Reporting Change a Big Burden for Small Charities

A proposed change to the way Not for Profits recognise income in financial reporting will be too complex and costly for smaller NFPs to implement, a leading advisor to the sector has warned.

The Australian Accounting Standards Board (AASB) released Exposure Draft (ED) 260  earlier this year, which aims to achieve better matching of the income and expenses of Not for Profits, such as that from grants and donations.

However, Audit Director at William Buck, Leo Tutt, said the draft would be far too costly and technical for many smaller NFPs and charities to administer, calling on the AASB to reconsider the change.

“The last thing we want is NFPs wasting their scarce resources on complying with technical accounting standards,” Tutt said.

“NFPs receive funding to enable them to deliver their valuable services or achieve their charitable objectives. It seems ridiculous that they need to review every grant or contract to determine if their obligation has been satisfied.

“If the standard comes into place, whenever a NFP receives funding it will have to go through a technical process to determine the specific intention of that funding. In most cases, they are going to have to pay for accounting or legal advice.

“Smaller NFPs have tight budgets and that money would be better spent delivering on their core purpose, not paying for advice on how to comply with an accounting standard.

“It seems a waste of time and not a useful application of their scarce resources.”

Tutt said if the standard was implemented, the charity regulator, the Australian Charities and Not-For-Profits Commission (ACNC), may be forced to step in and exempt charities with a turnover of between $250,000 and $1 million, who are likely to be most heavily impacted.

“If this does go through, we would encourage the regulator to make the standard only applicable to large charities with a turnover of more than $1 million,” he said.

“NFPs with turnover between $250,000 and $1 million just don’t have the resources to meet the complex accounting requirements associated with this standard.”

ACNC Commissioner Susan Pascoe AM told Pro Bono Australia News that the regulator has a statutory object to promote the reduction of unnecessary regulatory obligations on charities.

“We have been looking closely at the changes proposed to reporting by the Australian Accounting Standards Board and have proposed some simplification to the proposals,” Pascoe said.  

“We will continue to monitor this project and communicate with the AASB if we consider that any aspects of this proposal will impose unnecessary regulatory burden on medium sized registered charities.”

Feedback on the standard closed in August, with the AASB conducting an outreach program in across capital cities.