Charities are subject to different regulatory standards compared to companies. However, given the high level of accountability expected of charities, they must fulfil additional requirements for record keeping for charities as per the Australian Charities and Not-for-Profits Commission (ACNC). These primarily relate to record keeping and reporting functions of charitable bodies and the associated governance principles.

Record Keeping for Charities

Broadly, charities must keep both financial and operational records on file for seven years. A charity can choose the storage system and process. Under ACNC requirements, they must be in English, or in an easily translated form. Charities do not have to disclose these records to unless on the ACNC’s request.

Financial records should outline the following:

  • All inbound and outbound transactions a charity makes;
  • The current state of the charity’s financial affairs; and
  • Contain financial statements that can be reviewed if needed.

All charities, even those not required to report because of their size and type, must have this information prepared. This is because the ACNC Commissioner can and does compel charities to produce financial statements.

Operational records need to address:

  • How the charity is dealing with its tax obligations;
  • How the charity is following ACNC requirements; and
  • How the charity continues to meet the eligibility conditions to remain a registered charity.

When keeping records, it is important to remember to sort documents into the relevant reporting period and categorise them based on their document type (i.e., bank statements, emails).

Aside from the fact that having records is best practice, they also help demonstrate a charities compliance with the ACNC’s governance standards, show members a more transparent picture of a charity’s activities and make reporting a much more seamless process.

A charity, depending on its nature and activities, may also have further reporting obligations under other legislation governing matters such as health and privacy not covered by the ACNC.

Reporting Requirements for Charities

How regular a charity must report on its activities is determined based on its size:

  • A small charity has an annual revenue below $250,000;
  • A medium charity between $250,000 and $1 million; and
  • A large charity over $1 million.

The ACNC reporting period for all of these follows the annual information statement year (like the financial year, ends on the 30th of June and begins again on the 1st of July the following year). However, a charity may request a different reporting period. A charity’s annual information statement and financial report are due six months after the end of the reporting period.

An annual information statement is generally used to gather data about a charity’s yearly activities and has optional questions to assist the ACNC in reducing regulatory burden. It is also used to monitor trends and help the ACNC improve the charity sector.

Regarding financial reports, how these are submitted also varies based on the charity size categories. A small charity has the option of providing a financial report, and may choose whether to use accrual or cash accounting and will not have their statements audited by the ACNC.

Medium and large charities must provide audited or reviewed financial reports and can also use transitional reporting arrangements when necessary. Transitional reporting arrangments are a way for charities to streamline their reporting to multiple government agencies. This is primarily done by allowing medium and large charities to submit the same financial reports to the ACNC that they did to other agencies.

Key Takeaways

Charities face a range of record keeping and reporting requirements designed to help them withstand government and public scrutiny. As such, it is important charity directors carefully comply to ensure their organisation’s transparency and maintain their registration. If you have any questions about compliance or corporate governance for your charity, get in touch with our commercial lawyers on 1300 544 755.

Anthony Lieu

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