Australian charities have a record of the prudent and innovative use of resources to achieve their missions. Whether it is money, property or even the time of volunteers, all charities leverage their resources to pursue their charitable work for the benefit of the community.

Using resources effectively and ensuring that they are protected appropriately is one of the key responsibilities of the people who manage a charity. The Australian community has high expectations of charities in the way that they use their resources, especially those who own property on behalf of a community or who solicit public donations in their work.

This guide provides insights into good practice in financial management, focusing on practical steps that charities can take to ensure that their finances are used appropriately and protected from misuse. It also explains the obligations that charities have to the ACNC with regard to their finances such as providing financial reports and ensuring that they operate as not-for-profits.

Through the determination of people who work in charities and the generosity of the Australian public, charities have access to a range of resources to assist them in pursuing their charitable purposes. I am delighted to present this guide to the charity sector to support them to ensure that their resources are safe, secure and used effectively.

About this guide

This guide has been developed to help charities understand their obligations to the ACNC regarding financial management, reporting on transactions and the use charity funds. Being not-for-profit is an essential aspect of being a charity. But although the term is used commonly, the definition of not‑for-profit is not always well understood.

What this guide covers

This guide looks at the main reporting and record-keeping obligations, as well as what the term ‘not‑for‑profit’ means in practice.

The guide contains an overview of some of the main issues charity board members need to be aware of, such as being diligent about a charity’s financial affairs, protecting its resources from abuse and ensuring it is accountable.

Who this guide is for

This guide is for people who are, or are considering becoming, board members of a charity registered with the Australian Charities and Not-for-profits Commission (ACNC). It may also be of interest to employees and volunteers of charities.

In using the term ‘board members’, we refer to members of the governing body of a charity. In your charity, they may be called the directors, governors, trustees or members of the management committee.

For the ACNC, these people are also known as ‘responsible persons’. These are the people with responsibility for governing your charity. Your charity has certain obligations that relate to responsible persons, so it is important that you know who these people are.

Find out more about who your charity’s responsible persons are, and their role, at acnc.gov.au/responsiblepersons.

An important responsibility for your board is to make sure the charity has the resources it needs to carry out its work – this ensures it can achieve its charitable purpose. One of the most important responsibilities of board members concerns gaining and maintaining funds and other resources (for example, volunteer time).

The board must work to gather the resources necessary for a charity to undertake its work,but also to ensure that they are protected from abuse and used in an efficient and lawful way.

Charity board members have particular duties under the ACNC governance standards, which the charity must ensure they are aware of and complete with, including duties to ensure that the charity’s financial affairs are managed in a responsible manner and that it does not operate while insolvent.

A related duty is to disclose conflicts of interest.

Board members are responsible for ensuring that they themselves are accountable, but also that structures and processes exist so that there is accountability throughout the charity, including in arrangements with other organisations (such as those that fundraise or deliver services). This is important as it helps to protect the charity’s reputation as well as its resources.

The board must be able to identify major strategic risks and ensure that there are systems in place to identify, manage and respond to risks throughout the charity, such as processes to manage any risk of fraud.

How funds can be raised

Fundraising can be undertaken in a number of ways, such as:

  • seeking public donations (such as through door-knock appeals or highway collections)
  • holding public events for which you charge an admission fee
  • running fundraising events (even in partnership with others)
  • running raffles (or other games such as bingo), or
  • operating an opportunity shop or holding a bake sale.

Charities also raise money in other ways, including through:

  • charging membership fees
  • charging for services, and
  • receiving funding from government.

However your charity raises money, it is important that you understand the obligations that come with raising and having this money.

Duties of board members when raising money and obtaining funding

Board members must have a clear understanding of how money is raised, including any fundraising operations, as well as ensuring there are appropriate and lawful processes in place to manage any money raised.

They must ensure that any generation of funds occurs in a way that is in the charity’s best interests. This includes considering the charity’s charitable purpose, its beneficiaries and the impact on the public and other potential donors. For example, information collected from donors must be appropriately stored and used in ways that comply with relevant privacy laws.

Outsourcing fundraising does not remove responsibility from the board members – the ultimate responsibility lies with the charity’s governing body. If board members are not clear about how funds are raised or intended to be used they must be diligent and enquire.

However charity funds are raised, the board must ensure that the money, less reasonable expenses, is put towards pursuing the charity’s charitable purpose.

