Rethinking NPO financial reporting: Harmonising for greater impact

Have you ever considered how much time and effort non-profit organisations (NPOs) spend on meeting diverse donor requirements? These requirements, while meant to ensure accountability, can overwhelm NPOs and divert them from their core missions. It’s time to rethink how we support these vital organisations and create a more equitable and efficient system.

The challenge of diverse reporting formats

Currently, many donors have unique reporting templates and schedules for their grantees, leading to several key issues:

• Incomparability: The lack of uniform accounting standards makes it difficult to compare financial health and compliance across NPOs
• Resource strain: NPOs with multiple donors must navigate various reporting formats, consuming valuable staff time that could be better spent on their programmes
• Data variability: Even when a donor uses one template for its grantees, differing definitions and terms result in inconsistent data quality and comparability

Large international NPOs find this process challenging and costly, even when equipped with skilled accountants and advanced systems. One such organisation estimated that standardised reporting could save them 11,000 person-hours annually and that the use of standard accounting definitions by their main donors would result in 29,000 annual person-hours saved.

At the same time, smaller local NPOs – often under-resourced, under-staffed, and using simple accounting software – are unduly burdened by this lack of donor harmonisation and may be prevented from diversifying their funding (a financial sustainability best practice) due to their inability to meet due diligence and reporting requirements.

A solution on the horizon: INPAG

The International Financial Reporting for Non-Profit Organisations (IFR4NPO) initiative is set to publish International Non-Profit Accounting Guidance (INPAG) in mid-2025. This will be the first global accounting standard tailored to the non-profit sector, to be adopted by countries lacking such guidance (estimated at 90% of the world’s countries). Over 14,000 individuals from 3,500+ organisations in 169 countries are engaged in INPAG’s development, with contributions from representatives in over 70 countries. This collaborative effort aims to create robust, credible guidance acceptable to the sector, governments, the accounting profession and civil society.

Benefits of INPAG

INPAG will enable funders to assess NPO readiness for additional funding more accurately, as grantees will use a unified framework for financial reporting. This standardisation will reduce the time and effort needed to produce and interpret financial data and alleviate the reporting burden on NPOs. Additionally, accounting software providers will be able to develop affordable packages for smaller NPOs, thanks to INPAG’s standardised definitions and processes. This will support NPOs in managing restricted donations and tracking unrestricted reserves, strengthening the case for flexible funding and trust-based philanthropy.

Moving forward together

INPAG is scheduled to launch in 2025, filling the standards gap plaguing donors and NPOs throughout much of the world. No longer will NPOs be asked to use poorly aligned private sector standards (or no standards at all) to accurately demonstrate their financial health and capability. By adopting INPAG, the relationship between donors and grantee NPOs will be simplified and facilitated and should result in stronger partnerships and greater program impact. As part of INPAG development, country-level advocacy has already begun; we anticipate that in the next several years, individual countries will move to adopt INPAG-aligned standards, requiring nationally-registered NPOs to comply with this new accounting approach. Donors can proactively support their grantee organisations by working with them once INPAG launches in 2025 to assist their transition to the new reporting framework.

How funders can support INPAG

We encourage donors to support INPAG in various ways:

• Join the INPAG Donor Reference Group: Contribute to finalising the guidance and driving adoption
• Sign the INPAG support statement: Publicly recognise INPAG’s potential and importance
• Consider INPAG’s implications: Start thinking about using INPAG’s harmonised reporting format with grantees
• Plan and finance the INPAG roll-out: Help create the roadmap for INPAG adoption by countries, donors, and NPOs

By embracing INPAG, funders can lead the way towards a more equitable and efficient global development landscape. Supporting these harmonised standards ensures impactful contributions that respect the diverse capacities of NPOs worldwide. This is a pivotal moment to shift from fragmented practices to a unified approach, empowering NPOs to focus on their missions. By taking proactive steps to support INPAG, funders will strengthen partnerships with grantees and contribute to a more sustainable and transparent philanthropic sector, driving greater social change. Together, we can make 2025 the year we launch a more just and effective funding ecosystem for all.