As a Not-For-Profit organisation, compliance with the Australian Charities and Not-for-Profit Commission (ACNC) is essential. But it can be difficult to stay up to date with all of the regulations, especially when running an entire operation.
That’s why we’re here to discuss what you need to know about ACNC compliance, from implementing financial controls to undergoing an independent audit. We’ll also explore key areas such as record-keeping requirements and filing obligations, so you can ensure your organisation remains compliant at all times.
In December 2012, the Australian Government established the Australian Charities and Not-for-profits Commission (ACNC) to serve as the national regulator for the not-for-profit (NFP) sector. By maintaining, protecting, and enhancing public trust in this industry, the ACNC aims to support and sustain the sector while also reducing any unnecessary regulatory obligations. To register with the ACNC, charities must undergo a detailed eligibility assessment, after which they can be registered on the ACNC portal. This portal allows charities to communicate directly with the ACNC and receive advice and guidance to help them meet their obligatory requirements.
For any key decision-maker in an NFP business in Australia, it is important to understand the governance requirements for NFP accounting. Here’s what you need to know:
- Annual Reporting Requirements and the Annual Information Statement
As part of their yearly reporting obligations, registered charities are required to share their financial statements.
Every charity must also lodge an Annual Information Statement (AIS), which provides information about the organisation’s activities and governance. From the kind of work they’ve done over the past year to who they’ve supported (including demographic info), as well as the number of employees and some basic income, expenses, and balance sheet information.
These reports must be submitted every year within six months of the end of the charity’s fiscal year. Only authorized personnel from a registered charity have access to the charity portal where submissions can be made.
It’s also important to note that charities must now report on their related party transactions through the Annual Information Statement.
This means charities will need to keep records of related party transactions from the start of their 2023 reporting period; for many charities, this period began on 1 July 2022.
A party transaction involves a transfer of resources, services, or obligations between related parties, and does not necessarily involve a financial payment.
- Financial Controls
Implementing proper internal controls is essential to ensure a registered charity’s financial records are accurate and complete.
These controls are guidelines designed to ensure that any financial transactions are properly authorised, recorded, and reported.
At Hopscotch Accounting, we help our clients set up these controls and give them regular assessments to keep them updated and secure.
- Independent Audit
Charities come in all shapes and sizes, but when it comes to financial oversight, one size doesn’t necessarily fit all. While medium-sized organisations have the option to simply review their financial statements, larger charities are required to undergo an independent audit. This ensures that the financial statements are accurate and complete, and provides an objective opinion on their validity. The parameters of the audit will vary based on the charity’s size, nature, and any relevant regulations, so each audit is tailored to the unique needs of the organisation.
Depending on the size and type of registered charity, the audit parameters are tailored to specific regulatory requirements.
To select an auditor, follow these five steps as summarised by the ACNC:
- Start the process early to allow the reviewer or auditor time to perform their work
- Seek advice and recommendations from other charities
- Ensure independence from the organisation
- Check qualifications, and ensure value for money
- Send a request for proposal (RFP) to the appropriate auditing firms to allow for a comparison of options
- Enforcement and Penalties
It’s important for registered charities to follow governance standards and other regulatory requirements set by the ACNC. Failure to do so may result in enforcement action, which could include issuing directions or even revoking the organisation’s registration. At Hopscotch, we understand the importance of compliance and work closely with our clients to ensure they meet all necessary obligations.
Compliance with the ACNC not only avoids potential penalties or enforcement action but also strengthens the transparency and ethics of the organisation. That’s why we recommend partnering with NFP accounting experts for guidance on best practices. Get in touch with us to discuss your business needs.
Evidently, ACNC compliance is a necessary process for all Not-For-Profit organisations in Australia. Whether it’s adhering to reporting requirements, implementing financial controls, undergoing independent audits, or following ACNC requirements, there are many areas to consider with regard to compliance. While it may be daunting and time-consuming to stay on top of all the regulations, understanding them is critical for the success of your organisation.
If you’re still unsure or have any questions related to ACNC regulations, please do not hesitate to get in touch with our expert team. We’re here to ensure your organisation remains compliant at all times!