Australian Not for Profit (NFP) organisations may not be geared towards making money, and usually have different taxation obligations, but in many ways these entities should still be run as you would an enterprise. If you fail to take the governance and management of your charity group seriously or adhere to professional business practices, you could find yourself in hot water.
Audits are a regular part of annual business operations – so incorporating this activity into your NFP’s calendar is vital too. However, it can be complicated determining the best auditing practice for your charity organisation. You need to understand how your annual turnover and activity define your organisation’s characteristics, and then discern your audit requirements to meet state and federal government regulations.
But don’t worry – if all of this seems confusing right now, here’s a guide to the auditing requirements for Australian NFPs that should clear things up.
Why are Australian Not for Profits required to complete audits?
NFPs, by their very nature, are established with charitable aims and not to generate a profit for stakeholders. These entities receive income from a variety of sources, including:
- Donations and gifts.
- Enterprise activities, such as selling t-shirts.
- Sponsorship or membership fees.
Money contributed by individual or corporate entities, after covering operating costs, should go to their charitable cause (unless otherwise stated). If this doesn’t happen, it represents a breach of consumer trust.
The Australian Charities and Not-for-Profits Commission (ACNC) is charged with monitoring the financial activity of charity organisations nationwide, ensuring all eligible groups stay compliant. Independent financial reporting through an audit is one tool used to ensure all income is properly accounted for, and is a vital part of operations for larger charity groups. But what are the auditing standards for these larger groups?
The basics: Auditing for larger Not for Profits nationwide
As of 2014, all large Australian charities need to submit a financial statement to the ACNC, in order to demonstrate where funds have been spent and what the Not for Profit’s financial assets and liabilities are. Large NFPs are defined as any organisation that generates an annual revenue of over $1 million.
There are several other requirements for this audit data to be considered valid:
- Only a registered company auditor or an authorised external services provider can perform an audit. This ensures the financial data and recommendations generated are impartial and not in breach of professional codes of conduct.
- All documentation needs to be prepared correctly under the ACNC Act 2012.
- The report must describe any irregularities during preparation and state the level of assistance and supporting documentation offered by the charity during the audit.
The only exceptions to this rule are basic religious NFPs. These groups are not required by the ACNC Act 2012 to provide an audit report, although regular financial reviews or other evidence may be required under different state legislation.
Financial reporting is vital to the long-term function of charity groups across the country. Any NFPs failing to provide this annual data can incur fines or have their charity status cancelled. Everything is at stake when preparing an audit for large Australian charities, so doesn’t it make sense to seek professional help and ensure your NFP is covered in any instance?
How can DFK Crosbie help?
Financial accountability is essential for charity organisations. However, the problem for many NFPs is that the in-depth details of financial accounting standards are too complex. It takes accountants and business service experts years to master these details, so how can you expect to pick it all up as you go while managing your charity?
That’s where accountants and financial auditors are vital partners to NFPs. Decision-makers at the top of charity organisations rely on accurate financial data in order to operate. It pays to have expert eyes on this essential information, ensuring your NFP is meeting all financial regulations and can strategically budget for the future.
DFK Crosbie’s audit team is assembled from a range of financial service backgrounds and is committed to serving the Not for Profit sector. We offer a range of audit services, from providing resources on NFP financial accountability through to full operational audits. No matter what you need, we can provide clarity on where your organisation is at today so you can plan for tomorrow.
To talk to one of our audit experts, contact the DFK Crosbie team today.