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Comments are being sought on the third and last draft of the international non-profit accounting guidance (INPAG), which seeks to improve the quality of audited accounts in the non-profit sector while reducing the reporting burden on individual organisations.

The focus of the draft, which is published by CIPFA and global non-profit Humentum, is on the presentation of financial information, with new sections on fund accounting, the classification of expenses and fundraising costs.

The first two drafts considered the overarching framework for financial reporting in the non-profit sector and the key accounting transactions relevant in the field.

According to leading figures in the global non-profit sector, the guidance will play an important role in boosting credibility and trust by making financial reports clearer, more consistent and more transparent.

“At the moment, there’s no useful applicable international standard and by having one, it will improve the usefulness, the transparency and the reliability of financial reports,” said Hikmet Abdellah, director general of the Accounting and Auditing Board of Ethiopia.

Papa Ibrahima Sene, finance and administration head at the International Federation of Red Cross and Red Crescent Societies Asia Pacific, said enforcement of transparency and accountability to the donor was one of the chief benefits.

“The organisation can demonstrate the funds have been used according to the donor intentions and earmarking conditions,” he said.

“A stronger link between donor reports and financial statements can only strengthen the assurance process and may reduce the risk of errors,” said Naziar Hashemi, partner and head of social purpose and non-profit organisations at accountancy firm Crowe UK.

“The standard format will hopefully reduce the burden on non-profit organisations.”

The guidance, developed over the last five years through the IFR4NPO project, has been developed with input from advisory groups in 24 countries, bringing expertise in the fields of standard setting, auditing, reporting and grant making.

CIPFA chief executive Rob Whiteman said the accountancy profession played a critical role in building trust and inspiring action within the non-profit sector.

“That’s why CIPFA is delighted to be working jointly with Humentum to pioneer the first ever international financial reporting guidance for non-profit organisations,” he said.

“The third exposure draft addresses the most pervasive issues encountered by non-profit organisations globally.”

He urged organisations to submit their comments to ensure the final guidance was as effective as possible. Christine Sow, chief executive of Humentum, said the final exposure draft marked a “giant leap forward” in driving up the quality and reliability of annual audited accounts, while reducing the reporting burden on non-profit organisations.

“Additionally, the proposals for fund accounting and support costs provide transparency at a holistic whole-of-entity level, removing the barriers to flexible funding and full cost recovery that have been holding the sector back for decades,” she said.

“We now call on grant makers to seize the opportunity of a generation by actively engaging in this consultation and the finalisation of INPAG, to ensure that the funding ecosystem works for everybody.”

The draft guidance is open for comments until 16 September.