governance & reporting considerations in the new world of nfps & the acnc
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DESCRIPTIONGovernance & reporting considerations in the new world of NFPs & the ACNC. Dr Eva Tsahuridu – Policy Adviser, Professional Standards & Governance, CPA Australia Ram Subramanian – Policy Adviser, Reporting and Auditing, CPA Australia. Overview. Statutory definition of charity - PowerPoint PPT Presentation
Governance & reporting considerations in the new world of NFPs & the ACNCDr Eva Tsahuridu Policy Adviser, Professional Standards & Governance, CPA AustraliaRam Subramanian Policy Adviser, Reporting and Auditing, CPA Australia1OverviewStatutory definition of charityGovernance standardsNew financial reporting requirements from 1 July 2013Annual information statementsReduction in red tape
2Governancethe set of practices and procedures in place to ensure that an entity operates to achieve its objectives in an effective and transparent manner (explanatory statement)Need for strategy / direction & control & transparencyResponsible persons need to ensure that financial affairs are managed in a responsible manner and for the entitys purposeMembers of the governing body are the responsible persons in an entity.Who are the responsible persons in your entity? Treasurers would ordinarily be considered responsible personsresponsibility for ensuring that finances are in order, but also:role in preparation of financial statements / annual information statementrole in ensuring compliance with governance standards
3Governance StandardsGovernance standards apply to all ACNC registered entities (except basic religious entities)
Effective from 1 July 2013
Entities need to choose how to comply with the principles of the governance standardswhat needs to be done in order to ensure compliance may vary between entitiesstandards specify what needs to be achieved, rather than how each entity can achieve the specific outcomes in its unique circumstances
External conduct standards (expected in 2013)to regulate funds sent by registered charities outside Australia, and their activities outside Australia
Purpose of governance standardsprovide a minimum level of confidence to the public that registered entities: manage their affairs openly, accountably and transparentlyuse their resources (including contributions and donations) effectively and efficiently minimise the risk of mismanagement and misappropriation, andpursue their purposes.
policies, processes and systems help entities comply with the governance standards - attention to values and culture is also required
Governance Standards aStandard 1 - purposes and not-for-profit nature of a registered entityNeed to comply with purpose Accounting system to ensure donations etc. used for purposeNeed to provide information on purpose and nfp character of entityHow do you demonstrate that your entity runs a not for profit entity and works for its charitable purpose?How do you inform the public about your charitable purpose?
Standard 2 - accountability to membersIf you have members:How do you fulfill your accountability obligations to them?How do you enable them to ask questions about the running of the entity?6Governance Standards bStandard 3 - compliance with Australian lawsNeed to ensure that a registered entity is governed in a way that ensures its on going operations and the safety of its assets, through compliance with Australian laws (including preventing the misuse of its assets)Are you aware of your entitys legal obligations?Do you have appropriate controls and systems in place?
Governance Standards cStandard 4 - suitability of responsible entitiesA responsible entity is an entity responsible for the control and/or management of a registered entity. E.g. trustee of a charitable trust, director, board, committee member. A registered entity must be satisfied that its responsible entities are not disqualified from managing a corporation; or disqualified by the Commissioner, at any time in the preceding 12 months, from being a responsible entity of a registered entity.How do you ensure that responsible entities are suitable?How do you check that they are not unsuitable?
8Governance Standards dStandard 5 - duties of responsible entitiesexercising due care and diligence (reasonable person test)acting in good faith in the best interests of the registered entity, to further the purposes of the registered entitynot misusing position or informationdisclosing perceived or actual material conflicts of interestensuring responsible management of financial affairsnot allowing the registered entity to operate while insolvent.How do you make responsible entities aware of their duties?How do you ensure they behave in accordance with those duties?What processes do you have in place to deal with non fulfillment of duties?What processes/policies/procedures do you have in place to deal with conflicts of interest? What processes/policies/procedures do you have in place to ensure responsible financial management?
9Financial reporting some points to considerFinancial reporting requirementsReporting to other regulatorsThe Reporting Entity conceptSome audit and review considerationsAnnual Information StatementsSome key takeaway points10Financial reporting requirements from 1 July 2013ACNC Act requirementsACNC Amendment Regulation 2013 (no. 3)Sets out requirements for annual financial reportsResponsible entities declarationStandards applicable to special purpose financial reportsTransitional rules medium and large charitiesOne year grace period for financial report preparation if:Not currently preparing financial reports complying with accounting standardsMedium and large entities can provide a statement consisting specified information (similar to Annual Information Statement)
11Reporting obligations to other regulatorsSOURCE: REGULATORY IMPACT ASSESSMENT OF POTENTIAL DUPLICATION OF GOVERNANCE AND REPORTING STANDARDS FOR CHARITIES - COAG12Reporting obligations to other regulatorsExampleincorporated in ACTIncome $230,000Gross assets $200,000Current assets $45,000Members 1,500ACNCNo financial reportsNo audit or reviewAIS required (minimal information)
Australia Capital TerritoryFinancial reports requiredAudit required
13Reporting obligations to other regulatorsExampleincorporated in QueenslandTurnover $120,000Gross assets $250,000Current assets $120,000Members 850ACNCNo financial reportsNo audit or reviewAIS required (minimal information)
QueenslandFinancial reports requiredAudit required
14The Reporting Entity ConceptDefinitions for what constitutes a Reporting Entityan entity in respect of which it is reasonable to expect the existence of users who rely on the entitys general purpose financial statements for information that will be useful to them for making and evaluating decisions about the allocation of resourcesGeneral purpose financial statements are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needsDependent usersSeparation of management from economic interestEconomic or political importanceFinancial characteristicsResearch by Australian Accounting Standards Board15The Reporting Entity ConceptExample: likely reporting entityWell-known charitable company limited by guaranteeRevenue $15 millionMembers 500,000Employees 300Creditors 60Directors 15Raises funds from public through debenture issue & donationsExample: likely non-reporting entityIncorporated associationRevenue $255kMembers and management committee 10Loan from local bank
16Some audit and review considerationsWho can do the audit or review?Responsibility for selecting accounting policies, estimates and judgements rest with preparer of financial statementsImplications if being audited or reviewed for the first timeFeedback from the audit/review process
17Annual information statements some points to considerRequired by all charities (small, medium and large)Publicly availableNot audited or assuredSome detail on income, and grants and donations madeCould be cash based for small charities
18Some takeaway pointsPlan and prepare
Additional reporting requirements
Transitional rules comparative information