Since the Australian Charities and Not-for-profits Commission
(ACNC) opened its doors in December 2012 we have seen significant
developments in further government consultations on the proposed
reforms impacting on charities.
Last week the government also announced a deferral of the commencement of taxing unrelated commercial activities. Click here to view our alert on this topic.
Confirming Your Registered Charity Details with the ACNC
The ACNC has commenced sending letters to all Charities requesting that they complete form AB within two months of the receipt of the letter. All Charities in NSW and WA should have received their letters in the last week. For the rest of Australia, these will be progressively sent out over the coming weeks.
We draw your attention to the requirement in the draft financial reporting regulations for responsible entities to declare that the financial statements lodged with the ACNC satisfy the requirements of the Act, including the truth and fairness of the accounts, and confirm that there are reasonable grounds to believe that the entity can pay its debts as and when they become due. Given that the ACNC are currently corresponding with charities requiring them to confirm their registered details, we note the importance of ensuring the details supplied in relation to responsible persons, given their responsibility for these declarations.
ACNC regulatory approach consultation
The ACNC is seeking feedback from the sector on its regulatory approach through both its recent community consultations and an online survey. This consultation process closes on 1 March 2013.
Click here to complete the survey and provide your views on the ACNC regulatory approach.
Papers Currently Open for Comment
In particular, we remind you that submissions are due to the Federal Treasury by Friday 15 February 2013 on the following:
- The draft financial reporting regulations
- The Consultation Paper on Governance Standards including 6 proposed standards
The Council of Australian Governance (COAG) also released on 25 January 2013 a regulatory impact assessment of potential duplications of requirements arising from these governance and reporting standards. COAG is seeking comment on the questions raised in this paper by 21 February 2013. Click here to view
Draft Financial Reporting Regulations
In summary the draft financial reporting regulations incorporate the same framework and principles that currently apply to companies under the Corporations Law. This will see the differential reporting framework contained within Australian Accounting Standards being applied for all ACNC registered entities. We are strongly encouraged by this broad principle based approach. Nevertheless, given the range of interpretations that can be made in the application of this framework there is a high likelihood of differing practices being adopted by similar charities in lodging their financial reports with the ACNC. Furthermore, given that much of the current framework has been developed primarily for application by for-profit entities, there will be significant challenges for many charities in interpreting the requirements within their environment. It is our view that this will lead to a lack of clarity, comparability and understandability across the sector.
Therefore we emphasise the need for the Australian Accounting Standards Board (AASB) and the ACNC to work together to accelerate the development of specific standards that are capable of application by the charities sector with the aim of achieving consistency. The latest on these AASB and ACNC projects are detailed below.
Proposed Governance Standards
We welcome the broad principle based approach outlined in the governance standards included in the consultation paper as well as their limited number. This reflects our views and concerns expressed in submissions made on the earlier government consultation papers.
The standards set out in the consultation paper cover the following areas:
- Purposes and NFP Character of a Charity;
- Accountability to members
- Compliance with Australian law
- Responsible management of financial affairs
- Suitability of Responsible Entities; an
- Duties of Responsible Entities.
These broad areas are clearly important for all charities, where applicable, and thus seem eminently sensible to be included in the regulations. We will provide further specific comment on certain elements in our submissions to Treasury.
Latest from the AASB
We note the continued focus by the AASB on important projects focussed on private not-for-profit (NFP) entities which are likely to affect the financial reporting obligations of many charities to the ACNC. These key projects and AASB timelines for issuing further consultative documents and/or new or revised standards are:
- Service Performance Reporting – Consultative document expected in the latter half of 2013;
- Control in NFP public and private sector entities – new standard expected between April and June 2013;
- Income from transactions of NFP entities - Consultative document expected before 31 March 2013.
We also expect further consultations between the AASB and the ACNC in developing guidance for other areas of operations of charities, including charities which consider themselves to be non-reporting entities, even though they are require to lodge a financial report with the ACNC. This is a particular focus of ASIC through Regulation 85 and will also be much debated for charities until clearer guidance is issued. Although the principle based nature proposed in the ACNC draft financial reporting regulations is welcome the examples provided in the explanatory materials are of little value given they are at either end of the spectrum on this issue. Therefore we encourage the ACNC to consult further with the sector on this and to develop more practical examples and guidance for charities.
We will provide you with access to copies of our submissions on the above matters and details on other developments as they arise. In the meantime if you have any questions please contact your Moore Stephens relationship partner or a member of the NFP Steering Committee.
Please click here to access the latest Moore Stephens not-for-profit reform brochure (February 2013 update).
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