Background – impetus for service performance reporting

There are approximately 28,000 registered in NZ (one of the highest ratios per capita in the world). These charities are managing over $50 billion in assets and have a combined income of approximately $17 billion. A key question that has arisen with policymakers is how do stakeholders (funders, suppliers and beneficiaries etc.) know what returns they are getting?

In the public sector, reporting entities are already required to prepare an annual statement of service performance (SSP), which sets out the outcomes they seek to achieve, and their annual inputs and outputs.

Outside the public sector funders are increasingly moving towards funding outcomes rather than inputs as they want to see that they are allocating their funds to credible entities that are achieving good results. The SSP is an obvious mechanism to demonstrate this, to enable charities and other public benefit entities (PBEs) outside the public sector to “tell their story.” This is why it has been incorporated into the new PBE reporting framework applicable to charities and other not-for-profit organisations.

As more and more charities adopt an SSP, it is likely to become an essential “calling card” with funders and a distinguishing feature between charities competing for the same pot of funding.

Existing annual reporting requirements

Charities reporting under tiers 3 and 4 PBE standards are now required to present an SSP in their annual performance report. The legislative requirement to present an SSP has been deferred for tiers 1 and 2 PBEs because at present there is no PBE standard that focuses on service performance reporting (although the PBE standards do include some non-integral guidance on service performance reporting as a short-term measure).

Tiers 1 and 2 – new exposure draft

An exposure draft on a new financial reporting standard, ED NZASB 2016-6 Service Performance Reporting, was issued in February 2016 for public comment (now closed), and a new standard is likely to be issued early in 2017. The exposure draft proposed a two-year implementation period which, if carried through, means the resulting new standard may apply from as early as 1 January 2019.

Summary of exposure draft

The exposure draft refers to three dimensions of service performance and requires information on all three dimensions. The three dimensions are:

1. What did the entity do? What goods and services (referred to as outputs) did the entity provide during the period?

2. Why did the entity do it? What outcomes did the entity seek to influence?

3. What impact did the entity have?

Important detail

• PBEs must present an SSP that is appropriate to the complexity, size and nature of the entity.

• The aim is for “appropriate and meaningful” information. This will also require considerable judgement as to what is “relevant” and what is “verifiable”.

• Service performance information is to be presented in a format that best meets the information needs of users (i.e. there is no prescribed format).

• Comparative information (this year vs. last year) is required.

• Report against budgeted or forecast detail only if this was previously published.

If you would like further information on this topic please contact your local Audit Adviser.