Fundraising regulators

The ACNC does not have responsibility for fundraising regulation, but it does require compliance with the governance standards as well as appropriate record-keeping and reporting in relation to all of a charity’s activities, including how it raises funds. Fundraising is often conducted by charities as a way of achieving their charitable purposes.

If your charity undertakes fundraising activity, it needs to comply with any fundraising legislation in the relevant state or territory. Generally, you will need to register your charity to undertake fundraising activity and may need a permit. You may need to provide a report on any funds raised to your state or territory government regulator.

In some states and territories, special arrangements apply to charities that undertake fundraising through gaming activities such as raffles or bingo. Make sure you understand any special requirements associated with this kind of fundraising.

You will also need to consider elements such as taxation. If your charity is a deductible gift recipient (DGR) then it will also have requirements it must meet because of its endorsement with the Australian Taxation Office (ATO).

For more information see our list of regulators that may affect charities at acnc.gov.au/regulatorlist

Keeping an eye on your charity’s finances is essential to making sure your charity has access to the resources it needs to do its work. Regularly reviewing your financial position and your charity’s ability to pay for its upcoming debts will help make sure your charity has access to money when it needs it and is not operating while insolvent.

Consider establishing a sub-committee of your board with responsibility for overseeing your charity’s financial performance and controls. This committee could review financial reports in greater detail and provide advice to the board about the organisation’s financial position. You may even consider including one or two people on this committee who are not also board members to provide an extra level of accountability.

Protecting against fraud

Fraud occurs where someone, or a group of people, act in a way that is dishonest or against the law to benefit themselves. People can commit fraud in a variety of ways, including by: making false representations abusing their position failing to disclose information, and using other forms of deception. Theft does happen in charities – it is uncommon, but simple steps can help prevent problems. Ensure that your processes for money-handling are safe and secure to protect against fraud and financial crime.

For more information about financial controls, see our quick tips on basic financial controls at acnc.gov.au/tools and read the ACNC’s guide Protecting your charity from fraud at acnc.gov.au/fraudguide.

Protecting against the risk of terrorism financing

Charities can be potential channels for raising and distributing funds for terrorism financing. Because of this, charities must take all reasonable precautions and exercise due diligence (research and action to reduce the risk, particularly when working with other people and organisations) to ensure that funds are not inadvertently directed towards terrorism. This includes putting in appropriate governance structures. There may be serious consequences for charities if they are used for terrorism financing (even if the charity does not know), including criminal penalties. Strong financial controls and robust governance arrangements can reduce the risk of your charity being used for terrorism financing.

Find out more about protecting your charity from terrorist financing at acnc.gov.au/protecttf

Protecting against other forms of abuse

Compliance with the ACNC governance standards will assist your charity to reduce the risk of all forms of abuse, financial or otherwise. The ACNC governance standards are a set of core, minimum standards that deal with how charities are run (including their processes, activities and relationships) – their governance.

Having strong financial systems and controls is very important to help protect your charity, and ensure it runs effectively and can pay its debts. It’s a good idea to keep a formal document that sets out any financial controls that your charity uses.

Types of financial controls

A number of different financial controls are available to charities and the ones that you use will depend on the complexity and size of your charity’s resources. Some examples include:

1. Requiring multiple signatures on payments and receipts

It is a good idea to ensure that, for any money leaving the charity or coming into it, more than one person is involved in authorising and completing the transaction. Having more than one person involved means that there is a higher level of supervision involved in your charity’s financial transactions.

2. Keep a budget and track your performance against it

A budget is a document that shows a prediction of how much money you expect you will receive and how much money you will spend within a given period. Consider establishing an annual budget and track your performance against it throughout the year. You should also look into any significant variations.

3. Provide up-to-date financial reports to your charity’s board at regular intervals

Your charity’s board has ultimate responsibility for the financial health of your organisation and they should receive and review a report on its financial position regularly.

4. Establish clear financial delegations

If there are people in your charity who are authorised to approve purchases and other transactions, make sure your policies and procedures clearly establish how much they are permitted to spend without seeking approval. For example, a board might decide that the CEO can spend up to $5 000 before requiring its approval for any expenditure.

5. Keep information about your accounts secure

Make sure any passwords to online banking or the keys to any petty cash tin or safe are kept secure and that you know who has access to them.

6. Have an ongoing practice of reviewing and strengthening financial controls

You could have a regular item on the board agenda or schedule.

