In Australia, it is the Royal Flying Doctor Service. In the UK, Cancer Research is often number one. In the US, the Malaria Consortium is always near the top of the charts.

Charities and not-for-profit organisations like these are valued and trusted, which is why they often feature in roundups of worthy destinations for public money. This is no surprise: organisations that help those in need, or offer valuable cultural, scientific or educational services without taking profit, have traditionally enjoyed widespread public admiration.

Yet that respect can no longer be taken for granted. In some countries, while faith in organisations like these remains high, trust in the not-for-profit sector as a whole has plummeted. Recent research for the Charity Commission in the UK found that people now trust charities less than a stranger in the street. In the US, a poll commissioned by the Chronicle of Philanthropy revealed that one in three Americans lack faith in the not-for-profit sector.

It would seem that we no longer instinctively regard not-for-profit organisations as ‘good’.

A SECTOR WITH ‘A PROBLEM’

Baroness Stowell of Beeston, chair of the UK Charity Commission, admitted last year that the sector ‘has a problem’. “People clearly are less trusting of institutions and of those in positions of authority than they once were,” she said. “But that’s not because our parents and grandparents were more naïve. It’s because people now have more evidence to prove their suspicions. They are more sceptical of those in powerful roles or in positions that were once associated with respect, because they can see or have experienced directly how those groups really have let them down.”

Have charities let us down? A series of high-profile global scandals has eroded public trust in the sector. In 2018 a sex scandal rocked UK-based global poverty charity Oxfam, after aid workers were found to have been using sex workers in countries where they worked. Meanwhile charities and not-for-profits are facing public and regulatory pressure over high executive salaries and, in some cases, aggressive fundraising methods.

The upshot is that third sector finances are under the microscope in a way they never have been before. The public, and the governments they elect, demand ever increasing accountability.

Marilyn Pendergast, partner at US member firm UHY LLP in Albany, New York, says: “There is clearly a greater expectation and need for transparency in organisations that are publicly supported, whether through government sources or private donations, than for private companies which are not publicly traded. Both stakeholders and users of services have the right to expect openness and clarity in the information which is available to them.”

ABSOLUTE TRANSPARENCY

Not-for-profits face increased scrutiny by regulators on one side and by organisations specifically created to monitor their spending on the other. Last year, the group Charity Intelligence Canada publicly advised donors against giving to the professional ice hockey team charity, Calgary Flames, accusing it of a lack of transparency and high fundraising costs.

Such scrutiny is becoming the norm and can be damaging. A Money for Good poll in the US found that a majority of donors favoured charities that received good ratings from charity validators like Charity Intelligence, despite some debate over how fair those ratings are. As a result, not-for-profits have to be absolutely transparent about sources of wealth and how money is spent.

But the necessity for absolute transparency can be complicated by the sheer size and diversity of the sector. Marilyn says: “Not-for-profits can be very small, such as a community food bank which relies solely on contributions from neighbours and volunteer services, or they can be large national or even multinational foundations providing charity resources with budgets in the multimillions. Their missions are also widely diverse. In the US they cover the gamut from agricultural research organisations to zoos and everything in between.”

Subarna Banerjee, head of UK member firm UHY Hacker Young’s national charity and not-for-profit group, says there are 160,000 charity organisations in the UK, many of which are largely unknown to the public because they are ‘woven into the fabric of British business’. The larger public are generally unaware that they are operated by charities.

To take one example, the clothing retail chain Primark is owned by a company called Associated British Foods (ABF), and 59% of ABF is owned by the Garfield Weston Foundation (GWF). GWF, the second largest UK charity by asset size, is a family-founded trust which has supported UK charities with grants for the past 50 years. Few UK consumers have heard of GWF, but many will know the institutions it supports, from the Shakespeare Globe Trust to the Imperial War Museum, Oxford University and the Yorkshire Sculpture Park.

UHY Hacker Young audits GWF’s financial statements, and Subarna says grants and large historic endowments are another ingredient in the non-profit funding mix: “This is not public funding, either from individuals or through government grants, but it still needs to be thoroughly audited and accounted for.”

