For registered charities, financial accountability and governance are fundamental responsibilities. Meeting legal standards, maintaining stakeholder trust and ensuring stable financial control all depend on having a thorough understanding of audit and review requirements.
In essence, these are the key considerations that must be taken into account. Every registered charity must provide an Annual Information Statement (AIS) to the Australian Charities and Not-for-profits Commission (ACNC) each year, unless it is registered with the Office of the Registrar of Indigenous Corporations (ORIC). All charities must lodge an Annual information Statement (AIS) each year within six months of their financial year-end, which includes a section dedicated to charity finances.
The ACNC sets out clear standards regarding when a charity needs an audit. Depending on annual revenue, charities are divided into 3 sizes, small, medium and large which will determine when a financial report is reviewed or audited. The ACNC classifies charities by size according to the following criteria:
Small Charity – revenue less than $500,000
- No ACNC requirement to have financial reports reviewed or audited.
- Submitting a financial report is optional but still encouraged. No ACNC requirement to have financial reports reviewed or audited.
- If a small charity’s governing document e.g. a constitution requires it to submit financial statements, it must do so.
Medium charity – revenue between $500,000 and $2,999,999
- Must have their financial report either reviewed or audited.
- The audit or review must be conducted by a registered company auditor (as defined by the Corporations Act 2001), an audit firm, or an authorised audit company.
- Reviews may be completed by a qualified member of CPA, CAANZ, or IPA.
Large charity – revenue of $3 million or more
- Must submit an audited annual financial report.
- Audit must be carried out by a registered company auditor, audit firm, or an authorised audit company.
What to consider when determining your assurance needs:
- Your Charity’s Size and Reporting Thresholds:
- The level of assurance is primarily determined by your charity’s revenue so making accurate revenue classifications is essential.
- Governing Documents and Funding Conditions:
- Even if a charity falls into the “small” ACNC category, its constitution or grant agreements might mandate an audit or review.
- Reporting Entity Assessment:
- Charities that are considered “reporting entities” must prepare General Purpose Financial Statements (GPFS), which typically require more robust disclosures and often lead organisations to opt for a full statutory audit.
- Independence Requirements:
- Auditors or reviewers must provide an independence declaration, and ACNC guidance emphasises the need for independence and integrity during assurance engagements.
- Audit vs Review:
- A review provides limited assurance and is less extensive, while an audit provides a higher level of assurance and involves more detailed testing and validation of financial information.
Accru Felsers offers External Audits and a range of other Audit and Assurances Services for a diversity of organisations. We specialise in audits for not-for-profits, including schools and registered charities. Our clients typically perform above industry benchmarks.
If you would like to learn how we can help you with your auditing needs, please reach out through the contact form, or by calling us at 02 8226 1655.
Important Information – General Advice Disclaimer:
The information provided in this communication is general in nature and does not take into account your personal objectives, financial situation, or needs. Before acting on any information, you should consider its appropriateness in relation to your own circumstances and seek independent financial advice where necessary. We recommend consulting a licensed financial adviser before making any investment or financial decisions. Past performance is not a reliable indicator of future performance.
