By Malcolm Liu

12 November 2019

Very often we get asked what reporting responsibilities a charity will have once registered. The short answer is: keep all paperwork and keep your accounts in as meticulous order as possible.

The long answer is: Charities that report to the ACNC all have auditing requirements, such as the Annual Information Statement (a document that provides the ACNC with information on your charity, its activities and basic financial information), but only some have reviewing or auditing requirements.

From the 2014 reporting period onwards, medium and large charities have been required to submit financial reports that have either been reviewed or audited. The table below summarises the classifications of charity size, reporting and auditing requirements.

Auditing Requirements

Image: courtesy CPA Australia

As can be seen above, large charities must have their financial report audited, and then must submit both the financial report and auditor’s report to the ACNC. Medium-sized charities must also submit a financial report, but can choose to have it either reviewed or audited unless the charity:

  • must have audited financial reports due to other requirements, for example, as directed by the charity’s Governing Documents or a funding agreement; or
  • has received a written notice from the ACNC Commissioner stating it must provide audited reports.

Again, medium-sized charities must submit the reviewer’s or auditor’s report to the ACNC, along with the financial report.

  • Audits of a financial report must be conducted by one of the following:
  • Registered company auditor (RCA);
  • A firm with at least one member who is an RCA; or
  • An authorised audit company (AAC).

An audit must be conducted in accordance with Australian Standards of Auditing (ASA) issued by the Australian Auditing and Assurance Standards Board (AUASB). In conducting the audit, and preparing the audit report, the auditor must form an opinion as to whether:

  1. the financial report satisfies the requirements of Division 60 (Reporting) of the ACNC Act; and
  2. the auditor has been given all information, explanation and assistance necessary to conduct the audit; and
  3. the charity has kept financial records sufficient to enable a financial report to be prepared and audited; and
  4. the charity has kept other records as required by Part 3-2 (Record keeping and reporting) of the ACNC Act.

The auditor’s report must describe any material defect or irregularity in the financial report and any deficiency, failure or shortcoming in respect of the above.

The auditor must also sign a written declaration that, to the best of the auditor’s knowledge and belief, there have been no contraventions of any applicable code of professional conduct in relation to the audit or otherwise list out such contraventions in the written declaration.

An auditor’s report must include statements and disclosures required by the ASA and contain a statement from the auditor that it was prepared in accordance with the reporting requirements of the ACNC Act. If the auditor has formed an opinion that the financial report has not been prepared in such accordance, the auditor’s report is required to state why, and the auditor must, to the extent practicable, quantify the effect of non-compliance on the financial report. If the auditor is unable to fully quantify non-compliance, the audit report must state the reasons for not being able to do so.

In having an audit conducted of its financial report, the charity must ensure that the auditor:

  1. has access at all reasonable times to the books of the registered entity; and
  2. is given all requested information, explanations or other assistance for the purposes of the audit or review.

A request for information, explanations and other assistance by the auditor must be a reasonable request.

In addition to the above, where a charity proposes to operate or send money overseas, there are further auditing requirements that need to be complied with. Where a charity proposes to operate outside Australia, the ACNC has External Conduct Standards which now apply. These are a set of four standards that govern how charities operating overseas must manage their resources and activities, with the standards being:

  1. Management of activities and control of resources overseas;
  2. Annual review of overseas activities and diligent record-keeping;
  3. Anti-fraud and anti-corruption processed and procedures;
  4. Protection of vulnerable individuals.

The ACNC may choose to investigate any charity at any time. While not all charities have strict auditing and record-keeping requirements, it is safe to conclude that the best policy is to be diligent in the charity’s record-keeping practices and maintain proper and accurate financial records at all times, so as to ensure that it does not risk any adverse action from the ACNC in this respect. Hence why, even if your charity does not have onerous reporting requirements, the best way forward is to act as if it does.

 

If you have any questions regarding your charity’s compliance with the ACNC requirements, please contact a member of our charities team.

Disclaimer
The material contained in this publication is meant to be informational only and is not to be construed as legal advice. Tisher Liner FC Law will not be held liable or responsible for any claim, which is made as a result of any person relying upon the information contained in this publication.

Related Articles

View All
Charities & Not-for-Profit / Charities & Not-For-Profits

Reporting Requirements of Various Charities

Your charity’s financial reporting requirements and other obligations to the ACNC depend on whether it is...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Looking to Start a Sports Charity: Is Sport a Charitable Purpose?

However, as the sector continues to develop, charities outcomes are being scrutinised with many questioning if there is...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Philanthropy and Charity – Tailoring Your Giving Regime

Charity is defined as the voluntary giving of help, typically in the form of money, to those in need Philanthropy has...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Regulation of Not for Profits and Charities

This article will deal with the not for profits that fall outside of the ACNC’s regulatory grasp and we will deal...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Attention Door Knockers: Fundraising Regulations 2019 Take Effect from 1 June 2019

The new Fundraising Regulations support the Fundraising Act 1998 (Vic) which applies to all those who engage in...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Beware! Charities Operating Overseas Are Now Under New Scrutiny

The new standards are expected to come into effect on 1 July 2019 and will be binding upon all charities operating...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits / Wills, Estates & Probate

Tax-Deductible Gifts and Public Recognition

Typically, when a donor donates funds to an entity that is endorsed as a tax-deductible gift recipient (DGR), the donor...
Read More
Charities & Not-for-Profit / Business Law / Charities & Not-For-Profits

“I’m Just a Volunteer” – Liability of Directors or Committees of Not-for-Profits

Often though, the volunteer nature of these organisations may contribute to a failure by the organisation, its’...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

Tax-deductible opportunities for Indigenous charities

The school, focused upon educating Aboriginal members of its local community, was previously registered as a charity...
Read More
Charities & Not-for-Profit / Charities & Not-For-Profits

What to Do if You’ve Been Asked to Run a Charity

If you have been asked by a charity to assume a governance position, then you should definitely be aware of all of your...
Read More
Australia-Israel Legal Advice / Charities & Not-for-Profit / Technology and Start Ups

TLFC – Award Finalist for Law Firm of the Year (Medium Category)

Tisher Liner FC are proud to be nominated as an award finalist in the 14th annual Victorian Legal Awards Medium Law...
Read More