REGULATORY OVERSIGHT

Regardless of the origins of their funding, governments and regulators are expecting more from charities, whose humanitarian or altruistic credentials are no longer enough to protect them from intense scrutiny.

In the US, new nonprofit accounting standards came into effect in 2018, requiring extra disclosures around not-for-profit classification, allocation of expenses and liquidity, among others. And Kirsti Armann, managing director at UHY member firm Revisorgruppen AS in Oslo, Norway, says that a similar spotlight is now directed at Norwegian not-for-profits, and that tax and tax status attracts particular scrutiny.

“It has also been the desire in Norway in recent years for greater transparency when it comes to the financial reporting of charities and not-for-profit organisations,” she adds. “In fact, over the past 15-20 years the tax authorities in Norway have, to a greater extent than previously, exercised control over not-for-profit enterprises, especially regarding tax and tax position.”

With a requirement for greater transparency and reduced public confidence, many not-for-profits with limited budgets are finding it difficult to stay on top of expectations. This means keeping up with guidelines that can appear to change almost by the year. As in the US, the latest update to UK accounting standards for charities came in as recently as November 2018. In Norway, Revisorgruppen AS regularly assists not-for-profit clients with their transition to the ‘good accounting practice for nonprofit organisations’, a recently introduced alternative to the reporting required under the Norwegian Accounting Act.

Sungesh Singh, audit and assurance partner for New Zealand member firm UHY Haines Norton (Auckland) Limited, says that reporting regulations in the country have changed twice in recent years, in 2005 and 2012, and ‘quite strict reporting deadlines have been established’.

“The result, I would say, is that public confidence in the charities sector in New Zealand, from a reporting point of view, has become ‘moderate’. The transparency and the reporting requirements are relatively new, and I believe that it will take a fair while before it matures into a well-established reporting arena full of good information about what our charities do, where the money is spent and – most importantly – what the outcomes are.”

He adds that, since the new regulations came into force, charities in New Zealand have been struck off as a consequence of delayed reporting.

Growing complexity, greater scrutiny and a large, diverse sector does offer opportunities for UHY’s global network to help. “The smaller organisations rely on us to make them compliant,” says Subarna. “And even the larger not-for-profits have difficulty keeping up with legislation. We can do that for them.”

Sungesh agrees: “Given the huge number of charities in New Zealand, and the increased level of transparency requirements from a reporting point of view, firms like UHY are very much in demand.”

DIVERSE NEEDS, LONG RELATIONSHIPS

UHY LLP in Albany, New York, provides services to a range of not-for-profits, from colleges and museums to healthcare and social assistance organisations. The needs of these organisations are diverse, and Marilyn Pendergast says they often go way beyond traditional accountancy services: “Chartered and certified public accountants can provide value to their clients in many ways in addition to the traditional audit and taxation functions.”

“For colleges, for example, changes in demographics of students and the lack of significant endowment funds can create budgeting challenges. That is where we can be helpful in the evaluation of expenditure, helping management and the board to develop a plan for future continuance and growth.”

Museums may face the need to upgrade facilities, requiring long-term financial planning. Healthcare charities need help navigating a changing regulatory landscape. Valuation and business planning services can be valuable for many not-for-profit organisations.

There are also sound business reasons for developing a not-for-profit focus, says Subarna. The success of campaigns like The Giving Pledge, which encourages wealthy people to give significant amounts to philanthropic causes, have helped to spark a new philanthropy movement. UHY member firms may be regularly asked about the tax or inheritance implications of charity donations and endowments, by individuals and businesses.

“It is also true that the charity sector is immune to some extent from the economic cycle,” he adds. “Not-for-profits, especially those that receive funding from the government and endowments, can be relatively financially secure, even in difficult times for the wider economy. For professional services providers it is possible to forge very beneficial long-term relationships, if you are prepared to stay on top of regulation, offer good advice when required and keep them compliant in the face of tougher regulation.”

The message is clear. As rules get stricter and public scepticism grows, not-for-profits need good partners – and the authority, expertise and accountability they bring – more than ever.

