September 20, 2017
 
Consider Issuing a Schedule of Program Accomplishments

By Frank A Monti, CPA

Frank Monti
Because nonprofits don’t report bottom-line results in the way profit-oriented business do, they should consider issuing a certified schedule of program accomplishments annually to help funding sources understand how funds are used.

Typically, expenses of the nonprofit are presented on a functional basis. The organization reports the total expenses for each of the different programs or initiatives it has undertaken. While this reporting, certified as being fairly stated by independent auditors, is essential to this sector of the economy, many believe that an additional Schedule of Program Service Accomplishments should also be published by these organizations.

Simply put, this schedule would provide the reader, e.g., potential or current funding sources, with statistical information regarding the outcomes achieved from the dollars expended in program efforts.

While creating a schedule of program services will consume time and cost money, experience shows that the process sharpens the focus of the entire staff on outcomes and away from process. In addition, if organizations can document their value-added by certifying program achievement to outcome objectives, their search for funding will likely meet with greater success, as funders themselves increasingly focus on mission impact.

Reporting that ABC Agency spent $113,000 on counseling pregnant teenagers is not as useful to a reader as knowing that 400 teenagers participated in three counseling sessions. Even better reporting would be that the teenager's knowledge of prenatal care increased as a result of the counseling and that behavioral change followed new information. If this type of data were available, it could become part of the audited performance by an independent certified public accountant (CPA). It also could be presented along with traditional financial statements.

Creating a Schedule of Program Accomplishments

Creating a Schedule of Program Service Accomplishments for audit by an independent CPA is not a task to be left to the end of the year. A series of complex reporting standards apply to reporting program service accomplishments just as they do in financial reporting. It is these standards, promulgated by the American Institute of Certified Public Accountants (AICPA), that give nonprofits’ certified financial statements credibility with potential funding sources. Likewise, adhering to standards of reporting for program service accomplishments will impart similar credibility to those statistics.

The AICPA has established standards for certifying the information presented in a Schedule of Program Service Accomplishments, which indicate that a CPA may only certify an outcome if the following two conditions exist:

  1. The outcome is capable of evaluation against reasonable criteria that either have been established by a recognized body or are stated in the presentation of the outcome in a sufficiently clear and comprehensive manner for a knowledgeable reader to be able to understand it.

  2. The outcome is capable of reasonably consistent estimation or measurement using such criteria.
Criteria issued by regulatory agencies and other bodies composed of experts that follow such procedures as including protocols for broad distribution of proposed criteria for public comment should be considered reasonable criteria for this purpose. Criteria established by industry associations or similar groups that do not follow due process or do not clearly represent the public interest, however, should be viewed more critically.

When reasonable outcome criteria from sources external to the reporting organization do not exist, the organization itself may have to develop its own outcome criteria. In such a situation, the CPA must determine if the established criteria are reasonable. Reasonable criteria are those that yield useful information. The usefulness of information depends on an appropriate balance between relevance and reliability.

If your organization is formulating its own outcome criteria, the concepts of relevance and reliability must be understood and incorporated into those criteria.

I. Relevance

  • The capacity to make a difference in a decision.
  • The ability to bear upon uncertainty.
To be relevant, the outcome must also be timely, complete and consistent over time.

II. Reliability

Reliability is achieved through adherence to four goals:

  1. Representational faithfulness – The outcomes correspond or agree with the phenomena they purport to represent.
  2. Absence of unwarranted inference or certainly or precision – The outcomes may sometimes be presented more appropriately though the use of ranges or indications of the probabilities attaching to different values rather than as single point estimates.
  3. Neutrality – The primary concern is the relevance and reliability of the outcomes rather than their potential effect on a particular interest.
  4. Freedom from bias – The measurements involved in the outcomes are equally likely to fall on either side of what they represent rather than more often on one side than the other.
Frank Monti is a principal with Kahn, Litwin, Renza & Co., Ltd., a Rhode Island based certified public accounting and business consulting firm, servicing nonprofits in Rhode Island and Massachusetts. Email him at fmonti@kahnlitwin.com.

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