Last month, June 2013 saw a number of significant milestones in the development of the ACNC.
- Release of the Financial Reporting Regulations;
- The confirmation of the Governance Standards;
- The passing of the Charities Bill by parliament resulting in the first Statutory Definition of Charity in Australia; and
- Information to be withheld from the Public Register – Private Ancillary Funds & Donor Identification.
Financial Reporting Regulations
On 1 July 2013, the financial reporting requirements came into play. Under these regulations, medium and large registered entities (charities) will be required to lodge financial reports for the 2013/14 financial year with the ACNC.
These regulations do not significantly depart from the draft regulations released by Treasury some months ago which were subject to consultation.
Financial reports will be required to be prepared in compliance with the accounting standards on the basis of the reporting entity concept. This will see those who govern charities being required to determine whether to lodge a general or special purpose financial report.
In all cases there are certain minimum accounting standards to be complied with and certain other information to be included in the financial report. In addition the regulations recognise that the joint and collective reporting framework in the ACNC Act may be in contravention of certain Accounting Standards and in particular group reporting by charities. This is also currently subject to consultation by the Australian Accounting Standards Board.
There are also transitional provisions in place for the 2013/14 financial year consistent with the information required in the 2014 Annual Information Statement.
These are contained in the regulations which until the last few days of Parliament were subject to a disallowance motion by the Coalition.
The governance standards are principle based to facilitate adoption based on the particular charity's circumstances.
The revised standards are as follows:
- GS1 Purposes and NFP Nature of a registered entity;
- GS2 Accountability to Members;
- GS3 Compliance with Australian Laws;
- GS4 Suitability of responsible entities; and
- GS5 Duties of responsible entities.
The ACNC will launch during the Better Boards Conference this weekend the second edition of its Governance for Good publication which will provide specific guidance in light of these standards.
Statutory Definition of Charity
The Charities Bill was passed in the closing days of Parliament.
Key highlights include:
- A start date of 1 January 2014;
- The presumption of public benefit retained for relief of poverty and the advancement of religion and education;
- Relief of Poverty incorporated into a new purpose - the purpose of advancing social or public benefit; and
- The ability for ancillary funds to donate to charity like government entities.
The final legislation is essentially the exposure draft which we outlined in our not-for-profit article in April. We note that an addendum to the explanatory memorandum has since been released which incorporates recommendations from the Sector (including Moore Stephens) concerning clarity surrounding the distinction between purposes and activities of an entity, which was lacking in the EM.
Information withheld from the Public Register –
Private Ancillary Funds & Donor Identification
As part of the regulations surrounding the governance standards, the Government included regulations regarding the information to be withheld from the public register. For Private Ancillary Funds this includes all information. For other entities any information for which publication is likely to identify an individual donor is to be withheld amongst other minor conditions.
These provisions appear to have been included to address concerns raised by philanthropic interests regarding the privacy of donors to facilitate the development of philanthropy. Given all these details will still be maintained by the ACNC, we see this as an effective mechanism to remove any potential restrictions on giving by those who would like their giving to remain outside of the public domain.
Given that Parliament has risen for the last time before the Election, there is much conjecture and discussion regarding what a Coalition may do in relation to the overall Not for Profit Reform Agenda. The latest announcement by the Opposition spokesman Kevin Andrews MP suggests significant changes to the current legislation and the role of the ACNC.
Whilst the Coalition's current stance is a significant departure from the existing position, as the main elements of the regulatory review have now all been legislated it will require formal repeal of legislation and the potential commencement of an additional consultation process regarding a Charities office.
This is a watch this space issue at the moment and given the ACNC is in operation, we would recommend that all Charities continue to comply with the existing legislation and where this results in improvements in the governance and practice of your charity that these processes continue to ensure that your Charity is in its best condition to achieve its mission.
Please click here to access our latest brief summary on the ACNC.
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