Notes for Editors

UHY press contact: Dominique Maeremans on +44 20 7767 2621

Email: d.maeremans@uhy.com – www.uhy.com

In February 2019, Bank of England governor Mark Carney told an audience of senior City of London figures that a new global order was threatening international trade.

Carney, head of the UK’s national bank, talked first about the implications of Brexit, but his message was targeted more widely than the UK’s exit from the European Union (EU). In fact, he suggested Brexit might be a ‘canary in the coal mine’ for a new era of global economic retrenchment.

“It is possible that new rules of the road will be developed for a more inclusive and resilient global economy,” Carney said, before delivering a warning. “At the same time, there is a risk that countries turn inwards, undercutting growth and prosperity for all. Concerns over this possibility are already impairing investment, jobs and growth, creating a dynamic that could become self-fulfilling.”

RESTRICTIVE MEASURES

His concerns appear well founded. In January, the International Monetary Fund (IMF) warned that the global economy was weakening faster than expected, thanks to trade wars and populist governments wedded to policies of protectionism. At the same time, the United Nations’ (UN) trade and development body, UNCTAD, published figures showing a 19% fall in global foreign direct investment in 2018.

Have we entered a new era of nationalism and protectionism? The rise of restrictive measures suggests so. World Trade Organisation (WTO) members added an average of 11 trade restrictive measures every month between October 2017 and May 2018, including tariff increases, import tax increases and stricter customs regulations.

National leaders are driving these measures. Most famously, Donald Trump’s ‘America First’ agenda has seen US withdrawal from the Trans-Pacific Partnership (a trade agreement between 11 countries bordering the Pacific Ocean), and a trade war with China involving the tit-for-tat imposition of trade tariffs worth billions of dollars. The US has also threatened tariffs on a range of goods from the EU.

A wave of global populism followed in the wake of Trump’s election to the US presidency at the end of 2016. In May last year, Italian voters placed power in the hands of two populist parties, the Five Star Movement and the League. Relations between the EU and Rome have been strained by the new government’s spending plans, which may breach EU rules.

Is Italy becoming anti-European? Cristiano Fasanari, partner at FiderConsult Srl, a UHY member firm in Italy, says the Italian government is pushing back against some policies, but remains a committed member of the EU. “There is no declared scepticism over the EU,” he says. “I would say that there is disagreement with some EU policies and with the strict application – almost an imposition – of a restrictive budget policy and financial ratios.”

Italy is far from alone in electing a populist government with a more nationalist and inward-looking agenda and, often, a corresponding suspicion of traditional trading relationships. In fact, the four most populous democracies in the world are currently governed by populist leaders: Narendra Modi in India, Donald Trump in the US, Joko Widodo in Indonesia, and Jair Bolsonaro in Brazil. Populist ideas have swept through Europe, resulting in both far right nationalist governments like that of Viktor Orbán in Hungary, and anti-establishment sentiment of the kind expressed in the UK’s Brexit referendum vote.

GLOBAL TRADE TOO IMPORTANT

More economic protectionism sometimes seems inevitable in populist times. But in Brazil, José Bendoraytes Filho, advisory partner at UHY Bendoraytes & Cia, does not believe that the Bolsonaro government will follow President Trump down a road of hard protectionism, despite mutual admiration between the two leaders.

“The current Brazilian government does not have as much of a protectionist character as many people think,” he says. “Although Brazil is in line with US immigration and trade policies, it does not have the motto ‘Brazil First’. We are a country open to other markets and have a balanced trade with a high level of imports.”

José says that, with taxes and unemployment high, Brazil’s global trade is too important to the economy to risk.

He adds: “There is a constant search for the conquest and maintenance of foreign markets through development and export agencies, as well as the Brazilian embassies abroad that today function as true promoters of Brazilian products.”

But while a generally positive sentiment towards global trade persists, the Brazilian government has expressed frustration with Mercosur, a trading bloc comprising Argentina, Brazil, Paraguay, Uruguay and Venezuela. German chancellor Angela Merkel recently warned that the Bolsonaro government’s attitude was making a trade deal between Mercosur and the EU more difficult to reach.

