This Commissioner’s Policy Statement is issued under the authority of the Commissioner and should be read together with the ACNC Policy Framework, which sets out the scope, context and definitions common to our policies.
This Commissioner’s Policy Statement articulates the ACNC’s financial reporting scaffolding strategy – a set of principles that guide ACNC participation in dialogue about financial reporting.
Principle 1: Decisions should be made with the interests of the users of financial reporting as a priority.
Principle 2: Any proposed change should be supported after due consideration of empirical evidence.
Principle 3: The impact of a proposed decision on other elements of the framework, whether controlled by the ACNC or not, should be taken into consideration.
Principle 4: Where possible, cases and/or demonstrations of the intended outcome should be used to communicate the ACNC’s position and as a “reasonableness check” against the existing arrangements.
- The ACNC’s three objects are to:
- maintain, protect and enhance public trust and confidence in the sector;
- support and sustain a robust, vibrant, independent and innovative sector; and
- promote the reduction of unnecessary regulatory obligations on the sector.
- The ACNC has a role to participate in the ongoing conversation about financial reporting by charities, in accordance with these three objects.
- This policy describes each relevant component of the financial reporting process and how these elements scaffold together to inform any position that might be taken by the ACNC regarding financial reporting. This ensures that the ACNC takes a consistent position to drive a holistic financial reporting response. This also ensures that the ACNC is not inappropriately informed by one element of the framework at the cost of another(s).
- This policy describes the scaffolding priorities which will inform:
- ACNC responses to requests from the Australian Accounting Standards Board (AASB);
- ACNC responses to requests from the Australian Auditing and Assurance Standards Board (AuASB);
- any review of financial reporting regulations;
- any additional requests for the ACNC position with regard to financial reporting and
- its underlying framework;
- the Advisory Board and Executive of the ACNC with respect to the prioritisation of the aims and objectives the ACNC has for financial reporting over time, thus supporting ACNC decision making;
- any other interested party as to the policy framework within which the ACNC makes decisions and develops commentary related to financial reporting; and
- the ACNC’s streamlining (red tape reduction) discussions with other regulators and stakeholders.
- Financial reporting is a complex area for registered charities because:
- accounting standards are not necessarily fit-for-purpose in relation to these entity types; and
- entities’ scarce resources need to be applied where they will have most impact with respect to organisational purpose.
- However, effective financial reporting is an important governance and acquittal tool that is used to inform providers of funding, members, creditors and others as to the financial position and financial performance of an organisation.
- Therefore, there exists a natural tension between the desire for resources to be allocated to operational areas and the need for appropriate financial governance and reporting frameworks to be in place.
- This complexity is exacerbated because there are a number of elements that make up the financial reporting framework. These include the:
- ACNC Regulations;
- National Standard Chart of Accounts (NSCOA);
- Annual Information Statement;
- Standard Business Reporting (SBR) framework.
- The annual financial reports of each registered charity are also connected to this framework in that they need to respond to reporting requirements.
- In making decisions relating to the financial reporting framework, the ACNC will be cognisant of the following elements in the order of priority in which they are presented below:
- the cost of developing that financial information to the reporting entity and whether the cost/benefit nexus is likely to have been broken;
- the complexity of the reporting requirement in the context of the Tier of entities required to report and giving due consideration to custom and practice within the sector or sub-sector;
- the effectiveness of the financial information being provided in conveying a balanced view of the position and performance of the entity in the context of the Users’ requirements;
- whether the decision being made is internally consistent with previous decisions and with regard to the other elements of the financial reporting framework; and
- acknowledging that while there may be legislative restrictions, current legislative arrangements, policies and practices (some of which are externally derived), this should not restrict or limit the ACNC’s decision making, even if it results in supporting a future state rather than a present state if that constitutes a preferable outcome.
Principles for decision making
- Where possible, the criteria identified in paragraph 10 should be considered in the context of the following general principles when the ACNC is developing solutions, considering methodological changes, considering the reporting requirements or making contributions to discussions, discourses or other commentary:
- decisions should be made with the interests of the Users of financial reporting as a priority;
- any proposed change should be supported after due consideration of empirical evidence;
- the impact of a proposed decision on other elements of the framework, whether controlled by the ACNC or not, should be taken into consideration; and
- where possible, cases and/or demonstrations of the intended outcome should be used to communicate the ACNC’s position and as a “reasonableness check” against the existing arrangements.
- The ACNC holds the following key objectives to be central to outcomes related to financial reporting:
- that the financial reporting framework contributes to the Commission’s pursuit of its legislated objectives;
- that SBR be implemented;
- that the NSCOA environmental scan is completed and actions flowing from this are progressed;
- that Users’ needs are identified for each legislated Tier;
- that preparers and other key stakeholder groups involved with the charitable sector in Australia have respect for the financial reporting framework;
- that the financial reporting framework supports the reporting requirements of registered entities in the context of their Tier; and
- financial reporting should support and not hinder purpose reporting.
- Australian Charities and Not-for-profits Commission Act 2012 (Cth)
- Australian Charities and Not-for-profits Commission Regulation 2013 (Cth)
- CPS 2012/03: Commissioner’s Policy Statement on Decision-making
|Version||Date of effect||Brief summary of change|
|Version 1 – Initial policy||14/11/2017||Initial policy endorsed by the Acting Commissioner on 14 November 2017|
Document last reviewed on 11/04/2019