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Auditing of not for profits ... not necessary for all
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Audit requirements for not for profit organisations are driven by a number of factors.
There are some common requirements between ACNC, ASIC and the State and Territory regulators, and the requirements vary depending on annual revenue.
- Reduced reporting obligations if annual revenue is less than $250,000
- Choose audit or review if revenue is less than $1 million
- Must have an audit if annual revenue is $1 million or greater.
ACNC requirements
ACNC registered charities with annual revenue over $250,000 must provide financial statements to the ACNC within six months of the end of financial year. Organisations with revenue under that threshold only need to submit the Annual Information Statement – there is no requirement to provide financial statements to the ACNC (but you should refer to your constitution regarding obligations to members).
Charities with annual revenue of less than $1 million can choose whether to have the financial statements audited or reviewed. You can see the ACNC requirements here. Companies limited by guarantee that are registered with the ACNC only need to provide annual reports to the ACNC, not to ASIC.
Funding obligations
Many grant funded not for profits will be obliged by their funding agreement to conduct an annual audit. If this is the case you will need to have your accounts audited by a registered company auditor regardless of your annual revenue.
Constitution
Some organisations may have a requirement for an audit specified in their constitution or rules. Again, if this is the case, you will need to have your accounts audited by a registered company auditor regardless of your annual revenue.
Company limited by guarantee that is not ACNC registered
Small not for profit companies with annual revenue less than $250,000 have much reduced reporting obligations if they are not registered with the ACNC. (If ACNC registered, then the ACNC requirements prevail.) Unless directed to do so by a member or by ASIC, a small company limited by guarantee does not have to prepare a financial report or have an audit, does not have to prepare a directors’ report and does not have to notify members regarding annual reports (but do check your constitution regarding reporting obligations to members).
If revenue is above $250,000 you must prepare financial reports. You may choose to have the accounts audited or reviewed if annual revenue is less than $1 million; over $1 million the accounts must be audited annually by a registered company auditor. You can see the ASIC requirements here.
Incorporated associations
Associations have reporting obligations to State or Territory regulators that vary depending on your annual revenue. In a brilliant move to reduce red tape, ACNC-registered charities that are incorporated in the ACT, South Australia or Tasmania no longer have to report to the local regulator, only to the ACNC. If not registered with ACNC, associations need to lodge an annual statement and audited financial statement within six months of end of financial year.
You can see the reporting requirements for ACT here, South Australia here and Tasmania here. ACNC registered charities in other jurisdictions must report to both the ACNC and the local regulator.
If you are incorporated in NSW, you will need to lodge a Summary of Financial Affairs with NSW Fair Trading within one month of your AGM or within seven months of end of financial year at the latest. Tier 1 organisations, with revenue over $250,000 or current assets over $500,000, also need to provide audited financial statements. You can see the NSW Fair Trading reporting requirements here.
Organisations incorporated in Victoria report to Consumer Affairs Victoria where the three ‘tiers’ reflect the ACNC arrangements and all must submit an annual statement within one month of the AGM. Organisations under $250,000 annual revenue have no financial reporting obligations. Organisations under $1 million annual revenue can opt to have the accounts reviewed or audited and those over $1 million must have an audit; both must lodge the financial statements with Consumer Affairs. You can see the Consumer Affairs requirements here.
Queensland incorporated associations must lodge an annual return and financial statements within one month of the AGM; financial statements must be audited by a registered company auditor or verified by a certified accountant. You can see the Queensland reporting requirements here.
Northern Territory incorporated associations must lodge financial statements within 28 days of the AGM. Audit requirements are based on tiers – like ACNC, NSW and Victoria, but with smaller thresholds and less strict requirements on who can perform an audit. You can see the NT reporting requirements here.
Associations incorporated in Western Australia need to report to members only, not to the State regulator.
Review (rather than audit)
What is a review? Essentially it is a ‘light’ audit. It must be conducted by a member – with a current practising certificate – of Chartered Accountants Australia and New Zealand, CPA Australia, or the Institute of Public Accountants.
A review provides a lower level of assurance than an audit but it may cost less. ASIC and ACNC have much the same to say about auditors and reviewers – refer to ASIC here and ACNC here.
Postscript: this turned out to be much longer than I expected when I set out on this article.
What a mish-mash of requirements we have across Australia – very pleased to see that a few jurisdictions have handed charities over to ACNC for reporting, and that in many cases the organisation tiers/sizes are similar and have similar cascading requirements based on annual revenue. But still, it’s not at all straightforward so I hope this article helps answer some questions for someone
Kirsten Forrester
CEO at Accounting For Good
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