Here at KLM Accountants we’ve been auditing not-for-profit entities for more than 40 years. And with a large portfolio of not-for-profit clients, we think of ourselves as specialists in the not-for-profit sector.
Having just completed our end of June audit engagements, we thought we should remind charities about the obligations and challenges they face before we do our next audit at the end of December.
As you can imagine, charities face constant scrutiny from the general public. However, they also face scrutiny from stakeholders and government regulators such as the Australian Charities and Not-for-profits Commission (ACNC), which is responsible for all charities registered in Australia.
Here are some of the significant areas that can affect charities.
- Reporting Requirements
Depending on their size and structure, charities usually need to lodge an Annual Information Statement (AIS) six months after year end that includes audited financial statements.
Charities have access to a number of tax concessions including income tax, fringe benefits and GST. However, these concessions are available only to registered charities listed on the ACNC database. So it’s vital for each charity’s board and management to keep their charitable status by complying with the financial reporting and operational requirements.
- Assistance v Compliance
One of the ACNC’s roles is to ensure the public has up-to-date and accurate information about charities on the database. It received AISs from 99% of charities in 2013. However, in 2014 that figure fell to 83%, and it is now working with these charities to ensure they get their reports in.
But while it is a relatively new government agency, it’s now transitioning into the compliance phase of its role. And on 12 November 2015 it demonstrated this by revoking the charity status of 169 charities for having not reported in the past two years.
- Governance Standards
Governance standards underpin the charity’s core processes and mechanisms. They ensure the charity is run lawfully, and operates in an accountable and responsible way.
The minimum standards required by the ACNC are:
- Standard 1 – Purposes and not-for-profit nature
- Standard 2 – Accountability to members
- Standard 3 – Compliance with Australian Laws
- Standard 4 – Suitability of responsible persons
- Standard 5 – Duties of responsible persons (e.g. directors, board members, committee members)
It’s important for people involved in the organisation to not only be informed of the charity’s operations and purpose, but also review the oversight procedures over:
- financial reporting
- fundraising activities
- legal compliance
- changes to any charitable purpose.
- Responsible Persons
Responsible persons oversee the charity’s operations, and are responsible for its compliance with the governing document (e.g. Constitution), regulators, and other laws and regulations. They’re often the charity’s directors, committee members, board members and/or governors.
They need to be of sound mind, and should ideally have relevant skills that will help the charity achieve its purpose. This can include relevant experience in:
- financial management
- not-for-profit experience
- human resource management
- the charities sector (e.g. health, education, disability services, club management)
Most successful charities have both a well-skilled management team and a diverse range of responsible persons. And the relationship between the responsible persons and front-line staff is integral to not only the charity’s culture but also its ability to operate in a competitive sector.
You can find a wealth of information about running a charity and satisfying the ACNC’s ongoing compliance demands on the ACNC website.
If you’re involved with a charity, come and talk to the team at KLM Accountants. We can help you with services such as:
- preparing financial statements
- auditing financial statements and acquittal documentation
- being advisors during face-to-face contact with boards and/or committees
- providing technical advice, including governing legislation requirements (e.g. Charitable Fundraising Act NSW 1991)
- helping with ACNC obligations, including setting up new charities
- helping with relevant charitable exemptions (e.g. income tax, FBT concessions)
- helping your management team with its accounting, including KPI reporting and board-level reports.
Of course, we can also help with other financial reporting, auditing and assurance engagements. So get in touch with us today, and find out how we can help you.