What to expect from an ACNC audit

The Australian Charities and Not-for-profits Commission (ACNC) is the primary regulatory body overseeing NFPs. Part of their remit is to conduct audits to ensure that organisations comply with the ACNC Act and adhere to their responsibilities under Australian law.

As a specialist Not For Profit accounting firm, we understand the complexities involved in these audits. This article provides a comprehensive overview of what an ACNC audit involves and how not-for-profits should prepare for and reflect on the outcomes.

An ACNC audit is an independent examination of an organisation’s financial and non-financial information. It is important to note here that the ACNC only audits Not-for-Profit organisations with charitable status. As discussed in a previous article, not all Not-for-Profits are charities.

The ACNC conducts these audits to ensure compliance and verify that charities comply with their obligations under the ACNC Act and the Australian Charities and Not-for-profits Commission Regulation 2013.

Maintaining public trust is an essential function of the ACNC, and audits are conducted to ensure that NFP organisations operate transparently and ethically, maintaining public trust in the sector.

An audit will identify potential risks or areas of concern in the organisation’s operations. An audit can be initiated for various reasons, such as random selection, complaints received by the ACNC, or identified red flags in financial reports.

The ACNC will notify the organisation in writing about the audit. This notification will include the audit’s scope, required documents, and the timeline. At this stage, it is crucial to collaborate with your accounting team to gather all necessary documentation, including financial statements, governance policies, and compliance records.

The ACNC will review the submitted documentation and may request additional information. They may also ask for clarification or explanations regarding specific transactions or policies.
For larger or more complex organisations, this may occur on-site. During these visits, the ACNC auditors will meet with key personnel and board members to better understand the charity’s operations and governance.

The ACNC will analyse the collected data to assess the organisation’s compliance with ACNC standards and guidelines. This includes reviewing financial management practices, governance structures, and adherence to regulatory requirements.

Auditors may also examine how effectively the organisation achieves its charitable purpose and whether it is operating in the best interests of its beneficiaries.

The ACNC will provide a draft audit report detailing its findings upon completion. The organisation will be able to respond to the findings and provide additional information or clarification.
After considering the organisation’s responses, a final audit report will be issued. This report will outline areas where the organisation is compliant and needs improvements.

If the audit identifies non-compliance or areas for improvement, the ACNC may impose conditions, provide recommendations, or, in severe cases, take regulatory action, such as revoking charity registration. Compliant organisations will receive confirmation of their compliance status, which can be used to build donor and stakeholder trust.

An ACNC audit is a regulatory requirement and an opportunity for reflection and growth. Organisations can use the audit findings to identify areas for improvement. This might include enhancing internal controls, improving financial reporting, or refining governance practices.

The audit may recommend implementing or improving financial management practices, establishing clear governance structures, and ensuring all team members understand their roles and responsibilities. It may reveal gaps in knowledge or expertise among board members or staff, providing an opportunity to invest in training programs that educate your team on compliance, governance, and best practices for financial management.

Reflect on the audit to develop or enhance your organisation’s risk management strategy. Identify potential risks to compliance, financial stability, and reputational damage and implement strategies to mitigate these risks. Consider the audit as part of a continuous improvement process. Regularly review your policies, procedures, and financial management practices. Consider engaging with specialised NFP accountants to develop an action plan addressing these areas.

Lastly, be proactive in communicating the audit’s outcomes to stakeholders, including donors, members, and beneficiaries. Transparency in addressing any findings will help maintain trust and confidence in your organisation. This includes highlighting compliance with ACNC standards in annual reports and communications with donors and stakeholders.

Accounting For Good is a specialist accounting firm working with the Not-for-Profit sector. Our team has the necessary expertise and experience to help NFP organisations navigate ACNC compliance, manage tax concessions, and plan for sustainable growth. We’re here to help you achieve your mission.

We work with organisations with a turnover of $1M to $20M. Contact us today for a free consultation and discover how we can support your organisation’s financial health, so you can focus on what matters most—making a difference in your community.