A guide for charities reporting under the ACNC Act 2012
Upcoming SlideShare
Loading in...5
×
 

A guide for charities reporting under the ACNC Act 2012

on

  • 237 views

Chartered Accountants Australia and New Zealand has developed a free guide to help members operating in the Australian not-for-profit sector. It’s a guide for charities registered with the ...

Chartered Accountants Australia and New Zealand has developed a free guide to help members operating in the Australian not-for-profit sector. It’s a guide for charities registered with the Australian Charities and Not-for-profits Commission and will assist members detail the obligations for not-for-profits in relation to record-keeping, reporting and auditing. More information is available at charteredaccountants.com.au/ACNCguide

Statistics

Views

Total Views
237
Views on SlideShare
233
Embed Views
4

Actions

Likes
0
Downloads
2
Comments
0

2 Embeds 4

https://www.linkedin.com 2
http://www.linkedin.com 2

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

A guide for charities reporting under the ACNC Act 2012 A guide for charities reporting under the ACNC Act 2012 Document Transcript

  • A guide for charities reporting under the ACNC Act 2012 Applicable for the first annual reporting season commencing on or after 1 July 2013 Supplement to the Enhancing Not-For-Profit Annual and Financial Reporting guide 2013
  • 2 charteredaccountantsaustralia+newzealand Copyright Copyright © The Institute of Chartered Accountants in Australia. All rights reserved. This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, it may be copied, published or communicated in any form or by any means, provided that it is not amended or adapted without the prior written consent of The Institute of Chartered Accountants Australia and the ownership of copyright by The Institute of Chartered Accountants in Australia must be attributed at all times. Disclaimer The information in this document is provided for general guidance only and on the understanding that it does not represent, and is not intended to be, advice. Whilst care has been taken in its preparation, it should not be used as a substitute for consultation with professional accounting, tax, legal or other advisors. Before making any decision or taking any action, you should consult with an appropriate specialist or professional. No warranty is given to the correctness of the information contained in this document, or its suitability for use by you. Information contained in this application may have changed since publication, and may change from time to time. To the fullest extent permitted by law, no liability is accepted by The Institute of Chartered Accountants in Australia for any statement or opinion, or for an error or omission or for any loss or damage suffered as a result of reliance on or use by any person of any material in the document. Chartered Accountants Australia and New Zealand Chartered Accountants Australia and New Zealand is made up of over 100,000 diverse, talented and financially astute professionals who utilise their skills every day to make a difference for businesses the world over. Members of Chartered Accountants Australia and New Zealand are known for professional integrity, principled judgement and financial discipline, and a forward-looking approach to business. We focus on the education and lifelong learning of members, and engage in advocacy and thought leadership in areas that impact the economy and domestic and international capital markets. We are represented on the Board of the International Federation of Accountants, and are connected globally through the 800,000-strong Global Accounting Alliance and Chartered Accountants Worldwide which brings together leading Institutes in Australia, England and Wales, Ireland, New Zealand, Scotland and South Africa to support and promote over 320,000 Chartered Accountants in more than 180 countries. Chartered Accountants Australia and New Zealand is a trading name for the Institute of Chartered Accountants in Australia (ABN 50 084 642 571) and the New Zealand Institute of Chartered Accountants – see charteredaccountantsanz.com for further information. charteredaccountantsanz.com 0614-73
  • 3 charteredaccountantsaustralia+newzealand Introduction 5 Section 1: The ACNC Act 2012 6 Section 2: Guidance on reporting under the ACNC Act 9 Decision 1: Do the ACNC reporting requirements apply to me? 9 Decision 2: What financial report is appropriate? 10 Decision 3: Contents of the General Purpose Financial Statements 11 Decision 4: Contents of the Special Purpose Financial Report 12 Contents
  • 4 charteredaccountantsaustralia+newzealand Entities registered with the Australian Charities and Not- for-profits Commission must comply with the requirements of the ACNC Act.
