Strengthening Non Profit Transparency With INPAS

Enhancing Transparency in the Nonprofit Sector: The Emerging Role of INPAS

In Cyprus, non profit organizations are required to maintain accounting records, with larger entities also subject to financial reporting and audit requirements. At the same time, expectations for transparency and accountability are increasing, driven by donors, registrars, and other stakeholders.

While established frameworks such as IFRS Accounting Standards and International Public Sector Accounting Standards (IPSAS) provide structured guidance, they do not always reflect the underlying economic reality of non profit organizations or how they create and preserve value. Unlike jurisdictions such as the United Kingdom, which applies a dedicated Charities Statement of Recommended Practice, Cyprus lacks a sector-specific accounting framework.

In this context, the International Non Profit Accounting Standard (INPAS) is emerging as a leading practice, drawing on IFRS for SMEs (third edition), full IFRS, and IPSAS. Although not yet formally adopted in Cyprus or most jurisdictions, INPAS represents the first globally developed framework tailored specifically to non profits, aiming to enhance comparability and transparency.  According to ICAEW, adoption is targeted in at least ten countries by 2030.

INPAS addresses key donor and stakeholder questions on restricted funding and the relationship between programme and administrative costs, in a more structured and transparent way. Its focus extends beyond statutory compliance to address comparability and accountability in line with non profit operating models.  

For Cyprus based organizations, INPAS should not be viewed as a replacement for IFRS at present, but rather as a complementary framework that can enhance the quality and usefulness of financial reporting.

Key Developments Under INPAS: Five Areas to Consider

01 Narrative Reporting

Non profits need to present narrative reporting information that is useful for accountability and decision-making, related to the following: overview of the organisation, performance reporting on programs vs. outputs, financial objectives and strategies, analysis of the financial statements and principal risks and uncertainties.  

In preparing this, organizations may encounter information of a sensitive nature, such as commercial, operational or personal data. Where this is the case, a practical approach is to aggregate such information to reduce its sensitivity, allowing organizations to maintain transparency without compromising confidentiality.

02 Presentation of Financial Statements

INPAS sets out a financial statement structure broadly aligned with IFRS but adapted to reflect the specific characteristics of non profit organizations. A complete set of financial statements typically includes: a Statement of Financial Position, Statement of Income and Expenses, Statement of Changes in Net Assets, Statement of Cash Flows, and accompanying notes. 

A key conceptual distinction is the replacement of “equity” with “net assets,” reflecting that resources are retained to support mission-related activities rather than distributed to shareholders.  

INPAS also requires financial performance to be presented in a way that enhances users’ understanding of both financial position and performance in a non profit context.

03 Fund accounting

Fund accounting is a distinct feature of INPAS, enhancing transparency over how resources are used within non profit organizations. Funds provided or raised for a specific purpose, whether due to donor restrictions or expectations from fundraising campaigns, are tracked and reported as separate restricted funds. Where these extend across multiple reporting periods, their balances must be monitored to reflect ongoing activity delivery.

In contrast, resources without specific restrictions are classified as unrestricted or general funds and may be used at the discretion of the governing body to support the organization’s mission. INPAS also clarifies that a grant does not automatically constitute a fund, with classification depending on the presence of specific restrictions or designated purpose. 

To ensure accountability, organizations must maintain sufficient accounting records to track and report funds separately.

04 Revenue and Expense Recognition

INPAS distinguishes between non-exchange revenue, such as grants and donations, and exchange revenue arising from contracts with customers. Classification is based on the economic substance of the transaction, ensuring revenue is recognised according to whether the organisation is receiving resources without providing direct consideration or delivering goods and services in return. The framework also requires organizations to determine whether they act as a principal, taking responsibility for delivering grant-funded activities, or as an agent, arranging for another party to carry them out.

INPAS further requires expenses to be classified by both nature and function, providing clarity on what resources have been consumed and for what purpose. This includes distinguishing between program, administrative, and fundraising costs, as well as linking expenditure to specific grants or restricted funds.  

05 Volunteers

INPAS introduces specific guidance on how non profit organizations account for volunteer contributions and other donated services, an area of particular relevance in Cyprus where organizations often rely heavily on volunteer support. 

The framework acknowledges that volunteers can represent a significant resource in the non profit sector and, in certain circumstances, allows for the recognition or disclosure of volunteer services when their value can be reliably measured and is material to understanding the organization’s activities. Even where recognition is not possible, INPAS emphasizes transparent disclosure to reflect the contribution of volunteers to mission delivery.

INPAS in Practice: Benefits and Challenges

In principle, the potential benefits of INPAS are significant: supporting clearer donor reporting, improved visibility over fund utilization and more meaningful comparisons across non profit organizations. For larger and more complex entities, it may also strengthen governance and enhance engagement with international donors and partners, where consistent and transparent reporting is increasingly expected.

• Boards and governing bodies: INPAS strengthens oversight and decision-making by improving clarity over funds, performance, and financial position. It enhances visibility over resource allocation and supports a more informed assessment of both financial health and mission delivery. 

• Donors and external stakeholders: INPAS improves transparency and comparability across non profit organizations. More consistent reporting of revenue, fund use, and performance information strengthens trust and supports more informed funding decisions. 

Practical Implementation Challenges

Despite its potential, adoption may present challenges particularly for smaller and grassroots organizations. In Cyprus, many non profits operate with constrained administrative and technical capacity, often relying on volunteers with limited specialist support. In this context, introducing an additional reporting framework may increase administrative burden without proportionate benefits.

As a result, the value of INPAS is likely to be realized unevenly across the sector. Larger and more internationally connected organizations are better positioned to implement the framework effectively, using it to enhance credibility and donor engagement. Smaller entities may face greater challenges in engaging with the full requirements of the standard, potentially widening existing gaps in reporting capacity and transparency across the local sector.

A Step Forward for the Sector

Overall, INPAS represents an important step toward greater consistency and accountability in non profit financial reporting, but its success will depend not only on the quality of the framework itself, but also on the ability of organizations across the sector to implement it in a proportionate and practical way.  For Cyprus, the opportunity lies in strengthening trust across the sector by providing more transparent, comparable, and decision-useful information to all stakeholders.