José says that Mercosur imposes limitations on the bilateral agreements member countries can make outside the bloc, and many Brazilians agree with the government’s intention to reduce Brazil’s engagement with an economic and political union they consider restrictive.

ANTI-ELITE, ANTI-ESTABLISHMENT

President Bolsonaro has vowed to modernise Mercosur rather than leave it altogether. But the desire to strike bilateral trade deals as a more independent nation state finds an echo in the UK’s vote to leave the EU.

Brexit was an unashamedly populist movement, driven by anti-establishment and anti-elite rhetoric. Nigel Farage, the movement’s self-styled ‘man of the people’, has said that European integration showed ‘a complete lack of understanding of how human beings operate,’ and that ‘globally, the world is breaking down into smaller units’.

The anti-EU movement in the UK was a blow against open borders and what Farage characterised as an out-of-touch political elite as much as a trading bloc. But ‘leavers’ believed that, in economics too, the world was ‘breaking down into smaller units’. They insisted, and continue to insist, that a country with a proud trading history would be more than capable of holding its own outside what they view as the EU’s stifling embrace.

BUSINESS UNCERTAINTY

That theory has yet to be properly tested. What we are seeing now from business, says Martin Jones, partner at UHY Hacker Young in London, UK, is a period of retrenchment, in response to both Brexit and wider global trends.

“Inevitably the uncertainty is affecting investment levels and new cross-border activities, and also causing businesses to delay hiring staff due to concerns over the economic outlook,” he adds.

Alan Farrelly, managing director of Irish member firm UHY Farrelly Dawe White Limited, agrees that business decisions have been delayed or postponed because of the fog around Brexit – a fog that is unlikely to lift any time soon, regardless of the precise moment of separation. Ireland is the state in the EU economy most dependent on trade with the UK, and considerable resources are being expended on preparing for whatever Brexit might bring.

“In terms of advice on Brexit, we work with Intertrade Ireland who provide a grant of EUR 2,500 (around USD 2,825) to assess a company and their exposure to the threat of Brexit,” says Alan.

“This allows us to consider a company’s import and export flows to assess their overall business disruption exposure. Outputs include our clients seeking alternative suppliers and customers in new locations, most often inside the EU. This has represented real challenges in terms of pricing, testing and logistics.”

More widely, Alan believes President Trump’s policies and Brexit are symptoms of a new trading reality that will have significant impact for years to come.

“As we all know, trade deals are not negotiated in real time – there are considerable time and resources required to find agreement,” he says. “With Brexit, the road ahead for both Ireland and the UK may be challenging, with jobs losses, loss of business confidence, stressed decision-making and prolonged intergovernmental tensions. None of these are conducive to good trading conditions.”

AN OPPORTUNITY TO SHINE?

In these circumstances, what advice can professional service providers give? Martin Jones believes global uncertainty makes life tricky, but also gives UHY firms an opportunity to shine, establishing themselves as trusted business advisors in difficult times.

“Despite the uncertainties, all businesses still need to plan for the future, and hence it is important to understand the risks and opportunities that could emerge,” he says. “It is important to remain positive as a business advisor in this situation and seek to establish a competitive advantage for the business amid all the change, based on an assessment of the opportunities and risks. It does make the role harder, but potentially more enjoyable and rewarding.”

José Bendoraytes Filho also sees opportunities for member firms to excel, as well as to promote UHY’s global network more widely and champion its deep pool of local knowledge.

“I think every difficulty brings opportunities. I always advise those seeking to develop transnational operations to understand the culture of the country, its customs and values. For this, I always recommend that you seek local quality advice,” he says.

Perhaps counter-intuitively, the consensus is that in an era marked by isolationism, UHY member firms should be readier than ever to give expert advice to clients looking to expand operations beyond home markets. In the UK, that might mean helping clients reduce their exposure to the EU. In Brazil it could mean manoeuvring businesses around any obstacles imposed by the redrafting of the rules of Mercosur.

Ultimately, some trading arrangements may change, and others may emerge. Populism will eventually subside and protectionism ease. And when the shouting stops, Cristiano Fasanari says that successful businesses will still look to expand. They just need the best advice to help them do so.

