What are the reporting requirements for a NFP?
Reporting requirements for NFPs vary depending upon how they are registered, and their governing documents. A registered charity will be required to report annually to the ACNC, and depending upon their size, may be required to have an annual audit and submit their annual financial statements. Smaller entities may only need to provide very basic data to the ACNC, but all are required to confirm that they are doing what they say they will do.
The governing documents will usually specify whether an audit is required, and how often directors should report to members. This will likely be at least annually.
Australian Securities and Investments Commission
An NFP that is not registered with the ACNC, will be required to lodge an annual report with ASIC. This will usually require a set of financial statements. Such an organisation may also be required to lodge an income tax return. There’s a common myth out there that a NFP is exempt from income tax. This is not always the case and while some entities can self-assess their status as income tax exempt, we’ve seen examples where organisations have found themselves with ATO obligations they were unaware of. This can be very stressful. It’s important to ensure that you’ve got the tax status clear.
GST and BAS
NFPs that are registered for GST will also be required to lodge a BAS either quarterly or monthly. If there are employees, registration for single touch payroll and superannuation are also required.
Being an NFP unfortunately doesn’t necessarily come with any less reporting obligations than a business.
I’m a director, what do I need to know about reporting?
I often get asked whether one needs to have an accounting degree to be on the board of NFP. Whilst that’s not necessary, each director has a responsibility to understand all facets of the NFP, and this includes the finances. The treasurer will usually be someone with a financial skill set, such as an accountant, and it is ok to rely on that person’s oversight of the financial function to a degree. However, having a treasurer doesn’t absolve the rest of the board from their responsibilities, and board meetings should always include a review of the financial reports for the preceding period. Directors should always ask questions if they don’t understand something in the reports provided. In my experience, sometimes the best questions come from the non-financial people on the Board.
It’s not necessary for everyone to understand debits & credits, but if you’re concerned about this aspect of your board responsibilities, your treasurer should be able to assist in giving you some basic understanding.
The NFP Series
This is the final instalment of our seven-part Not-for-Profit series. Our team at WLF Accounting & Advisory has been working with, and supporting, Tasmanian NFPs and charities for over 100 years and our expertise is highly regarded. This series has been about sharing this expertise and knowledge as a free online resource for anyone thinking of establishing a NFP, as well as people currently managing one.
If you have missed any of the instalments you can find them all on this website:
- Establishing and managing a NFP
- The important of the finance function and budgeting
- Notifying agencies when your details change
- Accounting software and review of financial processes
- Taxes and your charity, what you need to know
- NFP Board governance
Thank to my colleagues Rachel Mendlik and Claire Thornett for sharing their professional expertise and commentary to create this series. We hope that you have found each article/video to be useful and informative, and we would be delighted to meet with you/your organisation if you require further assistance.