INPAS and the Legitimacy Challenge: Building a Global Standard for Non-Profit Accounting

INPAS and the Legitimacy Challenge: Building a Global Standard for Non-Profit Accounting

Like many in my field, I was drawn into the world of accounting standards through my academic research. I recall the intense focus of my Master of Commerce (MCom) accounting studies, where I researched the legitimacy of the International Accounting Standards Board (IASB) and its due process for setting standards. My dissertation explored how a private organisation could write financial "law" for over a hundred countries without a formal, legal mandate, a challenge that now comes to mind with the launch of the International Non-Profit Accounting Standard (INPAS) and its new governing body, the International Non-Profit Reporting Foundation (INPRF). The success of INPAS and its long-term acceptance by the non-profit sector hinges on how well it addresses these legitimacy concerns through its structures, procedures, and resources.

The non-profit sector has long been in need of a globally recognised standard. For too long, non-profits have had to rely on a patchwork of local regulations and inconsistent donor-specific reporting rules, forcing them to waste time and resources on redundant administrative tasks. This created a "financial trust and credibility gap" and undermined the sector's ability to focus on its core social mission.

The INPAS initiative has been meticulously designed to build the necessary credibility and authority. By applying a legitimacy framework, we can assess this new venture from a practical standpoint.

Procedural Legitimacy: A Due Process Built on Global Dialogue

A standard's legitimacy is deeply tied to the fairness, transparency, and inclusivity of its creation. The INPAS development process demonstrates a strong commitment to these principles.

• The standard, previously known as the International Non-Profit Accounting Guidance (INPAG), was developed over six years through a meticulous and transparent due process. This involved a Consultation Paper and three Exposure Drafts (EDs) published between 2022 and 2024, designed to gather public feedback.
• This engagement gathered input from thousands of organisations and individuals across 169 countries. The aim was to ensure that the standard was a collaborative framework built "by non-profits, for non-profits". This inclusive approach is critical for building a consensus that is accepted by all affected parties.

Institutional Legitimacy: A Permanent and Purpose-Built Home

For a standard to succeed, its governing body must be perceived as credible and independent. The establishment of the INPRF is a significant step in this direction.

• The INPRF positions itself as the third pillar in global standard-setting, alongside the International Financial Reporting Standards (IFRS) for corporates and International Public Sector Accounting Standards (IPSAS) for governments. This strategic move establishes INPAS as a purpose-built standard with a dedicated home, signalling its authority and relevance in the global financial ecosystem.
• The new INPRF governance structure, which has recently been made public, outlines a board of up to nine Trustees, including a Chair Trustee, who act in their individual capacity. The Trustees are expected to be from varied geographical regions and possess professional backgrounds relevant to the non-profit sector.

Blind Spots: The Path to Full Legitimacy

While the foundation is strong, a critical analysis of the framework reveals some potential blind spots that the INPRF must navigate to achieve widespread legitimacy and effectiveness.

• Uneven Participation: A key finding from my academic work showed that for the IASB, participation in standard-setting was often heavily dominated by a few powerful regions and interest groups. For example, Europe contributed over 50% of the comment letters, while Africa and South America submitted a very low proportion. While INPRF's governance states that Trustees will be from varied geographical regions, it is not yet public how this will be ensured in practice. The risk remains that the standard may not be fully relevant to the operational realities of non-profits in underrepresented nations.
• Funding and Influence: My research identified that the independence of a standard-setting body can be threatened by its funding model, especially if it relies on a small number of contributors. The INPAS initiative was initially funded by four donors, and its founding members are the two organisations that led the project (CIPFA and Humentum). The foundation's ability to maintain its independence will depend on whether it can secure a broad-based, publicly-sponsored funding structure and admit a wider range of members to its governance, to avoid any perception of undue influence.

The INPAS launch is a monumental achievement, providing a desperately needed framework for non-profit financial reporting. The INPRF has a strong foundation, but its lasting success will be judged not only on the technical quality of the standard but also on its ability to overcome these legitimacy challenges. The Foundation must work tirelessly to ensure that all voices, particularly from underrepresented regions and smaller organisations, are heard in the standard-setting process.

I will be at the INPAS launch in Geneva on 21 October 2025 to learn more about how the foundation plans to navigate these challenges. For those who cannot attend in person, I highly recommend joining the virtual launch on 9 October 2025. You can register here: https://ifr4npo.org/events/virtual-launch-inpas-arrives-a-new-era-in-non-profit-accounting/.