“In my opinion, this situation is not permanent and will end. So I would not discourage customers who intend to invest internationally. I would rather explain that, even in this period, maintaining a position that is limited to a local market is a disadvantage compared to global competitors.

“With the right attention, investing internationally is still necessary for future success.”

Notes for Editors

UHY press contact: Dominique Maeremans on +44 20 7767 2621

Email: d.maeremans@uhy.com – www.uhy.com

We welcome, MA Audit LLC, our new full member firm in Azerbaijan, together with its affiliate, MA Consulting LLC to the global accountancy network UHY, extending our coverage within the Eurasia region. The firms are in the process of adopting the UHY branding and will soon be known as UHY Audit LLC and UHY LLC.

Established in 2009, a team of 19 staff including five partners are based in the capital Baku.  The team brings wide-ranging experience in audit, accounting, consulting and tax to a portfolio of domestic and international clients primarily represented in the aviation, Fast-Moving Consumer Goods (FMCG), oil and gas and tourism sectors.

Managing partner, Teymur Naghiyev comments: “The UHY network’s collaboration, combined with the reputable UHY brand, will give our firm a competitive edge in Azerbaijan and the wider region. The global presence of the network combined with the expertise and knowledge of UHY’s 8,200 people around the world, not only strengthens our own capabilities, locally and internationally, but also these of our clients and their operations.  We look forward to elevating our business through a successful cooperation with other firms operating within the UHY network.”

Rick David, chairman of UHY comments: “We are delighted to welcome UHY Audit LLC and its affiliate to the UHY network. Azerbaijan, a member of the Commonwealth of Independent States (CIS), continues to embrace economic change with the energy sector still being one of their main sources driving economic growth.  UHY MA Audit LLC’s membership extends our footprint in the Eurasia region and strengthens UHY’s regional market expertise and capabilities to serve our international clients who have investments and a business presence in this country and the wider region.”

Liaison office for

UHY liaison office for UHY Audit LLC and UHY LLC

Contact: Teymur Naghiyev, Managing Partner, +994 12 480 13 62, +994 55 215 53 33,

teymur.naghiyev@uhy.az ,  W: https://www.ma-consulting.az/

Notes for Editors

UHY global press contact: Dominique Maeremans on +44 20 7767 2621

Email: d.maeremans@uhy.com – www.uhy.com

The cost of customs duties in G8 countries rose 4% last year from $99 billion to $103 billion, even ahead of the global ‘trade wars’, shows a new study by UHY, the international accounting and consultancy network.

The G8 countries’ import duties now amount to 1.24% of their approximately $8.3 trillion in annual imports.

UHY studied 20 countries around the world, calculating the value of their imports and the cost of duties on those goods and services (see chart below).

There is potential for the cost of tariffs to rise even further in the coming years due to the effects of global trade wars. In 2018, the United States introduced tariffs on a range of imported goods including steel, aluminium, washing machines, solar panels, and 818 categories of goods from China.

Several US trading partners have since responded by imposing retaliatory tariffs on imports from the United States. This has raised fears of a trend towards protectionism, which would increase costs for businesses and consumers worldwide.

UHY’s research shows that the biggest rise in the revenue from duties among major economies was seen in China, which registered a 26% increase from $37.8 billion in 2017 to $47.7 billion in 2018. China is one of the countries that levied retaliatory tariffs on US imports in mid-2018. However, the two countries agreed to postpone planned mutual increases in tariffs from 10% to 25% following talks in December.

US duties cost increased by 6.7% from $62.3 billion in 2017 to $66.5 billion in 2018. On several occasions, President Donald Trump has raised the prospect of the ‘Trump Tariffs’ policy being extended further. This could affect US car manufacturers who build vehicles in Mexico, as well as European carmakers.

Rick David, Chairman of UHY, comments: “In an increasingly globalised economy, a trade war could affect both businesses and consumers.”

“If trade disputes cannot be resolved by negotiation and result in substantially increased tariffs, there could be an impact not only on the cost of goods, but also economic growth and employment.”