Your charity must meet a number of obligations to remain registered with the ACNC. If your charity fails to comply with these obligations, we may revoke its registration.

The ACNC obligations that relate to managing and using money include duties to:

  1. record information (keeping financial records)
  2. report annually
  3. maintain eligibility for registration (including remaining not-for-profit and pursuing charitable purposes)
  4. notify us of certain changes
  5. meet the governance standards (including governance standard 5: duties of responsible persons to manage the charity’s finances responsibly and not allow the charity to operate while insolvent).

Obligations to other agencies that may relate to money

Unless we tell you otherwise, these obligations are in addition to any other obligations your charity has under other laws or to other Commonwealth, state and territory governments.

Your charity might have obligations because of:

  • concessions, exemptions or other benefits it may receive from other government agencies (for example, for certain Commonwealth, territory and local government taxes)
  • its legal structure (for example, as an incorporated association or company limited by guarantee). Your charity’s governing document may also have obligations relating to money
  • the way it raises money (for example, grants or fundraising such as street collections or raffles), and
  • how it operates and what it does (for example, specific sectors such as aged care, housing, childcare and education have other reporting requirements, as do charities who receive grants from the government).

Some charities also choose to meet voluntary standards such as codes of conduct or codes of ethical practice set by professional associations, peak bodies or other agencies.

For example:

  • Charities that are aid and international development organisations may be members of the Australian Council for International Development (ACFID), and follow ACFID’s Code of Conduct
  • Charities that fundraise may be members of the Fundraising Institute of Australia, with its Principles & Standards of Fundraising Practice.

Find out more information about other regulators at acnc.gov.au/otherregulators


1. Keep operational and financial records

For more information on how to keep operational and financial records and to view our records keeping checklist see:

Using the National Standard Chart of Accounts

Consider using the National Standard Chart of Accounts (NSCOA) when you are planning your record-keeping and reporting. NSCOA is a data entry tool and data dictionary for not-for-profits, including charities. All Australian governments (Commonwealth, state and territory) have agreed to accept NSCOA when requesting information from not-for-profits. While NSCOA is not compulsory, there are benefits in using it.

The benefits of using NSCOA are that it:

  • provides a common approach to the way not-for-profits record and report accounting information (consistency in accounting categories and terms). This facilitates data comparison and benchmarking across the sector
  • helps not-for-profits to learn from one another and work more easily together
  • makes it easier for finance staff and volunteers to service multiple not-for-profits
  • allows not-for-profits reporting in multiple jurisdictions or to multiple departments to apply a consistent approach to preparing financial information, reducing the time and cost in preparing financial statements, and
  • can be changed to suit each not-for-profit’s unique situation such as through creating extra accounts, sub-accounts or using cost centre accounting.

Find out more about NSCOA at acnc.gov.au/nscoa


2. Submit an information statement annually

Registered charities must submit an Annual Information Statement to the ACNC every year. Medium and large charities must also submit a financial report – this is optional for small charities.

The ACNC sends reminder letters to charities prior to their due dates. If charities do not submit on time, the ACNC will send warning letters after the due dates have passed. If your charity fails to submit for two or more years, the ACNC will progress towards revoking charity registration.

If your charity does not submit its Annual Information Statement and takes no action to try to do so, the ACNC will:

  • issue penalty notices if we find your charity is deliberately not meeting its obligation to report, and/or
  • publish a statement that your charity’s Annual Information Statement is overdue on the ACNC Register. This will appear on your charity’s entry on the Register if it fails to submit for more than six months after the due date.

ACNC resources to support you to submit your statement

Submit your Annual Information Statement through the ACNC Charity Portal.
The ACNC produces extensive guidance on reporting, including a:

  • checklist, everything you need to think about and do to report. It includes a list of records you should have on hand to help you report
  • guide, which looks at each Annual Information Statement question in detail and explains what we are asking, with examples
  • worksheet, a word document with all of the 2015 Annual Information Statement questions. If you complete this worksheet, you can share it with your charity’s board for approval, if needed. If you are reporting for more than one charity, you can simply add another answer column.

Find out more at acnc.gov.au/reporting

When is my charity’s annual information statement due?

Your charity’s Annual Information Statement and any financial report are due within six months of the endof your reporting period.

