When is a gift not a gift? It's a key question for charities

We should be wary of the use of accounting terminology to describe the gift economy, says Chris Harris of CIPFA

When is a gift a non-exchange transaction? When it is a non-reciprocal transfer.

That's not guaranteed to win any prizes even in the light of my own, very low joke-quality threshold. But it does provide an introduction to the fact that the Accounting Standards Board is looking at the issue of how we can make the transition from UK to international standards without particular sectors, such as charities, losing the good practice they have built up over the years.

The ASB suggests a public benefit entity standard that will cover all of the issues held dear by organisations that do not describe themselves as businesses. Take part in the consultation if you want to express a view.

One of the distinctive traits of the charity sector is an obsession with gifts. If there is no gift, there is no activity and no requirement from trust law to ensure funds are spent in line with the wishes of the donor - and no duty for the charity to explain what it has done with the money. And then we might all be out of a job.

However, the consultation does not use the word 'gift' anywhere. To be fair, it does explain that what it means by a non-exchange transaction is actually a donation, grant or legacy, but the word 'gift' is not used.

I think that matters, because as soon as we use accounting terminology we are in danger of adopting the whole accounting mindset, which is understandably dominated by commercial assumptions. Gifts feature rarely in the business world apart from when they are used as inducements to buy - and that is not a helpful comparison.

There might be some support from the government side, but its concept of a non-exchange transaction is dominated by tax, which is definitely not the same as a gift. That is not to say the two do not share some characteristics; indeed, it could be said that the £10 a month paid to provide services for a cause is taxation without representation. But a simple difference is that a gift is voluntary, whereas a tax is not.

It is tempting to succumb to the apparent neutrality of the accounting jargon, but we ought to recognise that by doing so we might lose the full understanding of the power of the gift economy. Gifts are a powerful antidote to the pressures of money, as those of us charged with the stewardship of not-for-profit distributing entities are aware.

I would encourage finance professionals within the charity sector to speak up for this key difference and let the debate play out in terms that do justice to the issue.

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