  • 5 charteredaccountantsaustralia+newzealand When the latest NFP guide was produced in 2013, not all the regulations were finalised relating to the Australian Charities and Not-for-profits Commission Act 2012 (the Act). Further, additional relief has now been granted for a charity’s first annual reporting period. The annual reporting information in the NFP guide (Section 2 and Section 3) is still relevant and considered best practice for charitable organisations reporting under the Act. Similarly, the illustrative financial statements contained in Section 4 of the NFP guide are still relevant for charitable organisations when they are producing general purpose financial reports. Where reference is made to the Corporations Act 2001 in the illustrative financial statements, these should be replaced by references to the ACNC Act 2012 for registered charities. This publication contains an update to some of the legislation references relating to the Act within the introduction of Section 4 and Table 2 in Section 5 of the NFP guide. An updated Table 2 appears in Section 1 of this guide. The updated flow charts that are relevant for ACNC registered charities to consider are contained in Section 2 of this guide. In addition to this publication, charities should continually check for updated guidance on the ACNC website as it continues to update its education resources on all areas covered by the Act. Further, the ACNC Commissioner also provides one-off relief on the website. For example, the Commissioner has exercised discretion to accept financial reports lodged with state or territory governments by incorporated associations, cooperatives or charities that undertake fundraising or charitable collections. At the date of this publication, the Senate Economics Legislation Committee had concluded its inquiry into the ACNC (Repeal (No 1) Bill 2014 with a government report recommending the legislation to abolish the ACNC be passed, with dissenting reports from the Labor Party and the Greens arguing for a retention of the ACNC. The ACNC Repeal Bill was referred to the Senate Economics Legislation Committee after it was introduced in the House of Representatives in March. One hundred and fifty five submissions were received by the committee, with more than 80 per cent opposing the proposed legislation. Should this Bill be passed in the current parliamentary sitting, it will not take effect until the enactment of a second Bill (yet to be released). The government intends the second Bill to contain details of the proposed arrangements to replace the ACNC. As a precursor to this second Bill, an options paper has been released by the Department of Social Services titled, Options Paper – Australia’s Charities and Not-for-profits. This means the ACNC remains Australia’s national charity regulator and it will continue to regulate the sector and perform its legislative functions until this second Bill is passed by Parliament.   Introduction This publication supplements the more general not-for-profit (NFP) guide that has been produced by Chartered Accountants Australia and New Zealand every two years, Enhancing Not-For-Profit Annual and Financial Reporting (NFP guide).
  • 6 charteredaccountantsaustralia+newzealand The ACNC Act – Record-Keeping, Reporting And Auditing The ACNC commenced operation in December 2012. The ACNC is responsible for regulating the operations of registered charities in Australia. All charities that were endorsed for charity tax concessions by the Australian Taxation Office (ATO) were automatically registered with the ACNC when it commenced operations. Entities that are registered charities with the ACNC must comply with the requirements of the ACNC Act and its accompanying regulations. This table focuses on the financial reporting and audit requirements of the ACNC Act and associated regulations. Section Summary Detail 55-5 Record-keeping Registered entities are required to keep written financial records that: • Correctly record and explain its transactions and financial position and performance; and • Enable true and fair financial statements to be prepared and audited. Registered entities must also keep written records that correctly records its operations. The financial records can be kept: • In English; or • Readily accessible and easily convertible into English. 205-25 Tiered framework A three-tiered framework exists for registered entities as follows: • Small – Annual revenue is less than $250,000 • Medium – Annual revenue is $250,000 or more but less than $1,000,000 • Large – Annual revenue is $1,000,000 or more. 60-5 Annual information statement All registered entities must prepare an annual information statement (AIS). The first AIS for the year comprises basic non-financial information about the registered entity. These are due for lodgement no later than 31 December unless the ACNC Commissioner has approved a substituted accounting period or has otherwise deferred lodgement. 