Under the ACNC Act, the main operative provisions of the financial reporting and governance requirements will be contained in the regulations.
Governance Regulations Finalised
Following the consultation period, the Government tabled the Governance Regulations in both the House of Representatives and the Senate on 12 March 2013.
You can access a copy of these regulations here.
We note that the Government has listened to the submissions made on these regulations and have incorporated the following changes into the regulations:
- inserting references that the governance standards must be interpreted in a manner that is consistent with the objects of the Act and the requirements of section 15 10 of the Act (in particular, the principles of regulatory necessity, reflecting risk and proportionate regulation, as well as the unique nature and diversity of not for profit entities and the distinctive role that they play in Australia);
- removing the governance standard proposed in consultation that specifically covered responsible management of financial affairs;
- this standard has now been incorporated as part of the governance standard that deals with duties of those who govern charities;
- clarifying that the governance standard about compliance with Australian law is necessary to trigger the ACNC Commissioner's enforcement powers in the event of a serious breach of the law, and that compliance with the law sets a minimum benchmark by which all entities should govern themselves;
- clarifying that the governance standard dealing with accountability to members does not mandate annual general meetings, and does not add to the financial reporting requirements that already exist in the ACNC Act; and
- introducing transitional arrangements that apply until 1 July 2017 and will allow incorporated associations to comply with duties under their State or Territory laws, instead of ACNC governance standard 5, which deals with duties of those who govern charities. This transitional arrangement arose from consultation on the Council of Australian Governments' Regulatory Impact Assessment on regulatory duplication in the NFP sector.
For our further commentary on the Governance standards, click here to access a copy of our Governance submission.
Overall, we are supportive of the revised Governance standards and it is encouraging to see that the Government has released these final regulations to allow Charities to start to consider existing governance arrangements and their current compliance with the standards.
As principle based standards, there is the flexibility to meet the standards based on the entities individual circumstances.
Appropriate consideration of the application of these standards by a Charity's board will not only allow for compliance with the Act but also enable the Board to address a key area of their responsibilities in an appropriate and transparent manner.
The Governance Standards will take effect from 1 July 2013.
Financial Reporting Standards
At the same time as Treasury released the Governance Standards Regulations, it also released draft Financial Reporting Standards Regulations.
The consultation process closed on 15 February 2013 and we are yet to see the revised regulations released. We anticipate that these along with the External Conduct Standards regulations will be issued shortly.
We support the overall approach being proposed in the draft Regulations and EM, particularly the proposals to:
- harmonise the financial reporting requirements applicable to ACNC registered entities with those currently applicable to companies limited by guarantee and associations;
- impose differential annual information statement, financial reporting and lodgement requirements for registered entities based upon their size;
- require registered entities to prepare their financial statements in accordance with one of the currently recognised financial reporting frameworks (special purpose, Tier 1: Australian Accounting Standards or Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements) based on professional judgement as to the needs of the users of the NFP's financial statements; and
- exempt 'basic' religious charities from having to prepare annual financial reports
However, we are of the view that further consideration is required in relation to the following:
- Joint and Collective reporting and its interaction with Australian Accounting Standards
- Application of Accounting Standards to non reporting entities
- Further guidance regarding temporary movement between reporting tiers
- ACNC's relationship with the Australian Accounting Standards Board (AASB)
- Reduced Disclosure Requirements its Public accountability requirements
- Allow the provision of comparative information on an early adopt basis
The Financial Reporting Standards will take effect from 1 July 2013.
This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.