FRC Unveils Accounting System for Churches, Mosques, Others
Executive Secretary/Chief Executive Officer, FRC, Mr. Jim Osayande Obazee
In order to ensure accountability and probity in churches, mosques and other not-for-profit organisations, the Financial Reporting Council (FRC) Monday unveiled the Statement of Accounting Standards (SAS) 32.
Speaking at a public presentation of the SAS 32 in Lagos Monday, Executive Secretary/Chief Executive Officer, FRC, Mr. Jim Osayande Obazee, said the accounting system would also bring about uniformity in the accounting system of all not-for profit organisations.
Not-for-profit organisations are entities normally without transferable ownership interests. They are organised and operated exclusively for social, educational, professional, religious, health, charitable or any other not-for-profit purposes.
Obazee insisted that currently, the financial statements presented by not-for-profit organisations in Nigeria were not uniform and comparable.
The SAS 32 amongst others stipulates that financial statements for not-for-profit organisations shall include: Statement of Accounting Policies; Statement of Financial Position; Statement of Activities (income and expenditure); Statement of Changes in Net Assets; Statement of Cash flows; Notes on Accounts and Five-year Financial Summary.
Obazee explained: “They (the accounting system for not-for-profit organisations) differ from one type of institution to another and sometimes among institutions of a particular type, thus making comparison and accountability difficult. The SAS 32, effective July 1, 2011 establishes uniform, basis of accounting and reporting activities of not-for-profit organisations.”
According to him, the national roadmap to the adoption of the International Financial Reporting Standards (IFRS) categorised not-for-profit organisation in Phase 2.
He added that they were expected to comply with the provision of IFRS, effective January 1, 2013.
“It has also been noticed that a number of entities operating on commercial lines, within charity, are claiming exemption on their income, on the ground that the totality of the outfits are charitable institutions. This is based on the argument that they are engaged in the “advancement of an object of general public utility” and classified a “company limited by guarantee” as provided for Section 26 of the Companies and Allied Matter Act 2004.
“Such a claim, when made in respect of an activity carried out on commercial lines, is contrary to the intention of the provision and put the assets of the charitable purpose at significant risk.
“Proper financial reporting infrastructure shall enhance the benefit to entities which are engaged in activities such as relief to the poor, education of members, medical relief and any other genuine charitable purpose, and to deny it to purely commercial and business entities which wear the mask of charity,” he explained.
However, Obazee pointed out that the income of all not-for profit registered under the Act was exempted from tax, even as he insisted that “business subsidiaries that are set up by charities are usually treated in the same manner as any other company. The income of these business subsidiaries is subject to income tax and should be rightly so reported, accounted and disclosed. This is the practice in the United Kingdom, Singapore and other developed economies.”
The FRC boss expressed optimism that most not-for-profit organisations in Nigeria were prepared for the impending financial reporting regime. But he advised other promoters of not-for-profit organisations who were not aware of the new accounting regime to ensure compliance by fine-tuning their financial reporting and corporate governance structure.