Charity Financial Reporting Concession for Incorporated Associations Expire
Tuesday, 19th January 2016 at 11:03 am
Many charities will need to improve the content and quality of their financial reports as the Australian Charities and Not-for-profits Commission’s transitional rules expire, writes Not for Profit accounting expert Jeff Tulk.
In order to reduce the burden on charities and provide them with the time to adjust, the ACNC’s transitional reporting arrangement allowed incorporated associations, co-operatives and charitable fundraising organisations to lodge reports with the ACNC based on their state regulatory requirements. The ACNC accepted these reports for the 2014 and 2015 years.
These transitional provisions have now expired.
Incorporated associations represent approximately 40 per cent (almost 15,000) of charities.
Accordingly many entities will be impacted by these changes.
For financial years ending from 1 January 2016, incorporated associations, co-operatives and charitable fundraising organisations financial reports will need to comply with the minimum six accounting standards as contained within the ACNC regulations.
Application of these accounting standards will require financial reports to include a statement of cash flows and contain detailed accounting policy notes that clearly describe the basis of preparation of the financial report.
In addition, for all charities classified as large (turnover greater than $1 million) and any medium charities (turnover between $250,000 and $1 million) that are audited, their financial reports are now required to be audited by a registered company auditor.
Currently no state or territory requires incorporated associations to be audited by a registered company auditor. Typically a qualified accountant rather than an audit specialist is able to complete the audit.
Charities will need to be proactive in complying with these legislative requirements as the ACNC won’t be contacting affected entities – their database does currently contain information regarding financial reporting compliance, nor has the ACNC required organisations to disclose their auditor either within the entity details or the annual AIS.
However, as the ACNC shifts more resources from education to regulation, I would anticipate the ACNC to increase monitoring of compliance with these legislative requirements.
As a result, I would recommend that every charity, in particular incorporated associations and unincorporated entities, should consider their current financial report to determine the level of compliance with the prescribed accounting standards.
In addition, charities should also check if their current auditor is a registered company auditor. This can be easily performed via an ASIC register search.
When a charity identifies that financial reporting improvements or a change of auditor is required, acting early to comply with any organisation governing document requirements and allowing time to identify an auditor with appropriate expertise in your organisation’s industry will likely result in positive organisational governance outcomes.
About the author: Jeff Tulk is the Head of Financial Reporting at specialist Not for Profit audit and accounting firm Saward Dawson.