Increasing financial reporting thresholds for ACNC-registered charities
The Council on Federal Financial Relations has asked that a framework for increasing harmonised financial reporting thresholds for charities registered with the Australian Charities and Not-for-profits Commission be announced by 30 June.
A consultation paper Increasing financial reporting thresholds for ACNC-registered charities provides a snapshot of present regulatory arrangements, outlines the proposed new reporting thresholds, and sets out key issues for consideration during consultations.
The proposal arises from an independent review of the ACNC, Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislative Review 2018, which recommended increasing financial reporting thresholds for ACNC-registered charities.
The recommendation read: ‘Registered entities be required to report based on size with thresholds of less than $1 million for a small entity, from $1 million to less than $5 million for a medium entity and $5 million or more for a large entity’.
Current thresholds for financial reporting for ACNC-registered charities are:
| Charity size | Current annual revenue threshold | ACNC Reporting requirements |
| Small | Less than $250,000 | ACNC Annual Information Statement |
| Medium | $250,000 or more and less than $1million | Annual Information Statement and reviewed or audited financial report |
| Large | $1million or more | Annual Information Statement and audited financial report. |
Proposed thresholds for financial reporting for ACNC-registered charities:
| Charity size | Proposed annual revenue threshold | Minimum ACNC Reporting requirements |
| Small | Less than $500,000 | ACNC Annual Information Statement |
| Medium | $500,000 or more and less than $3million | Annual Information Statement and reviewed financial report |
| Large | $3million or more | Annual Information Statement and audited financial report. |
The proposed thresholds are lower than those recommended by an ACNC review panel.
In proposing the thresholds, Commonwealth and State governments seek to balance a reduction in regulatory red tape while maintaining transparency to promote accountability, public trust, and confidence in the sector.
A claimed benefit for charities of the reform is that it will decrease professional service expenses for almost 6,800 charities that will move to a lower threshold (representing more than 10% of the sector).
About 3,300 charities would move from the medium to small category and no longer be required to produce reviewed financial reports. It would save the charities around $2,400 in professional costs annually.
Nearly 3500 charities would move from the large to the medium category and no longer be required to produce audited financial reports. These charities would annually save around $3000 in professional costs.
While the Federal Government can increase ACNC reporting thresholds with relative ease (through changes to regulations), most jurisdictions will need to change legislation or regulations for incorporated associations to ensure that harmonisation continues or to ensure that reporting thresholds for ACNC-registered incorporated associations and other incorporated associations in their jurisdictions remain harmonised.
ACNC-registered charities that are incorporated associations in South Australia, Tasmania, and the Australian Capital Territory would immediately benefit from increases in ACNC reporting thresholds via changes to Commonwealth regulations.
This is because state legislation provides that an ACNC-registered entity is exempt from state reporting requirements (including thresholds) as long as the charity is meeting its ACNC-reporting requirements. Victoria also has an exemption in place via a legislative instrument that would also ensure immediate relief to ACNC-registered associations incorporated in Victoria.
Charities filing incomplete financial reports
The ACNC’s annual review of almost 300 medium and large charities’ financial reports has revealed that almost a third of them were incomplete.
The survey showed that 20% failed to disclose the government revenue they had received, and some 5% of those surveyed had inconsistencies in corresponding information in their annual information statements and financial reports.
While reporting had improved, the commission said, there remained areas of concern.
Around 30% of annual financial reports reviewed were missing one or more necessary components. While many charities disclosed government revenue in their financial reports, they failed to do likewise in information statements.
ACNC commissioner Gary Johns urged charities and their accountants, auditors and reviewers to check carefully financial information they submitted to ensure it was correct and met requirements.
‘Increasingly, potential supporters, donors and the public are looking at information on the charity register to inform their charitable giving. Having a full record of AIS’s and accurate annual financial reports is an important way for a charity to present itself.’
Medium-sized and big charities are required to submit annual financial reports with their information statements. The reports should include full sets of financials, notes on the statements, a responsible person’s declaration, and a signed audit or ‘review’ report.
