Not for Profit News October 2015 By William Buck on 01/10/15 - Mins to read: 6 minutes Welcome to the First Edition of Not for Profit News Packed full of useful information covering specific updates on financial reporting, education and tax as far as they affect the NFP sector as well as the latest on what the Australian Charities and Not-for-profits Commission has been up to. We very much hope that you enjoy the contents of this newsletter and your thoughts and comments are always welcome. Tax ATO help for NFP administratorsIf you’re an administrator, for example, a treasurer, office bearer or employee involved in the tax administration of Not-for-profits (NFPs), the Australian Taxation Office (ATO) has three tools specifically aimed to help you in your role. An ‘Induction package for not-for-profit administrators’ introduces you to the ATO and its services. It contains an overview of NFP tax issues and links to other sections of the ATO’s website Handover checklist for not-for-profit administrators’ helps when your NFP changes the administrator of its tax affairs. Use this checklist to hand over your entity’s tax affairs to the new administrator, and A ‘Self-governance checklist for not-for-profit organisations’, which helps you review your entity’s status as an NFP, and allows you to check how well your organisation understands its tax and super obligations. Check out the ATO website, download the tools, and incorporate them into your policies and procedures. Education A go to reference for non government school boardsThe Governance Institute of Australia has launched an essential guide to assist members of non-government-schools’ boards to understand and exercise high standards of governance. Public expectations of schools and their commitments to student outcomes have never been higher. ‘Adding value to school governance: A practical toolkit for any potential or current member of a school board’, has been developed by the institute in conjunction with experienced school-board members to help current and potential governors, principals and business-development managers in the non-government-school sector to understand their obligations and make a positive impact on their schools’ governance. The institute’s toolkit outlines governance models in a schools context, identifies the responsibilities of school-board members, explains how to optimise the important relationship between boards and principals, and provides guidance on how to conduct effective stakeholder and risk management. It also incorporates case studies and checklists in a practical, user-friendly format. Streamlined financial reporting for non government schoolsThe ACNC has announced that non-government schools will not have to provide any financial information direct to the commission for the 2014 and 2015 reporting periods. The ACNC will instead extract the relevant data from Department of Education and Training Financial Questionnaires. Non-government schools benefit from transitional arrangements, allowing the commission to accept financial reports already provided to the Department of Education and Training. The announcement means that this arrangement will extend to non-government schools’ not being required to complete financial questions in 2014 and 2015 AISs. Importantly, the ACNC intends to pursue longer-term arrangements. The commissioner intends to seek an amendment to the regulation that will extend the transitional period while the commission works towards a long-term streamlined reporting solution for the sector. The ACNC will continue to consult with the Independent Schools Council of Australia and other state and territory bodies to implement longer-term data-sharing arrangements with the Department of Education and Training. ACNC Update 4000 charities get red markThe ACNC has put a ‘red mark’ against more than 4000 charities for failing to report. A ‘red mark’ on a charity’s listing on the commission’s register, available online at acnc.gov.au/findacharity, sends a clear message to potential donors, volunteers and grant-makers that the charities are not compliant with their ACNC obligations. ACNC Commissioner, Susan Pascoe, AM, said that the charities were required to submit their 2014 Annual Information Statement (AIS) by 31 January. ‘These charities, which are now more than six months late, have a red mark on their listing … to highlight to people that the charity has yet to meet the legal requirement of submitting their 2014 Annual Information Statement. Once the charity submits its overdue 2014 Annual Information Statement, the red mark will be removed.’ Submitting an AIS is not only an obligation of being an ACNC registered charity; it is also a way for charities to demonstrate transparency and show the public the work they are doing in the community. Charities can check their reporting due dates by viewing their charity’s entry on the ACNC register at acnc.gov.au/findacharity or by logging into their portals at charity.acnc.gov.au. Charities can find further information about the 2014 AIS at acnc.gov.au/2014AIS. A list of charities more than six months late with their reporting is available on the ACNC website at www.acnc.gov.au/. Please check that your charity is not on the list. Tips to help charities avoid reporting errorsThe ACNC has identified the most common errors made by charities in their annual information statements. Here are some tips to help you to avoid mistakes. Tip Explanation Read more Know your charity’s size Make sure you get your size right. Charity size affects reporting obligations. acnc.gov.au/charitysize Know your financial-report type Are you submitting a general-purpose or special-purpose financial report? acnc.gov.au/financialstatements Will you self-assess as a basic religious charity? Know the requirements Most charities that are incorporated cannot self-assess as a basic religious charity. acnc.gov.au/basicreligiouscharity Check that the financial information you enter is correct Don’t mistake cents with dollars or record ‘revenue items’ as ‘other income’. Remember to provide financial information Don’t forget to provide financial information, even if you did not conduct charitable activities during the year. Medium charities must submit a financial report that is either reviewed or audited. Large charities must submit a financial report that is audited. The tips below are for medium and large charities. Tip Explanation Read more Remember to submit your financial reports, including the financial statements The statement of cash flows, statement of comprehensive income and statement of changes in equity were often omitted. Preparing a special purpose financial statement? Remember the accounting standards You need to comply and state that the statement is prepared in accordance with the six mandatory accounting standards. acnc.gov.au/financialstatements Check you have an accounting policy note and it is correct In the notes to the financial statements, there must be an accounting policy note that contains adequate accounting policy disclosures. Policy note requirements in the relevant accounting standard AASB 101 ‘Presentation of Financial Statements’ Preparing a general-purpose financial statement? Check the completeness and quality of the related-party disclosures Make sure you provide sufficient detail of transactions between related parties and key management-personnel compensation. Make sure you attach all required documents Remember to attach the audit/review reports and/or responsible-persons declaration and make sure that they are signed. The ACNC has published a detailed report based on the most common errors found in submissions entitled ‘Lessons on reporting to the Australian Charities and Not-for-profits Commission’, which explains some of the material issues and errors found in the analysis of information statements. Review the ACNC’s tips and lessons when preparing your AIS and annual report New annual report template for charitiesOver the next few months, most charities will hold an Annual General Meeting (AGM). To assist charities in preparing for their AGM, the ACNC has developed a free annual-report template. The template suggests items that the report should cover including, an overview of activities, governance, finances and other important information. Although the commission does not require charities to prepare an annual report, it is one of the key ways a charity can demonstrate accountability to its members, celebrate achievements and focus on the year ahead. An annual report can also help in planning AGMs and completing AISs. The ACNC has a dedicated resources page to help charities to understand their obligations in relation to AGMs. The page includes several free templates, including: AGM-notice template AGM-agenda template, and AGM-minutes template For more information, visit acnc.gov.au/AGM. Use the tools provided by the ACNC to facilitate reporting practices. Financial Reporting NFP service performance reporting exposure draftIn a first, the Australian Accounting Standards Board (AASB) is proposing that public and private NFPs report on how well they are performing as well as their financial statements. Exposure draft 270 ‘Reporting Service Performance Information’ proposes mandatory reporting by NFPs of service-performance information. Service-performance information may be defined as material that tells users about the delivery of goods and services that intend to make a positive impact on society or segments of society. The draft was written in response to a perception that financial-reporting requirements alone did not sufficiently address non-financial information that users required to understand how well their contributions were being used. The AASB considers that service-performance information helps users of general-purpose financial statements to assess an entity’s performance. Exposure draft 270 proposes that service-performance information be reported at least annually about: An entity’s service-performance objectives Key outputs, including the inputs used to produce them Any outcomes an entity is seeking to influence, and An entity’s efficiency and effectiveness in achieving its service-performance objectives. The draft does not specify whether the information should be audited; this will be a matter for each entity’s regulator. At the very least, NFPs should be aware of the proposals and monitor developments. Eventually these ideas are bound to affect financial reporting and communications with stakeholders. Be proactive, and let the AASB know your views by 12 February. More views means a better standard for everyone.