Australian Charities Audit and Reporting: Read about he challenge of charities and not-for-profits audits reporting, and how to become compliant in Australia
For the Australian charities audit and reporting the ACNC requires to submit financial reports which have been audited or reviewed by an auditor.
Australian Charities Audit and Reporting
Medium charities with annual revenues of less than $250,000 and more than $1,000,000 are required to submit financial statements that have been reviewed or audited. Large charities, however, must submit audited financial records. The ACNC Act outlines who can audit the reports and what must be submitted to them.
Annual Reporting to the ACNC
The Australian Charities and Not-for-profits Commission (ACNC) has several reporting requirements for charities.
They cover operational reporting and record-keeping to ensure that charities meet the ACNC Governance Standards. Charities must also report to the ACNC annually in order to maintain their registration. The size of charities’ annual reporting obligations is dependent on how large they are – whether they are small, medium, or big.
Charities must submit an Annual Information Statement and an Annual Financial Report (if they are medium- or large in size) to fulfill their annual reporting obligations.
FIND OUT MORE ABOUT CHARITIES AUDIT AND REPORTING IN AUSTRALIA
Charity Size and Reporting
The ACNC will require you to report financial information and fulfil other obligations.
Your charity’s size is determined by its total annual income for the reporting period.
- Annual revenue of small charities is less than $250,000;
- Medium charities generate an annual income of at least $250,000 but less than $1 million;
- Large charities generate an average annual income of $1 million.
What’s revenue?
Revenue is an income component. It can be realized from the sale or use of capital, assets, or goods. If certain conditions are met, revenue can also be generated by the donation of assets to charities.
Revenue is often shown as the highest line item in an income statement (profit and loss). Examples of charities that are relevant include:
- Grants from the government, foundations, or private sources;
- Donations, tithes, and bequests to the Church;
- Provision of services: Fees;
- Goods for sale;
- Fundraising activities and sponsorships generate inflows;
- Dividends and interest earned from investments;
- License fees and royalties;
- Donations in-kind (for example, goods or volunteer time).
Annual Information Statement due Dates
The charity’s audit and reporting are required to submit an Annual Information Statement within six months of the end of their reporting period. These are the two most commonly used reporting deadlines:
- 31 December for charities that report to a regular fiscal year (1 July to June)
- 30 June for charities that use a calendar-year reporting period (1 January to 31 Dec)
ACNC’s standard required filling for the charity’s audit and reporting period is, from 1 July to 30 June. You can request that your annual information statement be prepared for a charity using a different reporting period.
Only one piece of information is required about each reporting period. This will allow the ACNC to know when you have to report and enable us to send reminders at the appropriate time.
Failing to submit an Annual Information Report
The ACNC will take action if your charity fails to submit its Annual Information Statement.
- If they discover that your charity is not reporting its obligations, or if you are unable to comply with them, we will issue penalty notices;
- Publicize a notice that your charity’s Annual Info Statement is late on the ACNC Register. If your charity fails to submit within six months, this will be displayed on your charity’s entry in the Register.
ACNC can penalize charities that fail to submit their Annual Info Statement on time. Your charity’s Annual Information Statement will be submitted to the ACNC Register, and the ACNC Register will update the details and remove the late statement.
ACNC may revoke your registration if your charity fails to submit an Annual Information Statement every year for at least two years. The Australian Taxation Office will then remove your charity’s eligibility for tax concessions.
Additional reporting information for charities audit and reporting, and non for profits in Australia
Basic Religious Charity
For the scope of charities audit and reporting, a charity that meets the requirements for being classified as a Basic Religious Charity can be exempted from certain reporting obligations. This includes the requirement to submit financial reports to the ACNC. The ACNC’s External Conduct Standards will apply to basic religious charities that are based overseas.
Bulk lodging and Group Reporting
Bulk lodgement allows eligible charities to submit multiple Annual Information Statements on behalf of multiple registered charities.
Under the charities audit and reporting rule, a charity can be eligible as a group under group reporting. This is possible in two ways: as part of a joint reporting arrangement or as a collective reporting arrangement. In certain situations, charities can submit their Annual Information statements in bulk or as part of a group.
Transitional Reporting
To help charities reduce their reporting burden, the ACNC has made arrangements with several government agencies. These arrangements are designed to make the charities audit and reporting easier to report to other agencies and to give charities more time to comply with any new requirements.
Reviewing Financial Reports and Audit
Depending on the charity’s size, the requirement to submit an audited or reviewed annual financial report is different.
- Small Charities Audit and Reporting: It is not necessary to submit a financial statement in the Annual Information Statement for small charities. Therefore, there is no ACNC requirement that a small charity has its financial reports reviewed or audited. We encourage small charities to submit financial reports as part of the Annual Info Statement. If a small charity’s governing documents require it to submit financial reports, it must.
- Medium Charities Audit and Reporting: Medium-sized charities may have their financial reports reviewed or audited. As part of the Annual Information Statement, the auditor’s or reviewer’s report must also be submitted.
- Large Charities Audit and Reporting: Large charities should have their financial reports audited. As part of the Annual Information Statement, the auditor’s report should be submitted.
Non-for-profit organizations and charities audit and reporting review in Australia
Appoint an Auditor or Reviewer
- You can start early so that the auditor or reviewer has time to complete their work;
- Ask for recommendations and advice from other charities;
- Assure that the individual is not tied to the organization;
- Make sure they are qualified;
- You should ensure that you get value for your money.
Prepare to a Review or Audit
The following steps can help your charity make the audit or review process more efficient:
- Any accounting problems that are discovered before the audit/review are recorded;
- These problems can be solved. If they are not, write a plan for how your charity will fix them;
- Before they begin, ask the reviewer/auditor for a schedule. This will outline what the charity needs and when the review/audit will be completed;
- To clarify any questions, contact them prior to the audit/review;
- Provide them with desk space and schedule time for them to meet;
- All staff should be informed about the audit/review and what they can expect from them.
Read more about charities audit and reporting review in Australia
Make the most of your Review or Audit
Your charity has the opportunity to improve its accounting systems and administrative processes by having them reviewed or audited. Don’t be alarmed if an auditor or reviewer finds faults in your charity’s accounting systems and processes, as this is normal. This is how you get the most from this process:
- Ask the auditor/ reviewer to point out areas in which your charity could be improved;
- Talk to the auditor/ reviewer about any issues they find;
- Develop a plan to solve the problem;
- Give the auditor/ reviewer a copy of your plan and request feedback;
- All staff should be made aware of the lessons learned from the audit/review.
Removing an Auditor or Reviewer
- You should take the time to decide and make sure that you don’t retain the reviewer or auditor;
- You may find a process your charity must follow in the governing document, policies, and procedures of your charity;
The corporations act 2001 has strict requirements regarding the appointment and termination of auditors for charities.
If you found this article helpful, please go to the rest of the website for more about accounting in Australia, some of the audit exemptions in Australia, an overview of Financial Reporting in Australia, understanding the Australian income tax, or more accounting and financial topics in International Accounting, Audit, Taxation, Accounting Software, Cloud Accounting and Accounting Automation.
Read this article in: English – Dutch – French – German – Spanish
