Know where you stand

Saturday, 01 August 2015


    Susan Pascoe examines charity reporting in the not-for-profit space and highlights some of the key areas of focus for directors.

    For directors of charities, an important area of good governance relates to understanding the financial affairs of their charities and the reporting obligations to government agencies, such as the Australian Charities and Not-for-profits Commission (ACNC). The ACNC recently reviewed a number of 2014 annual financial reports (AFRs)and annual information statements (AISs)submitted to us. Our findings have revealed some common errors we want to share so they can be avoided.

    Annual statements

    Small, medium and large registered charities need to complete financial information questions in the AIS. It is critical that the person who signs the AIS and declares the information provided is true and correct, understands charity obligations and has the relevant financial knowledge to extract the appropriate information from the AIS. Consider the following factors when completing your AIS:

    • Your charity size. Revenue thresholds determine your charity’s size and charity obligations, therefore correctly calculating your revenue is critical in ensuring your charity meets its obligations.
    • Your report type. Your charity’s financial report will either be general purpose or special purpose. You must know the type of report you prepare and record this in your AIS.  This affects how your financial information is calculated and disclosed.
    • Whether you are a basic religious charity. The classification as a basic religious charity removes your charity’s financial reporting obligations. It is critical that any self-assessment is done in accordance with the guidance provided.
    • Whether the information you record is correct. The financial information on the AIS provides vital information about your charity to the public. It is in a charity’s best interest that this information is reliable and accurate. Common errors include incorrectly recording cents as dollars, and recording “revenue items” as “other income”.
    • Whether you have provided financial information. Irrespective of whether you conducted charitable activities in the reporting period, charities must provide financial information.

    Financial reports

    Medium charities must submit an AFR that is reviewed or audited. Large charities must submit an AFR that is audited. When completing your AFR, you must:

    • Remember to submit complete financial reports. The statement of cash flows, statement of comprehensive income and statement of changes in equity were often omitted. In some cases an AFR was not lodged at all, or an extract was lodged or it was incomplete.
    • Remember the requirements for a special purpose financial statement. For special purpose AFRs, the six accounting standards listed in the ACNC Regulation 2013 must be adopted and this should be disclosed appropriately.
    • Check you have an accounting policy note and it is correct. To assist in understanding the AFR, all financial statements must have an accounting policy note containing measurement and recognition principles on significant financial items presented by the charity.
    • Include related party disclosures for general purpose financial statements. Ensure you provide sufficient detail of transactions between related parties and disclose key management personnel compensation. Note that key management personnel usually includes more than just the directors of the organisation.
    • Make sure you attach all required documents. Remember to attach the audit/review reports and the responsible persons’ declaration and check they are signed.

    An understanding of the transitional requirements for state/territory organisations will also be necessary.  Some of the obligations above may not yet be necessary for organisations that lodge financial reports with their regulator. The ACNC had these transitional provisions in place for 2014 and has extended these for the 2015 reporting period. The ACNC continues to work with regulators on reducing any future potential duplicative reporting.
    For more information visit

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