance, a tuition program may have excellent pass rates but inadvertently exclude under-resourced learners if lessons finish after the last bus departs.
The development of a universal reporting template requires collaboration between NPOs, governments, donors, beneficiaries, academics, and standard-setters. By working together, they can create a commonly accepted and adopted framework that reduces the cost and anxiety of reporting while allowing users to find the information they need. This can help NPOs focus on delivering social and environmental services rather than spending excessive time and resources on reporting.
The implementation of a universal reporting template can have significant benefits for NPOs, donors, and beneficiaries. It can increase transparency, accountability, and comparability, ultimately leading to better decision-making and resource allocation. As the nonprofit sector continues to evolve, it is essential to address the reporting challenges faced by NPOs and work towards a more efficient and effective system.
Key points
- A universal reporting template can help reduce the time and resources spent by nonprofits on reporting to funders.
- The current reporting system can distort the performance of nonprofits, highlighting the need for non-financial information to be included in reporting.
- Collaboration between stakeholders is necessary to develop a universally accepted and adopted NPO integrated reporting framework.
