ACNC review: National solution to charities and not-for-profits regulation is welcomed

There is a need to find a balance between supporting the sector, reducing red tape, enhancing accountability and addressing misconduct.

The final report from the Independent Panel tasked with a review of the Australian Charities and Not-for-profits Commission (ACNC) legislation was released on 22 August 2018. Initial reading indicates a broad-reaching and far-sighted review, with a balanced and objective set of recommendations tackling the big issues facing regulation and reporting in the sector.

The Independent Panel report also highlights additional work needed in some key areas to instigate appropriate regulatory change. If implemented, the recommendations are likely to have a significant impact on the sector by furthering red-tape reduction and better addressing stakeholder needs.

While CPA Australia undertakes a more detailed analysis to fully understand the report’s implications, here are some of the report’s more salient recommendations.

Financial reporting thresholds should be increased

Revenue thresholds for small charities should be increased to less than A$1 million for small charities (currently less than A$250,000), less than A$5 million for medium charities (currently less than A$1 million) and more than A$5 million for large charities (currently more than A$1 million). 

Revenue thresholds should be determined on a rolling three-year basis rather than on an annual basis, which is currently required.

Although there are no specific recommendations to change the currently applicable financial reporting frameworks, the report suggests that further work should be undertaken by the ACNC, the Australian Accounting Standards Board (AASB), the Australian Auditing and Assurance Standards Board (AUASB) and other relevant stakeholders to consider further changes to the financial reporting framework.

The report suggests that changes could include:

The report recommends that charities required to prepare financial reports should report on related party transactions in compliance with AASB 124 Related Party Transactions.

Remuneration reporting by large charities for their senior executives and board members is also recommended.

Professional Development: Not-for-profit governance: in addition to the traditional governance responsibilities, this course covers broader governance topics which are now becoming more relevant to finance professionals – strategy, insurance, voluntary codes, policies and procedures, risk management and Board roles.

Fundraising regulation requires reform

The report recommends a national solution to fundraising regulation through amendments to the Australian Consumer Law, repeal of existing state and territory-based laws and regulations, and development of a mandatory code of conduct. These recommendations align with CPA Australia’s position and previous submissions on the matter.

ACNC should serve as a “one-stop shop”

Commonwealth Government should mandate that departments and agencies should seek information from the ACNC where available, rather than requiring charities to provide information to them directly. This recommendation is one of the many relating to red-tape reduction measures in the report.

ACNC regulatory oversight should expand to other NFPs

The Panel recommends migrating the regulation of income tax exempt not-for-profits (NFPs) with annual revenue of A$5 million or more to the ACNC. The incorporation and regulation, other than action for criminal offences, of charities that are also public companies limited by guarantee should be transferred from ASIC to the ACNC. 

Other key matters

  • Secrecy provisions: these should be relaxed to allow disclosure of information by the ACNC in a wide range of circumstances, particularly to protect the public interest and confidence in the sector.
  • Basic Religious Charities (BRC): current exemptions enjoyed by BRCs should be reviewed if other recommended changes to financial reporting requirements are adopted.
  • Objects of the ACNC: the Panel concluded that the objects of the ACNC continue to be relevant and there are no recommendations to change these.

In submitting the report to Parliament, the Panel has highlighted the need to find a balance between supporting the sector, reducing red tape, enhancing accountability and addressing misconduct. 

CPA Australia will continue to follow the progress of the recommendations of the Panel and engage in ongoing developments and discussions.

Ram Subramanian is a CPA Australia Policy Adviser – Reporting

Further resources:

CPA Australia’s submission to the Review of the ACNC legislation

CPA Australia’s submission to the Senate Select Committee Inquiring into charity fundraising

Read next: Raising ideas for charity regulation

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