Most charities use the standard ACNC reporting period, which is the financial year from 1 July to 30 June (01/07–30/06). So, if your reporting periodends on 30 June then you have until 31 December to submit your statement. We often refer to Annual Information Statements by their year. For example the 2015 Annual Information Statement covers the period 1 July 2014 until 30 June 2015.

When is a good time to start preparing my charity’s Annual Information Statement?

Most charities hold an annual general meeting (AGM). This can be a good time to start preparing to submit the Annual Information Statement to the ACNC. At the AGM, most charities will present a report to their members (such as an annual report) which sets out the work it has done throughout the year and a financial statement that explains how the charity used its finances. This is exactly the sort of information you will need to complete your charity’s Annual Information Statement.

Some charities require board/committee approval on their answers to the questions in the Annual Information Statement. The ACNC has prepared a template worksheet to help you do this.

Before you begin your 2015 AIS, we recommend you review your charity’s profile page on the ACNC Register to make sure everything is current and accurate.

What does the ACNC Annual Information Statement ask for?

The Annual Information Statement includes non-financial questions on your charity’s activities, as well as financial questions. Many of the non-financial questions will have answers prepopulated based on your previous year’s statement. In the 2015 Annual Information Statement the financial information questions are based on an income statement and balance sheet extract. For small charities there are 9 questions, for medium charities there are 12 questions and for large charities there are 15 questions.

Prepare by using the Annual Information Statement checklist, which is updated each year. Read more at acnc.gov.au/reporting

What kind of reporting does my charity have to do?

What information your charity has to report mainly depends on its size, according to the ACNC’s definition. Most charities registered with the ACNC are small.

The size of your charity is based on annual revenue. Revenue is the part of income created from the sale of goods or services, or any other use of capital or assets during the ordinary activities of your charity.

The ACNC has three different charity size categories based on annual revenue:

Small charitiesMedium charitiesLarge charities

Annual revenue is less than $250,000

Annual revenue is $250,000 or more, but less than $1 million

Annual revenue is $1 million or more

Size affects the number of financial information questions the ACNC asks and also whether you have to:

  • use accrual accounting
  • submit an annual financial report
  • have your financial report audited or reviewed.

Small charities can choose if they want to submit a financial report (optional) and can use either cash or accrual accounting.

Both medium and large charities must submit a financial report and from 2015 must use accrual accounting. The type of statement in this financial report depends on whether the charity is what is called a ‘reporting entity’ or not. Financial reports can be either general or special purpose. The ACNC will accept either type, as long as your charity has met the requirements of the ACNC Regulations.

Medium charities must have their financial reports either reviewed or audited.

Large charities must have their financial report audited.


3. Keep your charity status

To remain eligible to be registered as a charity, your charity must continue to be not-for-profit and pursue charitable purposes that are for the public benefit.

Generally, to maintain your status as a not-for profit, you must ensure your charity is not operating for the profit or gain of individual members. This is the case whether the gains would be direct or indirect. Your charity must also operate this way when it ‘winds up’ (closes down). Any money received or profit made by your charity should go back into the operation of the organisation to carry out its purposes, and not be distributed to any of its members.

This guide will later look at some of the most common questions charities have (and some myths) about not-for-profit status, such as generating profit (surplus), keeping money in reserve, investing, private benefit and undertaking commercial activities.

Find out more about how to keep your charity status at acnc.gov.au/staycharitable

What is a not-for-profit?

Generally, a not-for-profit is an organisation that does not operate for the profit, personal gain or other benefit of particular people. This can include its members, the people who run it or their friends or relatives. The definition of not-for-profit applies both while the organisation is operating and if it winds up.

Not all not-for-profits are charities

There are many not-for-profit organisations that do not meet the definition of charity. These include some community service organisations, sports clubs and professional associations.

These not-for-profits are not regulated by the ACNC, but are likely to be regulated under other laws and by other Commonwealth, state or territory government agencies. Much of the information contained in this guide will still be useful to these types of not-for-profits.

Demonstrating that your charity is not-for-profit

It is not enough merely to look like a not-for-profit – your charity must also behave like one. This will include the activities it undertakes, how it deals with money and any potential benefits to its members.

When applying to register with the ACNC, an organisation must be able to show that is not-forprofit. This can be done by having clear clauses in its governing documents and following these in its operations (including if it winds up).