Clive Gawthorpe, Partner at UHY Hacker Young in the UK, comments: “The UK is in a very precarious position when it comes to trade deals and tariffs, as it prepares to leave the European Union, the world’s largest trading bloc.”

“Some politicians had suggested that the UK would have dozens of trade deals already in place by the time it leaves the EU, but that seems to have been challenging to deliver in reality.”

“A no-deal exit from the EU could prompt the Government to waive customs duties on some imported goods, to prevent businesses and consumers from being exposed to a steep rise in costs.”

UHY says that Israel is one country that is seeking to decrease the impact of customs duties, following a 14% increase in the cost of duties from $2.5 billion in 2017 to $2.9 billion in 2018.

Kobi Shtainmetz, Partner at UHY Shtainmetz Aminoach & Co in Israel, says: “Israel is looking to buck the global trend towards increased barriers to trade that has emerged in recent years. The Israeli Finance Ministry plans to abolish customs duties entirely on a range of household items, at a cost of around $1 billion per year.”

“That is in addition to expanding trade deals, such as an exemption on customs duties for vegetable imports from Turkey.” 

Thomas Wahlen, Partner at UHY Wahlen & Partner in Germany, says: “There is a lot of uncertainty in the EU about potential future tariffs with the UK.”

The biggest rise in the cost of duties among major economies was seen in China, which registered a 26% increase from $37.8 billion in 2017 to $47.7 billion in 2018

Notes for Editors

UHY global press contact: Dominique Maeremans on +44 20 7767 2621

Email: d.maeremans@uhy.com – www.uhy.com

Nick Mattison or Peter Kurilecz

Mattison Public Relations

+44 20 7645 3636, +44 7860 657 540 or email peter.kurilecz@mattison.co.uk

About UHY

Established in 1986 and based in London, UK, UHY is a leading network of independent audit, accounting, tax and consulting firms with offices in over 300 major business centres across 100 countries.

Our staff members, over 8,200 strong, are proud to be part of the 16th largest international accounting and consultancy network. Each member of UHY is a legally separate and independent firm. For further information on UHY please go to www.uhy.com.

UHY is a member of the Forum of Firms, an association of international networks of accounting firms. For additional information on the Forum of Firms, visit www.forumoffirms.org

We welcome, Malik Hamid Jamal Chartered Accountant, our new member firm in Afghanistan, to the global accountancy network UHY, extending our coverage within the Asia-Pacific region. The firm is in the process of adopting the UHY branding and will soon be known as UHY Malik Hamid Jamal Chartered Accountant.

Malik Hamid Jamal Chartered Accountant, with a team of 58 staff including five partners, is based the capital city of Kabul and was established in 1967. The partners bring wide-ranging experience in audit, accounting, tax, and management consultancy combined with the necessary technologies, methodologies and specialist resources to a portfolio of domestic and international clients primarily represented in the construction, education, not-for-profit and transport sectors.                      

Managing partner, Malik Hamid Jamal of Malik Hamid Jamal Chartered Accountant says: “We are based in an economy with a huge potential for future growth. The UHY network’s collaboration, combined with the reputable UHY brand, will give our firm a competitive edge in Afghanistan and the wider region. Our local capabilities and knowledge of UHY’s 8,200 colleagues around the world, not only strengthens our own market position, locally and internationally, but also will be of great value to our current and potential clients and their operations.

Rick David, chairman of UHY comments: “We are delighted to welcome Malik Hamid Jamal Chartered Accountant to the UHY network. The mineral rich Afghanistan, strategically located as a trade route between Central and South Asia, continues to pursue its ambitious economic reforms. Malik Hamid Jamal’s membership extends our footprint in the Asia-Pacific region and strengthens UHY’s regional market expertise and capabilities to serve our international clients who have a business presence in this country and the wider region.”

Liaison office for Malik Hamid Jamal Chartered Accountant             

Contact: Managing partner, Malik Hamid Jamal on +93 782 886 313

Email: mhjamal@smmcokabul.com Website: www.smmcokabul.com

Notes for Editors

UHY global press contact: Dominique Maeremans on +44 20 7767 2621

Email: d.maeremans@uhy.com – www.uhy.com