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Malaysian NPOs’ Reporting: Where Do They Stand?

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In the current economic environment, provision of sustainable public services by non-profit organizations (NPOs) are quite challenging due to restricted funding allocation and reduction in voluntary donations. Therefore, in ensuring continuous support from the resource providers through the ability to administer the activities of NPOs, it is paramount for NPOs to provide sufficient transparency level to facilitate an assessment of their accountability through annual reports. However, less stringent reporting requirements for Malaysian NPOs may give rise to information asymmetry that can hinder effective monitoring and regulating due to insufficient information disclosed. Thus, this study examined the extent of accountability and transparency on financial reporting practices which were disclosed by NPOs in Malaysia. Using content analysis of annual reports from 2009 to 2011 of 40 NPOs which were registered with the Companies Commission of Malaysia. From the financial position/stability, this study reported 90% of the NPOs disclosed the detailed revenue but only 50% disclosed the detailed expenditure. Only 40% of the disclosure items have been disclosed under management and performance policies with 50% of the NPOs provided merely brief explanation on performance and achievement which revealed that there is no comprehensive disclosure has been made. For an organization efficiency, 70% of the NPOs provided the detailed disclosure on program spending but 80% of them did not disclose any information in relation to fundraising method and expenses incurred. These results revealed the important insights into the current state of information reported in NPOs’ annual report which can be potentially increase the extent of information reported to help the regulators in their continuous efforts to improve accountability and transparency in non-profit sector and fulfil the need for more comprehensive reporting guidelines.
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Keywords: Accountability; Disclosure; Financial Reporting; Non-Profit Organizations; Transparency

Document Type: Research Article

Affiliations: 1: Faculty of Accountancy, Universiti Teknologi MARA, Melaka Branch, Jasin Campus, 77300 Merlimau, Melaka, Malaysia 2: Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, 40450 Shah Alam, Selangor, Malaysia 3: Faculty of Accountancy, Universiti Teknologi MARA, Selangor Branch, Puncak Alam Campus, 42300, Bandar Puncak Alam, Selangor, Malaysia

Publication date: November 1, 2017

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