The First Global Accounting Standard for Nonprofits Just Launched — And It Might Actually Matter

By Yufeng (Andy) Tao @ 2025-10-22T07:58 (+82)

Disclaimer: I work for the Centre for Effective Altruism, though these are purely my personal thoughts and should not be taken to represent my employer or any other organization. I'm interested in this topic as someone who values organizational transparency and financial accountability across the nonprofit sector, not because of any organizational mandate.

TLDR:

After 50+ years of for-profit companies having international accounting standards, nonprofits finally have their own: INPAS (International Non-Profit Accounting Standard), launched in October 2025. This could make it easier to compare nonprofits across borders, reduce administrative overhead, and build donor trust. However, adoption is uncertain and there are legitimate concerns about implementation burden.

Why this matters (even if accounting sounds boring)

Picture this: You're trying to decide between two global health charities. One operates in Kenya, the other in India. You want to know which uses unrestricted funds more efficiently. But their financial statements use completely different accounting frameworks, making apples-to-apples comparison nearly impossible.

This has been the reality for decades. While for-profit companies got international accounting standards starting in the 1970s (the International Accounting Standards Committee was established in 1973, evolving into today's IFRS), nonprofits have been operating in a fragmented landscape with up to a dozen different systems worldwide.

INPAS is the nonprofit sector's attempt to catch up.

What problem is this actually solving?

The transparency gap: Ever wondered why some organizations are weirdly vague about their "unrestricted funds" or "administrative costs"? Often there's no consistent way to report this information across different regulatory regimes. INPAS specifically addresses how to present restricted vs unrestricted funds, which matters enormously when:

Donors want to know an org's true financial flexibility
Nonprofits are trying to make the case for unrestricted funding
Anyone is doing "room for more funding" analysis

The reporting burden problem: Individual donors and foundations sometimes impose their own reporting requirements. This creates a somewhat inefficient and burdensome system where nonprofit staff spend time customizing reports instead of doing their actual work. Major donors like the Ford Foundation, Oak Foundation, and Open Society Foundations have all expressed support for INPAS.

The global coordination problem: EA organizations increasingly work across borders. Current accounting fragmentation makes consolidation and comparison difficult. If you're trying to evaluate GiveWell-recommended charities that operate in multiple countries, you're effectively comparing financial statements written in different "languages".

The case for cautious optimism

1. It's based on proven frameworks
INPAS isn't starting from scratch — it draws on IFRS for SMEs (small and medium enterprises), full IFRS standards, and International Public Sector Accounting Standards. It's standing on the shoulders of giants rather than reinventing everything.

2. It addresses nonprofit-specific needs
Unlike forcing nonprofits to use corporate standards, INPAS was specifically designed by the sector, for the sector. The IFR4NPO project (launched in 2019) gathered input from nonprofits, regulators, donors, and accountants across 80+ countries.

3. Short-term pain, long-term gain?
Yes, there are transition costs: training staff, updating systems, possibly running parallel reporting for a while. But if this succeeds, organizations should eventually benefit from simplified reporting to multiple funders, and better access to sophisticated donors who can actually read the nonprofit financials.

4. The timing might be right
The EA community has already pioneered rigorous evaluation (GiveWell's cost-effectiveness analysis, public reasoning about grant decisions, etc.). We could be natural early adopters who help prove the standard works.

The case for skepticism

1. Adoption is far from guaranteed
As of the time of this writing, national regulators haven't officially mandated INPAS anywhere yet. Australia has used elements in "guidance", but that's not the same as required adoption. There's a long history of attempted international harmonization efforts that stalled, e.g. US GAAP vs IFRS.

2. Short-term costs are real
Especially for smaller organizations, the transition burden could be significant. If major funders don't require or incentivize INPAS adoption, many nonprofits may rationally decide "why bother".

What could the EA community do about this?

If we think this is important infrastructure for the nonprofit sector, there are concrete actions:

For EA grantmakers:

Consider incentivizing INPAS compliance for future grants
Fund implementation support for high-impact organizations transitioning to INPAS
Commission research on whether INPAS adoption correlates with organizational effectiveness

For charity evaluators:

Incorporate INPAS compliance into evaluation criteria
Publish analyses comparing INPAS vs non-INPAS financial transparency
Develop guidance on interpreting INPAS-formatted financial statements

For EA organizations:

Be early adopters and document lessons learned
Provide feedback to INPRF on what works and what doesn't for mission-driven orgs
Share implementation resources with other nonprofits

For individuals:

Ask charities you support about their plans for INPAS adoption
Preferentially donate to organizations with demonstrably strong financial transparency
Spread awareness in nonprofit networks outside EA

My tentative take

I think this is genuinely important infrastructure that's been missing for too long. The fact that nonprofits are 50+ years behind for-profit companies in having international accounting standards is pretty shocking. And it probably contributes to the sector's persistent trust and credibility challenges.

That said, new standards succeed or fail based on whether they get adopted, and adoption depends on incentives. If major funders don't care about INPAS, most organizations won't adopt it. The EA community's combination of analytical rigor, international scope, and emphasis on institutional improvement could make us uniquely positioned to help INPAS succeed — if we decide this is worth prioritizing.

Questions I'm still uncertain about:

Is INPAS actually detailed enough for the complex international structures many nonprofits may have?
What's the realistic timeline for meaningful adoption globally?
Could early adoption actually disadvantage transparent orgs if others aren't adopting?

Feedback welcome: I have not posted often on the forum, so I'd appreciate thoughts and feedback you may have. Thank you for reading!

