NFP ACNC activities | May 2021

ACNC releases new best-practice disclosures guide 

ACNC’s new best-practice guide for charities reporting on government revenue they received will help charities provide consistent information, enhancing transparency and accountability across the sector.  

Annual Financial Report Disclosures – Best Practice has come about because donors, funders, supporters, and the public want to know whether a charity receives funds from government, and the size of those funds. 

Nearly half of charity-sector revenue comes from governments, and increasingly people are viewing financial details on the ACNC’s charity register, often to inform decisions on charitable giving. 

The ACNC recommends using disclosures to ensure that annual financial-report supplements and matches information in annual information statements and believes the move might lead to more cuts to red tape. 

Three recommended disclosures of government funding in a charity’s annual financial report are: 

To ensure that financial statements are clear and easy for users to read and understand, the Commission recommends making most disclosures in notes to financial statements rather than in statements themselves. 

Recommended disclosures are not intended to replace existing disclosure requirements under Australian Accounting Standards. For some charities, the recommended disclosures are already required. Rather, they provide the ACNC’s view of best practice in disclosing this kind of financial information and encourage charities to adopt this approach. 

Consider the recommendations when preparing your charity’s annual financial report. 

Related-parties policies are worthwhile

A related party policy or procedure would reduce the risk that a charity’s decision is influenced by others’ interests. A policy might also help to ensure that related-party transactions do not occur without the approval of the person that governs a charity.  

Currently, registered charities must comply with ACNC governance standards to maintain their eligibility for registration (apart from basic religious charities). And while there is an ACNC governance standard that says a charity must take reasonable steps to ensure that its responsible persons – those governing the charity – meet certain duties, there are none that outline the duties of related persons to the responsible person.  

Governance Standard 5: Duties of Responsible Persons is that which guides those whom govern a charity, and says that a charity must take reasonable steps to ensure that its responsible persons meet certain duties, including: 

• To act honestly and fairly in the best interests of the charity and for its charitable purposes 
• Not to misuse their position 
• To disclose any actual or perceived conflict of interest, and 
• Ensure that the charity’s financial affairs are managed responsibly. 

Conflicts of interest (whether actual or perceived) may arise where a related party has an interest that might conflict with the best interests of the charity. Where a responsible person has an actual or perceived interest with a related party, it might be difficult to demonstrate a duty to act in the charity’s best interests. 

Related parties are not defined in the ACNC legislation. The term ‘related party’ is defined by the Australian Accounting Standards Board in AASB 124 Related Party Disclosures. 

Charity –activity bans broadened 

Changes to the ACNC’s Governance Standard 3: Compliance with Australian Laws will expand banned activities for registered charities. 

The amendments say that, in addition to current governance standards, registered charities: 

• Must not engage in conduct that may be dealt with as a summary offence relating to real property, personal property or persons under an Australian law, and 
• Must take reasonable steps to ensure that their resources are not used, nor continued to be used, to promote or support entities engaging in unlawful activities prohibited under the standard. 

The changes respond to recommendation 20 of Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislation Review 2018. 

The purpose of Standard 3 is to give the public confidence that a registered charity is governed in a way that is sustainable and consistent with its purposes, and that it protects its assets, reputation, and the people it works with. The amendments are intended to ensure that the standard is more consistent with disqualification as set out in the Charities Act 2013. 

Program details allowed 

Charities that operate on a calendar year have until 30 June to submit their 2020 Annual Information Statements. For the first time, you may provide details of up to ten programs demonstrating what your charity does.