From the end of 2015 and into early 2016, the press was awash with claims as to the financial issues facing Shane Warne’s charity, The Shane Warne Foundation.

From various media reports and awkward television appearances, the mismanagement of the charity became apparent. The positive outcome of the debacle is that it brought many problems with charities in Australia to the surface. The Shane Warne Foundation had failed to keep up to date with its reporting requirements. Under its status as a registered charity, it was required to report its earnings to the Australian Charities and Not-for-profits Commission (ACNC). However, no action to deregister the charity was taken.

Media reports also suggested that the amount of money going directly to charities via the Shane Warne Foundation was less than was being reported publicly. There is currently no legislation which addresses the percentage of a charity’s earnings which must go directly to the work the charity is assisting with and the amount that goes to the staff and administrative costs of running a charity.

Auditing a Charity’s Accounts

Consumer Affairs Victoria (CAV) audited The Shane Warne Foundation when concerns were raised regarding the inconsistencies in financial claims made about some donated funds and the delay in financial reporting.

The Director of Consumer Affairs Victoria has powers under the Fundraising Act 1998 (Vic) (the Act) to make a number of requests concerning charities. Under section 32 of the Act, CAV may request that an audit of the charity’s accounts, where a person has or is conducting a fundraising appeal regulated by the Act. CAV also has the right to make public statements about a relevant charity under section 70B of the Act particularly, where it is in the public interest to do so and raise concerns about the activity of that charity.

The audit report released in March this year was largely unsuccessful in addressing the specific concerns about the funds and where the donations came from, although it was clearly the primary source of income. Although auditors KPMG collected evidence, it was not sufficient to make a determination as to exactly why the financial reports were in such bad shape. The report also detailed that the charity had not met several years of reporting obligations to the ACNC.

Financial Reporting Requirements for Charities

The requirements as to financial reporting as a registered charity depends on the size and the type of charity you are running. Upon setting up your charity, it is important to research the particular requirements your charity needs to meet as well as put in place sufficient accounting processes.

As a registered charity, you need to consider your reporting and compliance requirements concerning the ACNC and any relevant state and federal body that governs charitable fundraising in that state.

A serious consequence of not meeting your reporting duties is the withdrawal of the status as a registered charity. If your charity is stripped of registered status, then you will also not be able to receive the tax benefits that you may have set up through DGR (deductible gift registration) status with the ATO. Not to mention the bad publicity for your organisation as a whole.

All registered charities are required to provide an Annual Information Statement and you may be required to provide a more detailed financial report and an audit depending on the size of your charity.

If you are a Small Charity (annual revenue is less than $250,000):

  • You are required to provide an annual information statement.
  • Financial reporting is optional.

If you are a Medium Charity (annual revenue is more than $250,000 but less than a $1 million): 

  • You are required to provide an annual information statement.
  • Financial reporting is required (either reviewed or audited)

If you are a Large Charity (annual revenue is $1 million or more):

  • You are required to provide an annual information statement.
  • Financial reporting is required (and must be audited).

There are some exceptions to having to report information to the ACNC. These requests are usually made where there are concerns about the personal safety of persons involved in the charity or the public.

There were media reports that the Shane Warne Foundation did try to apply for this exception however they did withdraw this application at a later date.

As a charity, you may also have other reporting requirements to meet such as to ASIC, the ATO about any tax issues and the state body regulating fundraising in the states in which you operate.

Winding Up a Charity

Shane Warne announced earlier this year that the charity would be winding up. You can wind up your charity voluntarily or you may be required, for example, if your not for profit is insolvent. Like a business winding up, this process involves multiple steps and it is important to seek legal advice to wind up your charity properly. You will need to follow the steps as set out in the charity’s constitution or governing documents. There will also be some steps you may need to comply with depending on your charity’s business structure. For example, as a company, you will be required to comply with the Corporations Act 2001 (Cth). Upon meeting your requirements concerning the relevant regulations, you will also need to cancel your registration with the ACNC as a charity.

Key Takeaways

When starting and running a charity, it is essential that the charity has in place proper accounting systems and reporting policies. The charity should take note of and take seriously deadlines set out by the ACNC as to when these reports need to be submitted. You should also be aware of the powers of other state regulators to audit your books, as such these should be kept up to date irrespective of the time of year.

When running a small charity, it is still important to have proper policies and procedures in place even if you are not required to report financial information. If you have any questions about setting up your charity or complying with your financial reporting obligations, get in touch with our lawyers on 1300 544 755. 

Edith Moss

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