Don’t double default – NFP Organisations and safeguarding your reputation

The ACNC has recently taken the step of naming and shaming Australian charities that have failed to comply with their reporting obligations.

Some 2000 Australian-based charities and NFPs are now at risk of having their charity status revoked. For NFPs, it is now more important than ever to get your accounts in order, on time.

Two thousand charities have at least two Annual Information Statements outstanding, according to the list released by the Australian Charities and Not-for-profits Commission (ACNC).

Many on the list are longstanding charities which have a physical location and provide a valued service.

Why has ACNC taken such a rigorous approach to charities?

In Australia there are approximately 56,000 organisations on the ACNC Charity Register, growing at almost 4 per cent per year – “a rate that is faster than population growth and business formation.”

Established in 2012 and conducting a major clean-up of organisations transferred to the ACNC from the Australian Taxation Office in 2013, the ACNC has continued to revoke the charity status of organisations annually. Across Australia, 196 charities were revoked in the 2017 & 2018 period.

According to the ACNC Commissioner, the Hon Dr Gary Johns, within recent years, “The number of concerns identified proactively through intelligence gathering and data-matching jumped to 20%, up from 8% in 2017.”

Why do charities and NFPs need to comply?

Charities and NFPs receive money from the public and funding from the government. Some are also funded by grants from other NFPs. Charities have financial obligations to their paid employees, their suppliers and the ATO. Furthermore, they have an important moral obligation to their volunteer base, supporters and advocates.

From a purely functional standpoint a charity’s reputation is everything, so defaulting on obligations, even if unintentional and later rectified, is a serious misstep. Public perception is based on good governance. Donators, vocal supporters of the cause and grant providers (government or private bodies) will swiftly distance themselves from a targeted organisation.

Failure to respond to notifications from ACNC will result in a loss of charity status.

Don’t be a double defaulter

There are several common factors behind why two thousand charities are now classed as double defaulters, yet the following could have been resolved quite easily.

Failure to maintain contact is the first simple mistake. While the ACNC makes multiple attempts to contact charities directly, it noted that some had listed incorrect contact details.

Not fully completing the AIS submissions procedure is the second simple error. Submissions must be made through its charity portal and the ACNC comments: “We have noticed that some charities have filled out their Annual Information Statement without finalising their submission”.

Falling behind with the AIS statement. Punctuality is now written into the compliance requirements. It isn’t good enough to blame infrequent committee meetings or key person dependency on a staff member who happens to be overseas or in hospital.
Hopscotch Accounting can help with the preparation of submissions, and other reports such as grant acquittals. We can also consult with the board and track your reporting requirements.

Moving into a different threshold.  Around one-third of Australia’s registered charities are medium or large organisations with annual revenue of more than $250,000. This obligates them to provide financial statements to the ACNC within six months of the end of financial year (smaller organisations might also stipulate this in their constitution). While $250,000 seems like a lot of money, some charities can slip into this threshold if they hold a one-off successful event, or they partake in a high-revenue activity – even one that is costly and results in a slim profit/fundraise.
Hopscotch Accounting can help assess your reporting requirements threshold, set up clear accounting guidelines for big events, and produce an expert AIS financial report on time where required.

Multiple separately registered charities. Approximately one-third of Australia’s registered charities have operations in more than one state, and some of our best-known organisations consist of multiple separately registered charities. They operate longstanding services that are the lifeblood of towns across Australia, from “religious groups, rural fire services and Returned & Services Leagues (RSLs), to surf life-saving clubs, childcare groups and private hospitals”. Unfortunately, the multiple registration status of some charities can confuse their approach to accounting and reporting.

Hopscotch Accounting can help assess your reporting requirements, set up clear accounting processes for multiple separately registered charities, and produce an expert AIS financial report on time where required.

We have a strong track record working with NFPs to help them grow, focus on their goals and maintain positive public perceptions. You can see what our clients say here or contact us today for an Accounting Efficiency & Risk Check where we will review your accounting operations to identify your reporting obligations and ways we can save you time and money.

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