Top Tips to Prepare for New Compliance Regime
Thursday, 13th June 2013 at 10:04 am
Australian Not for Profits are being encouraged to prepare for new compliance guidelines that will come into effect on July 1, 2013. Stephen Rooke, Principal with William Buck Accountants and Advisors offers his top tips on what areas to focus on.
The new guidelines are being introduced as part of the transition to the the new charity regulator, the Australian Charities and Not-for-Profits Commission (ACNC), a body set-up to implement the Federal Government’s reform agenda.
The new guidelines will require Not for Profits to focus improving any weaknesses that exist in the areas of governance, accountability and transparency. The framework for these changes is flexible and focused on requirements that should get proportionally more onerous as the charity gets bigger and more complex.
A number of key areas for Not for Profits to focus on include:
Board/governance skills – Review your board/governing council and establish whether there are any gaps in the skills of board members needed to oversee and direct the charity. It’s important to evaluate whether it’s a professional board comprising members chosen for their experience and technical skills (business management, accounting, law) or whether they’ve been popularly elected from the membership and whether it has the basic fundamentals needed by every charity. If there are any shortfalls, there are many examples of charities who have already been through this process of addressing these and it may also be necessary to seek professional advice.
Staff composition – As with the Board review, it’s important to review staff composition and establish whether the organisation is reliant on volunteers or staff with a professional skill set and experience. A skilled and experienced team will be in a better position to deliver on the goals and objectives of the organisation. Begin setting out a plan of how the organization can fill any skill gaps that exist. Also review how the Chief Executive Officer and senior employees work with the Board and establish whether they are supporting each other. It’s a good idea to benchmark with other similar organisations and consider training, support, policies or future hiring requirements to address any shortfalls.
Accountability – By increasing accountability requirements for charities, the Federal Government’s main focus is to address 'accountability to the community'. However, it will also address internal accountability. The focus for charities should be on accounts and management reports – how often they are prepared and how soon after the end of the period they are available. Most importantly, the accounts should align to the activities of key staff or managers and these employees should be held accountable for their efforts.
Budgeting – Functional budgets are an important part of any organisation and allow the directors and management to see where the organisation is going. The budgets should make it clear what each person is expected to achieve. It’s important to review whether the organisation has functional budgets in place, and whether management regularly compares actual performance against the budget, adjusting outputs accordingly.
Transparency – A key focus for the ACNC will be to make Not for Profits more transparent to the public. An important question to ask is whether your organisation is ready to be on full public display? This will mean ensuring accounts are in order, an auditor has been appointed and briefed, the organisational constitution has been updated and any housekeeping matters that need to be attended to in the next 12-18 months have been identified.
The ACNC portal will post an organisation's documents in public view over the next 15-18 months and time is running out fast to attend to any documents that are incomplete and/or out of date (objects and constitution) or inconsistent and in need of modernising (financial statements). You can still email or post your governing document to the ACNC. If the ACNC has information (especially updated contact details) they will also be able to pre-fill some of the Annual Information Statement that all charities will need to provide after 1 July 2013 (and by 31 December 2013). If you have any questions please email the ACNC at email@example.com or call on 13 ACNC (13 22 62).
The first financial statements will be due for the year ending June 30, 2014 so there are opportunities to address formatting and disclosure issues in the 2013 and 2014 accounts to get this right.