60-10 and 60-60 Reporting requirements and lodgement Medium and large registered entities must also prepare annual financial reports for financial periods from 1 July 2013 unless they are a basic religious charity. These are due for lodgement no later than 31 December unless the ACNC Commissioner has approved a substituted accounting period or has otherwise deferred lodgement. 205-35 and 60-95 Basic religious charity A basic religious charity is defined in section 205-35 as one that: • Is a registered entity • Is registered with a purpose that is the advancement of religion • Is not entitled to be registered as any other subtype of charity (i.e. does not have another purpose). Basic religious charities cannot be: • A body corporate registered under the Corporations Act 2001 • A corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 • A corporation registered under the Companies Act 1985 of Norfolk Island • An entity that is incorporated under any of the relevant state or territory incorporated associations legislation • An entity that has deductible gift recipient status (except as excluded by s205-35 (3A)) • An entity that forms part of a reporting group for the year (see 60-95); or • An entity whose total grants received from Australian government agencies in the current financial year or either of the previous two financial years exceeds $100,000. Section 1: The ACNC Act 2012
  • 7 charteredaccountantsaustralia+newzealand Section Summary Detail 60-15 and Reg 60.5 Requirements for annual financial reports Where annual financial reports are required, they comprise: • The financial statements for the year • The notes to the financial statements • The responsible entities’ declaration about the statements and notes. 60-15 and Reg 60.10 and Reg 60.30 (SPFS) Compliance with accounting standards The financial statements must comply with accounting standards. The notes are the notes required by the accounting standards and any other information necessary to give a true and fair view of the entity’s financial position and performance. The financial statements and notes for a financial year must give a true and fair view of the financial position and performance of the entity and comply with accounting standards (subject to the transitional relief noted below). Where special purpose financial statements are prepared the following minimum accounting standards must be applied: • AASB 101 Presentation of Financial Statements • AASB 107 Statement of Cash Flows • AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors • AASB 1031 Materiality • AASB 1048 Interpretation of Standards • AASB 1054 Australian Additional Disclosures. Reg 60.20 – 25 and Reg 60.35 to 40 Subdivision 60-E and 60-G Transitional relief in respect of compliance with accounting standards For an entity that was not required to prepare a financial report complying with accounting standards in respect of the 2012/13 financial year and did not prepare such a statement then the financial statement can comprise the financial information section within the 2014 AIS. But this financial information must still be reviewed or audited as per below. Compliance with accounting standards is not required if they conflict with the requirements of sub-divisions 60-E or 60-G of the ACNC Act in respect of joint or collective reporting and additional reporting requirements. 60-95 to 60-105 Collective or joint reporting Under the collective or joint reporting provisions, groups of charities that meet certain criteria can apply to the ACNC to prepare a combined set of financial reports that incorporate all the financial activities of a group • Joint reporting – two or more registered charities that form a reporting group are allowed to prepare and lodge a single information statement or a single information statement and a single financial report • Collective reporting – two or more registered charities that form a reporting group are allowed to prepare and lodge one or more information statements or one or more single information statements and one or more single financial reports, other than on an entity by entity basis. Reg 60-15 Responsible entities’ declaration The declaration must state: • Whether the registered entity is able to pay its debts as and when they become due and payable; and • Whether the financial statements and notes satisfy the requirements of the Act. 60-20 and 60-25 Audit/review requirement Medium-sized registered entities must have their financial reports audited or reviewed. Large registered entities must have their financial reports audited.
