Key points:

  • Registered charities have an obligation to complete an Annual Information Statement each year. This includes answering questions about their charity’s finances.
  • Small charities do not have to submit separate financial reports alongside their Annual Information Statement. But if they choose to do so, they can compile them using either cash or accrual accounting.
  • Charity board or committee members must have must have a level of financial literacy that allows them to make informed decisions about their charity’s finances.
  • The National Standard Chart of Accounts (NSCOA) is a free accounting tool for charities and not-for-profits available from the ACNC website. It is designed to standardise reporting in the sector and can help small charities with their reporting.

The Annual Information Statement

Registered charities in Australia must submit an Annual Information Statement (AIS). The AIS asks questions about your charity, its activities, basic financial information, staff and volunteers, and other information to help us understand the charity sector and reduce its overall reporting burden.

Charities registered with the ACNC must complete and submit an AIS for every reporting period unless they have an exception. Organisations that have exceptions include:

  • Aboriginal and Torres Strait Islander corporations (Regulated by the office of the Registrar of Indigenous Corporations)
  • Basic Religious Charities
  • Non-government schools

The AIS is due six months after the end of the charity’s reporting period. If your charity uses a traditional financial year reporting period (1 July to 30 June), its AIS will be due by 31 December.

Financial reports and using cash or accrual

Each year, medium and large charities are required to submit a financial report with their AIS. Small charities are not compelled to submit a financial report – but if they do, they can use either cash or accrual accounting to compile it.

The main difference between cash and accrual accounting is the timing of when revenue and expenses are recognised in a charity’s financial records.

Cash accounting records revenue when money is received and expenses when money is paid out, while accrual accounting records revenue when it is earned and expenses when they are incurred.

Financial literacy

A charity’s board or committee members (their Responsible Persons) must have a level of financial literacy that will enable them to make informed decisions about their charity’s finances.

Sometimes this can be a challenge for smaller charities. Responsible Persons might be volunteers with limited financial literacy or experience, for example, or they might face time challenges and competing priorities in their everyday lives. Even so, ACNC Governance Standard 5 spells out a number of duties Responsible Persons have, including duties covering financial management.

Responsible Persons cannot make informed decisions about their charity’s finances without an understanding of the concepts that relate to them. At the very least, they should be able to determine whether their charity is solvent and how decisions they make will impact on their charity’s financial health.

There are financial literacy courses available to help Responsible Persons. There is also information on the ACNC website.

NSCOA

The National Standard Chart of Accounts (NSCOA) is a free accounting tool for charities and not-for-profits which can be downloaded from the ACNC website. It includes a standardised list of financial account categories and a comprehensive data dictionary designed for use by organisations in their accounting systems.

All Australian governments (Commonwealth, state and territory) have agreed to accept the NSCOA when requesting information from not-for-profits.

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