The accountability paradox: How more reporting led to less trust in global philanthropy

Well-intentioned efforts to increase transparency in the non-profit sector have created a system that optimises for the appearance of accountability rather than genuine financial clarity.

The numbers tell a stark story. Organisations worldwide spend millions of hours annually manipulating the same financial data into dozens of different grant formats. Meanwhile, 72% of stakeholders across 179 countries supported the development of international accounting standards because of significant challenges with current reporting processes. We have somehow built a system where non-profits learn how to generate reports while funders struggle to assess true organisational health. This is not new news. The global development and humanitarian sector’s Grand Bargain commitment in 2016 acknowledged that fragmented requirements undermine the very transparency they seek to create. Yet, until now, we were still mired in “reporting performance” instead of sharing data to share information.

The new International Non-Profit Accounting Standard (INPAS), developed by Humentum and CIPFA through the IFR4NPO Project, offers a way out of this paradox, but only if we’re willing to acknowledge how sector-wide good intentions created such problematic outcomes.

How good intentions created bad outcomes

The current reporting chaos arose from legitimate concerns. After high-profile non-profit scandals, donors rightfully demanded better accountability. Each funder, acting independently, developed what seemed like reasonable requirements for their grantees. However, because 92% of countries lack national-level guidance for non-profit reporting, organisations were left to navigate a maze of growing and contradictory expectations.

For example, consider an NGO working with multiple funders. The same financial transaction – purchasing medical supplies for a health programme – might need to be categorised as “direct programme costs” for one funder, “beneficiary support” for another, and “medical interventions” for a third. The organisation’s finance team becomes mired in data manipulation, spending more time on reporting than analysing actual financial health.

Now think of the corollary of for-profit accounting. With internationally accepted standards, shareholders know how to interpret results. No one asks BP or Nestle to break down asset depreciation into 14 different categories – they accept what’s in the reported numbers.

This non-profit “norm” has created “reporting performance;” the ability to present financial information in whatever format funders request, regardless of whether that format provides meaningful insight to their own organisation. The skill being rewarded is not financial stewardship but rather the ability to fit numbers into a multitude of different terminology requirements. The proliferation happened because each funder genuinely believed their specific requirements were essential. Development banks needed certain risk indicators. Private foundations wanted different impact metrics. Government donors required compliance with national procurement rules. No single actor saw the full burden they were collectively imposing on the sector.

The cost to both sides of the partnership

This fragmented approach extracts a heavy toll from everyone involved. For non-profits, the administrative burden has become unsustainable. Senior finance staff – people who should be analysing cash flow patterns, forecasting and supporting strategic decision-making – instead spend their time reconciling the same transactions across multiple reporting formats. The hidden costs are enormous: duplicate audits when funders don’t accept each other’s assurance processes, workaround systems that introduce errors, and multiple staff needed just to focus on reporting.

But the funders suffer too. Despite receiving volumes of financial reports, they struggle to compare organisations or assess relative financial health. Due diligence processes lack confidence because reported information varies dramatically in format and emphasis. Critical issues like double funding become nearly impossible to detect when organisations present the same activities using completely different frameworks. (Again, compare it to a shareholder who invests in multiple publicly traded companies.)

The sector-wide impact is perhaps most troubling. Resources flow not to the most effective organisations but to those most skilled at reporting compliance. Smaller organisations, particularly those in the Global South, find themselves excluded from funding opportunities simply because they lack the administrative infrastructure to manage complex reporting requirements. We’ve created a system where administrative acumen has crowded out actual accountability.

INPAS: A framework for genuine accountability

The International Non-Profit Accounting Standard represents a fundamentally different approach. Developed over six years from 15,000+ engaged stakeholders across 169 countries, INPAS creates a single, sector-specific framework for non-profit financial reporting. Unlike current processes, INPAS addresses the unique aspects of non-profit operations: restricted funding, programme accountability, volunteer contributions, and mission-driven resource allocation. It provides a common financial language that works across borders, regulatory environments and organisational types.

For non-profits, INPAS offers a relief from “reporting performance.” Instead of maintaining expertise in dozens of formats, finance teams can master one robust system. Data manipulation outside accounting systems – the source of so many errors and inefficiencies – becomes unnecessary.

For funders, INPAS delivers what the current system promises but fails to provide: genuine comparability. Due diligence becomes more reliable because organisations report using consistent frameworks. Risk assessment improves because financial health indicators mean the same thing across different organisations. For the sector as a whole, INPAS addresses both efficiency and equity. Reducing reporting burden not only saves resources but levels the playing field for smaller organisations that currently face barriers to funding simply due to administrative capacity constraints.

The path forward: From performance to substance

Moving beyond the accountability paradox requires a fundamental mindset shift from all stakeholders. Funders need to move from asking “does this financial report meet my needs?” to “what is this organisation’s actual financial reality?” Accountability requires courage from funders to let go of bespoke controls and embrace a shared language. This means focusing on organisational health indicators and accepting that meaningful accountability comes from consistent, comparable information.

Non-profits must shift from viewing financial reporting as only necessary for external audiences and instead as a tool for internal management. This requires investing in robust financial systems rather than sophisticated workarounds. INPAS offers a way out that strengthens both accountability and trust. It replaces compliance performance with systems that deliver genuine financial transparency, creating conditions where trust can be built on substance rather than administrative performance.

The window of opportunity is now. INPAS is ready for adoption, having completed rigorous development and consultation processes. The question is whether funders will provide the leadership necessary to drive sector-wide change. Greater equity and accountability await those philanthropies willing to champion a better approach to non-profit accountability.