  • 8 charteredaccountantsaustralia+newzealand Section Summary Detail 60-30 Auditor/reviewer qualifications Audits can be undertaken by: • A registered company auditor (RCA) as defined under the Corporations Act • A firm with at least one member of which is a RCA who is ordinarily a resident in Australia • An authorised audit company as defined under the Corporations Act. Reviews can be undertaken by: • Those suitable to provide audits (as above); or • A member of one of the three accounting bodies (Chartered Accountants Australia and New Zealand, CPA Australia or Institute of Public Accountants). 60-30, 60-35,40 60-45 and 60-50 Audit report/review report requirements The audit or review must be undertaken in accordance with auditing standards. An independence declaration is required. The report must consider in respect of the financial report: • Compliance with Division 60 of the Act • Quantify the effect of any non-compliance if practicable (or state why not possible) • Describe any material defect or irregularity and any deficiency, failure or shortcomings in respect of: –  whether all information and assistance has been provided –  whether financial records are sufficient –  whether other records as required have been kept • Compliance with statement or disclosures required by auditing standards. 60-65 Errors in information statements and financial reports When a registered entity identifies a material error in a lodged information statement or financial report it must give a corrected statement to the ACNC Commissioner as follows: • Small registered entities: within 60 days after the entity identifies the error • Medium or large registered entities: within 28 days after the entity identifies the error.
  • 9 charteredaccountantsaustralia+newzealand Decision 1: Do the ACNC Reporting Requirements apply to me? Section 2: Guidance on reporting under the ACNC Act There may be other current reporting requirements to consider imposed by states/territories and/or other Commonwealth laws, regulations and/or regulators (e.g. ATO/ASIC). Start here  REGISTERED CHARITY WITH THE ACNC/ATO? 1 Yes Yes Yes No AIS required – this includes non-financial information for the first financial year. Those charities that are not BRCs (see below) will have to provide the ACNC with financial information in the AIS for subsequent financial years. Is the entity a Basic Religious Charity (BRCs)? 2 Financial report required in accordance with accounting standards 3 Is the entity a reporting entity?  See Decision 2 Responsible entity declaration to be prepared 1. Registration with the ACNC is voluntary and allows access to Commonwealth tax concessions and other benefits otherwise unavailable. Any organisation that was registered as a charity with the ATO should have become a registered charity under the ACNC Act 2012, unless they have opted out or become unregistered since December 2012. 2. Basic Religious Charity comprise Religious entities that have the sole purpose of advancing religion and are not; a deductible gift recipient (unless it is only one for the operation or one or more funds, authorities or institutions with a combined revenue of less than $250,000), or received a financial grant from the Australian government in the current or previous two financial years exceeding $100,000, or a body corporate under one of the corporations/companies acts, or an incorporated association or part of a reporting group under the proposals according to s205-35 of the ACNC Act 2012. 3. The exception to this is whether the transitional relief is met contained in Reg 60-20 – 60-25 and Reg 60.35 – 60.40. Yes No General Purpose Financial reports (GPFR) See Decision 3 Special Purpose Financial reports (SPFR) See Decision 4 No No Is revenue less than $250K?
  • 10 charteredaccountantsaustralia+newzealand Decision 2: What financial report is appropriate? The financial report produced in most cases must be in compliance with accounting standards. Statement of Accounting Concept 1 Definition of a reporting Entity (SAC 1) and Statement of Accounting Concept 2 Objective of General Purpose Financial Reporting (SAC 2) issued by the Australian Accounting Standards Board (AASB) set out the detailed consideration as to whether an entity can prepare a general purpose financial report (GPFR) or a special purpose financial report (SPFR). See the decision tree below to help assist the Board/Governing Body in its determination. General purpose financial report – go to Decision 3 Special purpose financial report may be prepared – go to Decision 4 Many stakeholders; operate Australia wide and/or internationally. The whole management team is employed with little volunteer involvement; professional workforce involved in delivery of services or running day-to-day activities; governing Board includes ‘outsiders’ with specific skills. Significant community impact and/or representing a number of communities or affiliated bodies. If most of your responses   fall on