The two main clauses, and examples of how they can be worded, are:

The not-for-profit clause

This clause sets out how the organisation’s assets and income are to be used and distributed:

The two main clauses, and examples of how they can be worded, are:

The not-for-profit clause

This clause sets out how the organisation’s assets and income are to be used and distributed:

Example: ‘The assets and income of the organisation shall be applied solely to further its objects and no portion shall be distributed directly or indirectly to the members of the organisation except as genuine compensation for services rendered or expenses incurred on behalf of the organisation.’

The dissolution clause

This clause sets out what happens to the organisation’s assets if it winds up:

Example: ‘In the event of the organisation being dissolved, the amount that remains after such dissolution and the satisfaction of all debts and liabilities shall be transferred to another organisation with similar purposes which is not carried on for the profit or gain of its individual members.’

Find out more about demonstrating not-forprofit status at acnc.gov.au/notforprofit


4. Notify us of changes or errors

It is important to let the ACNC know if details about your charity change. This includes changes to your organisation’s name, Address For Service, Responsible Persons and governing documents.

Changes to your charity

It is also important to let the ACNC know if there are other significant changes to your organisation. It may have had a shift in its purposes or changed its governing document. These types of changes to your organisation may affect whether you are still operating as a not-for-profit, so contact us if you are unsure.

Reporting a material error or omission in the financial report

You must notify the ACNC of any material error or omission in relation to your financial report, within 60 days of first becoming aware of the error if you’re a small charity or 28 days if you’re a medium or large charity.

Breaches of the ACNC Act or governance standards

You must also tell us if you think your charity has breached the ACNC Act or not complied with an ACNC governance standard in a significant way, and as a result it is no longer entitled to be registered. For example, if your charity has expanded its purposes to include a non-charitable purpose (such as sport) it may no longer have solely charitable purposes.

You must notify the ACNC as soon as you reasonably can, but no later than 28 days after you become aware of the failure to comply, using a Form 3C: Notification of contravention or noncompliance, available at acnc.gov.au/forms.

Find out more about when to notify us of changes to your organisation at acnc.gov.au/notify.


5. Meet the governance standards

Registered charities must meet a set of governance standards to be and remain registered with the ACNC. The governance standards are a set of core, minimum standards that deal with how charities are run (including their processes, activities and relationships) – their governance. These standards set out the minimum standard of governance, to help promote public trust and confidence in charities.

The governance standards that deal with financial management include:

Governance standard 1: Purposes and not-for-profit nature

This standard requires charities to be able to demonstrate that they:

  • were set up as a not-for-profit with a charitable purpose
  • run as a not-for-profit and work towards that charitable purpose, and
  • provide information about their charitable purpose to the public.

This standard reinforces the requirement that charities remain charitable as discussed earlier. In demonstrating compliance with this standard, you need to be able to show that your charity is appropriately managing its finances, including in relation to surpluses, reserves and investments.

Related party transactions and private benefit

A significant issue for charities is that of private benefit – where the resources of the charity are used for the benefit of those close to or related to the charity, rather than for the charity’s beneficiaries, and for its charitable purpose.

Related party transactions are those between the charity and ‘related parties’. These can be people or organisations, such as:

those with a significant influence over the charity’s strategy and finances (including board members or executive officers, rather than operational managers), and close members of their families (such as a parent, partner, sibling, or child), and

Organisations with a significant influence over the charity (for example, an organisation that appoints one of the members of the board of the charity).

Charities need to be aware of the standards required of them, and be aware of the problems of private benefit and implement policies and procedures to prevent and manage them.

Governance standard 3: Compliance with Australian laws

The standard requires charities to not act in a way that under Commonwealth, state or territory law could be dealt with as:

  • an indictable offence (being a serious crime that is generally tried by a judge), or
  • a breach of law that has a civil (not criminal) penalty of 60 penalty units (equivalent to $12,600 as at December 2018) or more.

It is important that you are aware of the relevant legal obligations your charity has in relation to financial management, in addition to the obligations your organisation has to the ACNC. Breaching this standard, by failing to comply with relevant laws, may result in your charity being reviewed by the ACNC, and/or other regulators.

Governance standard 5: Duties of responsible persons

This standard requires charities to take reasonable steps to make sure that a number of duties apply to responsible persons and that they follow them. These responsible person duties include duties to:

  • ensure that the financial affairs of your charity are managed responsibly, and
  • not allow your charity to operate while it is insolvent.

Find out more at acnc.gov.au/governancestandards