Financial Times

The Institute of Chartered Accountants of Sri Lanka (ICASL) recently released a document on ‘Recommended Practice for Not-for-Profit Organisations (including NGOs)”.

In a statement it said: “NGOs are those who voluntarily get together to form an association to act for the public good. The growth of Non Governmental Organisations has been phenomenal in all parts of the world. NGOs have proliferated because the State by itself has not been able to fulfill all the aspirations of people. Therefore even from the beginning of the 20th Century people of goodwill worked towards the alleviation of poverty, women’s rights, human rights, peace, environment and a number of issues. Through the evolution of the NGO sector global institutions began to emerge specialising in development, human rights, conflict resolution, environment etc. The sum total of activities of the NGOs has therefore filled the space the state and the merchant could not fill. Today the power of the third sector cannot be underestimated in the promotion of human rights, democracy, good governance and many other issues” (from feature “An enquiry into NGO bashing” – the Island of Friday 24th March 2006 - by Dr. Kumar Rupasinghe, Chairman of Foundation for Co-Existence).

Despite NGOs becoming the third sector in the socio, political and economic development of any country “in our country there are often epidemics of NGO–bashing”, Dr. Kumar Rupasinghe, further states. One area of NGO bashing is on account of transparency – or the lack of it - in finance and accountability.

The ICASL said the magnitude of the funds channeled through these organizations creates considerable responsibility in terms of accountability, reporting, follow up and monitoring. Transparency therefore becomes an important issue in Sri Lanka. “It is claimed that the statutory and regulatory environment is vague in Sri Lanka. Clear guidelines need to be provided to these organizations on how to conduct their affairs, including the accounting and reporting. It is also acknowledged however, that extensive regulation is not necessarily fruitful, and that “too much” regulation might turn out be equally bad as “too little”, considering the important role that these organizations play within society at large. The Sri Lanka Statement of Recommended Practice for Not-for-Profit Organisations (including Non-Governmental Organisations) has been designed within this broader frame work. The project for developing the SL SoRP-NPOs [including NGOs] was undertaken by the ICASL at the request of the Ministry of Finance. Extensive research was carried out extending over a period of more than one year. A team of high quality Chartered Accountants was involved. A number of publications on the subject were studied, including “NGOs in Sri Lanka, Past and Present Trends” by Udan Fernando; “Financial Statements of Not-for-Profit organizations, by the Financial Accounting Standards Board of USA; Accounting and Reporting by Charities: Statement of Recommended Practice” by the Accounting Standards Board of the United Kingdom and the “Technical Guide on Accounting and Auditing in Not-for-Profit Organisations” by the Research Committee of the Institute of Chartered Accountants of India,” it said.

However, the SL SoRP has its unique features. It is a stand alone Standard for the preparation of financial statements by NGOs.

During the Round Table Discussion held on the SL SoRP for NGOs with a well represented group of NGO representatives and their auditors, Dr. Vinya Ariyaratne of Sarvodaya highly complimented the SoRP, stating that it is a very useful document.

He further stated that their financial statements and proposals prepared in accordance with the Sri Lanka Accounting Standards, are well accepted by foreign donor agencies.