this side of the   decision tree, you are most likely a reporting entity. Few stakeholders, operate in a limited geographic area (for example, in one suburb or a country town). In answering this question you need to consider donors, sponsors volunteers, staff, the public, grant providers, regulators, suppliers, program beneficiaries, interest groups and affiliated bodies. The NFP is managed by the stakeholders, including volunteers or a small management team is employed and supplemented by volunteers; activities conducted by volunteers; governed by a Board of volunteers. Impact limited to a specific community and one group within that community. If most of your responses fall on this side of the decision tree, you may be a non-reporting entity. Is the NFP in receipt of government or philanthrophic grants and/or reliant on donations? Widespread How widespread are your stakeholders? Is management separated from stakeholders? Who are your stakeholders? Yes Yes No No Limited  spread Does the NFP have a significant impact on the broad community or represent a broad group? (Consider the activities and economic significance) Yes No
  • 11 charteredaccountantsaustralia+newzealand Decision 3: Contents of the General Purpose Financial Statements General purpose financial report – Australian Accounting   Standards, reduced disclosure requirements Full Tier 1 general purpose financial report – compliance with all recognition, measurement and disclosure requirements   of the Australian Accounting Standards. Start here  Does your NFP want to elect to take advantage of the reduced disclosure regime (RDR) available under AASB 1053? YesNo No Yes Does the NFP’s constitution prevent the use of an RDR? Record Board/governing body resolution regarding decision to elect to adopt Tier 2 reduced disclosure requirements and disclose the adoption in the notes to the financial statement. Apply all recognition and measurement requirements from the Australian Accounting Standards. Review the disclosures permitted to be removed and decide which will not be included.* Add any additional disclosures if relevant for the compliance with: • Any applicable fundraising legislation • The Australian Council for International Development (ACFID) code (see NFP guide, Section 5.3 for more information). * Note: The reduced disclosure standards show all disclosures that are no longer required in the financial statements. Entities may choose to remove all of these disclosures or only some of them, subject to any true and fair requirement in respect of the financial statements in relevant legislation. Once the entity removes any disclosures permitted under this regime, the financial statements are deemed to be prepared in accordance with the Australian Accounting Standards, reduced disclosure requirements.
  • 12 charteredaccountantsaustralia+newzealand Decision 4: Contents of the Special Purpose Financial Report 1. Registered charities must comply with the following minimum accounting standards, as determined by the law: AASB 101 Presentation of Financial Statements AASB 107 Statement of Cash Flows AASB 108 Accounting policies, Changes in Accounting Estimates and Errors AASB 1031 Materiality AASB 1048 Interpretation of Accounting Standards AASB 1054 Australian Additional Disclosures SPECIAL PURPOSE FINANCIAL REPORT Start here  Determine the accounting framework to be used, ensuring it meets the needs of those identified users. Consider any additional requirements of other State/territory legislation and/or the entity constitution/charter/trust deed. This will include: • Mandatory accounting standards applicable for registered charities under the ACNC Act1 • Consideration of other accounting standards necessary (recognition, measurement and disclosure) to give a ‘true and fair’ • Consideration of requirements of other State/territory legislation and/or the entity constitution/charter/trust deed. Add any additional disclosures, if relevant, for the compliance with: • Any applicable fundraising legislation • ACFID code (See NFP guide, Section 5.3). Record Board resolution documenting the assessment that the entity is not a reporting entity, the accounting framework used in the preparation of the financial statements and the appropriateness of the framework to the needs of users. Ensure the basis of preparation note included in the financial statements provides details of compliance with accounting standards.
  • Contact details Chartered Accountants Australia and New Zealand 33 Erskine Street, Sydney NSW 2000, GPO Box 9985, Sydney NSW 2001, Australia Phone 1300 137 322 or +61 2 9290 5660 Fax +61 2 9262 4841 Level 7, Chartered Accountants House, 50 Customhouse Quay, Wellington 6142, PO Box 11342, Wellington 6142, New Zealand Phone +64 4 474 7840 or 0800 469 422 Fax +64 4 473 6303 charteredaccountantsanz.com