Financial reporting lag in selected voluntary organisations in Malta : an analysis

Abstract

Purpose: This study investigates the Financial Reporting Lag present amongst Category 2 and 3 Voluntary Organisations during the years 2018, 2019 and 2020. The study also investigates the main determinants affecting the financial reporting lag, both from a holistic point of view and on a year-by-year basis. Moreover, the study also presents the perceived opinions of various individuals on the concept of timeliness in the voluntary sector, with specific reference to the local framework governing voluntary organisations and the results obtained from the statistical analysis. Design: To address the research objectives, a mixed-method approach was adopted. Following an analysis of existing literature, a sequential explanatory approach was used. This involved the use of statistical analysis through the IBM SPSS Software, followed by a total of seven semi-structured interviews. Findings: This study found that Category 2 voluntary organisations face a significant challenge regarding the financial reporting lag, with their average financial reporting lag relating to the three years examined in this study, exceeding the legally permitted limit. The COVID-19 pandemic further exacerbated this issue. Moreover, factors such as size, bad news and liquidity were found to significantly affect the FRL. Furthermore, the majority of interviewees expressed dissatisfaction with the current legal framework, and argued that the relationships between various factors and the FRL can work both ways. Conclusion: The study recommends the elimination of the one-size-fits-all-approach adopted in the current legal framework, and instead, introducing different regulatory requirements that consider the specific characteristics of voluntary organisations. The revision of the regulatory deadlines for submission is also being recommended in order to provide more leeway to voluntary organisations. Additionally, a campaign to attract more professionals to the voluntary sectors should be launched as this would help in reducing the financial reporting lag. Value: This study is expected to be beneficial to regulatory authorities as it identifies the current weaknesses in the local voluntary sector in terms of the financial reporting lag. Additionally, this study also helps regulators in understanding the main determinants affecting the financial reporting lag, and thus enable them to be in a better position to ensure both accountability and transparency in the voluntary sector.