Gemma 🔸 @ 2025-10-22T16:20 (+9)

Thanks for sharing - this was super helpful! It's exciting that this is progressing!

Here's a link to the full implementation guidance (for those that don't want to share your email address).

I'd be curious what EA grantmakers and charity evaluators think of the harmonised grant reporting format? How does it compare to the existing reporting you request?

abrahamrowe @ 2025-10-22T20:42 (+8)

Nice! Thanks for sharing.

I only read the implementation guidance, so these comments are not super in the weeds. Also, I'm only comparing to GAAP, not FRS/IFRS:

Restricted net assets seem to be handled way better than GAAP, and I'm very in favor of getting rid of release transactions, though in practice it seems like this is mostly something organizations don't actually do on their books, so are mostly added by auditors.
- It also gets rid of the issues of people who try to track restricted assets on the balance sheet, which is clearly an intuition lots of people in nonprofits have / want to act on, so that seems good.
It doesn't seem like it can handle endowments/permanently restricted assets super cleanly compared to GAAP - this explicitly seems like an upside of GAAP's restriction handling, but also maybe isn't super relevant to many EA orgs?
The rest of the standards seems basically fine, but I wouldn't expect EA organizations to see major changes in their books if they adopted them — I suspect it basically wouldn't change how EA orgs recorded transactions (at least against GAAP), and just would impact preparation during an audit.
- Since almost no EA funders ask for financial reporting (especially in a standardized format), I don't know if it would impact organization's engagement with funders.
I could see this being really nice for anyone who does gov grants in the US, though that would require a substantial policy change.

My controversial accounting take will forever remain that the vast majority of EA nonprofits and funders would be better served by organizations preparing financial statements on a modified cash basis rather than any accrual standard, and I suspect this is true for basically any non-service provisioning nonprofit (e.g. hospitals or food pantries, etc), and I'd be way more excited to see a standard that supported modified cash accounting for audit purposes.

Yufeng (Andy) Tao @ 2025-10-23T07:45 (+3)

Hi Abraham, thanks for sharing your thoughts! I really appreciate you taking the time to read through the implementation guidance.

I'm especially curious about your point on the modified cash basis. I'm not familiar with this approach, and I can see the appeal of simplicity of this basis compared to the full accrual basis. My concern is whether this would create comparability problems:

Lack of standardization: I don't know if there is a uniform way to implement modified cash basis - each organization could choose which items to treat as cash vs. accrual, making cross-organization comparisons difficult.
Timing artifacts: Organizations with different payment cycles could show different expense patterns even with identical underlying activities. For example, an org that pays invoices immediately vs. one that batches payments quarterly could look artificially different.
Missing obligations: Without capturing accrued expenses or other provisions, we wouldn't be able to see the org's outstanding commitments, which seems important for understanding the true financial position.

You mentioned you'd be excited to see a standard that supports modified cash for audit purposes - which I think would be really interesting! Creating such a standard would presumably need to address these comparability challenges by defining exactly which modifications are acceptable and how to apply them consistently.

abrahamrowe @ 2025-10-23T14:33 (+5)

Yeah, I agree with the standardization issue and all the downsides you outline, which for me would be the main appeal of someone creating a standard, and might resolve most the concerns (since then there would be consistent practices on when organizations do cash vs accruals). I think that generally, organizations who do modified cash accrue things on a timed basis (e.g. liabilities that will exist for longer than a month will be accrued) and a size basis (e.g. major multi-year grants might be accrued), and just using that as a standard would help.

I think the primary advantage is cash accounting has way less room for error. It's half the general ledger lines, so I guess half as many places to make mistakes. And, since a journal entry of only P&L and liability/receivable accounts isn't reconcilable, in practice, it seems like transactions that only touch them generate more errors than ones touching cash accounts.

And, I think I regularly encounter organizations doing accrual whose liability accounts are just really messed up (e.g. I'm pretty sure every organization on earth accruing payroll taxes has some payroll tax account with a messed up value they have to correct).

I do think for EA organizations, INPAS seems like a big improvement on GAAP. One issue in adoption in the US - since statements need to be prepared according to GAAP for charitable solicitation registration audits for most states, there would need to be some state level policy change, since organizations might be hesitant to pay for two audits.

James Herbert @ 2025-10-22T14:52 (+2)

Very cool! Thanks for sharing!

JesseBT @ 2025-10-24T02:45 (+1)

Does anyone know of specific organizations (EA or otherwise) that plan to adopt INPAS?

Or grantmakers who have decided to push grantees to adopt it?

Yufeng (Andy) Tao @ 2025-10-26T19:17 (+1)

Hi Jesse, I think the information about this may not be available yet since the standard is still in its early stage. However, you may refer to the Country Champions, and Supporters page of the INPRF website for more information.

SiobhanBall @ 2025-10-22T09:15 (+1)

Hi, thanks for bringing this to our attention! I'm generally in favour of any new measure which increases transparency within EA, as I think the movement has somewhat deviated from its focus on cost-effectiveness (at least in animal advocacy).

Will CEA be adopting INPAS?

Yufeng (Andy) Tao @ 2025-10-23T07:21 (+1)

Hi Siobhan, thanks for your question!

I'm writing from my personal perspective here, so this doesn't represent CEA's official position. However, I think this is worth discussing internally, and I appreciate you raising it.

I'd expect that for any organization considering adopting INPAS, there would need to be some time to properly understand the specific requirements - including how they relate to existing local regulatory reporting obligations and what the implementation process would look like.