Charity review calls for higher disclosure requirements

| September 21, 2018

Despite the announcement of the report into the Australian Charities and Not-for-Profit Commission Act 2012, which sought to review the disclosure requirements of charities, the $444 million government grant to the Great Barrier Reef Foundation has highlighted major concerns with transparency in the not-for-profit sector.

Dr. Ushi Ghoorah, from Western Sydney University, conducted research on Australia’s not–for-profit sector and said that out of a database of 342 not-for-profit (NFP) organisations, only 55 were found to have published their comparative annual reports and financial statements.

“Although most of the sampled organisations made elaborate narrative discussions of their program and their program-related activities, few of them disclosed the dollar amount spent to achieve their social mission,” says Dr. Ghoorah.

“Currently within the Australian NFP sector, there is no common definition for program and fundraising expenditures.”

Dr Ghoorah’s research also showed that the social services NFP sub-sector showed the lowest amount of voluntary financial disclosures.

“Charities have been experiencing a steady decline in trust and confidence from 2013 to 2017, which is highlighted in ACNC’s latest public trust and confidence report,” she says.

The ACNC report also reviewed the legislation governing charity disclosures and proposed the following:

  • Disclosure of senior executives’ and board members’ remuneration

  • Potential reporting on fundraising and administration costs

  • Changes to the revenue thresholds used to determine the size of a charity.

Changes to new revenue thresholds will mean charities earning between $250,000 and $1 million will no longer be required to provide reviewed or audited financial statements to the ACNC. Instead, these charities will only lodge basic financial information with the ACNC.

In addition, charities earning $1 million or more and less than $5 million will get to choose whether to submit reviewed or audited financial statements to the ACNC.

“A review of financial statements does not examine a charity’s financial statements to the same extent as an audit and is less likely to identify financial reporting issues,” says Dr. Ghoorah.

Dr Ghoorah says the extent to which the proposed annual thresholds and disclosure requirements will improve accountability and transparency in the charitable sector remains debatable.