Charities are being advised to do better in their financial reporting following the release of an annual review by the Australian Charities and Not-for-profits Commission (ACNC). Under the review, annual financial reports (AFRs) from some 274 charity organisations were examined with various errors and omissions being identified.
About a third of charities were found to have selected the wrong type of AFR during submission. 8% were also found to have failed to provide an auditor’s report. This was up from 6% last year. Amongst the most common omissions were statements of comprehensive income absent from about 29% of submissions and cash flow statements missing from another 12%.
The review also noted a decline by about 4% of responsible persons’ declarations with another 5% of the declarations lacking a solvency declaration indicating the charity’s ability to pay its debts. Many charities were also faulted for failing to disclose if they were not-for-profit and confirming the statutory basis on which their reports were prepared.
This report comes soon after a proposal by the federal government to grant the ACNC greater powers. According to federal assistant Treasurer Michael Sukkar, plans are being considered to grant the regulator the power to deregister charities whose members may be considered likely to commit offences. Sukkar noted that organisations that condoned crime while presenting themselves as charities were likely to undermine Australian’s trust in the sector.
There is however some criticism of the ACNC for already requiring submission of accounts yet appearing unwilling to act on obvious financial irregularities and abuse of the system. There have been highlighted cases of people setting up charities for purposes of hiding wealth rather than contributing to society. The country has even become a charity haven for overseas bodies like the Church of Scientology that has remitted tens of million, apparently drawn by the lack of regulatory scrutiny and tax-free benefits.
Local charity leaders are also opposed to the idea of granting the ACNC new powers. Particularly those that would allow the regulator to revoke charity status on mere suspicion and without evidence or due process. The Treasury did provide charities with an opportunity to voice their concerns as the legislation is being drafted.
With crime being a worry for the federal government, charity organisations and their accountants are expected to comply with proposed changes to Governance Standards to avoid serious penalties, including possible revocation of their registration and loss of Commonwealth charity tax concessions. Proposed amendments to Governance Standard 3 regards the range of offences covered by Australian law and updates to Governance Standard 6 on accountability issues related to child sexual abuse concerns.