Accounting Changes Raise Red Tape Concerns for Charities

It is feared the proposed removal of special purpose financial statements (SPFS) by the Australian Accounting Standards Board (AASB) will cause a “massive burden” for smaller charities.

The AASB said in a recent paper they had to review SPFS because of “consistency, comparability and transparency” issues within financial reports, which did not meet international standards.   

Instead of SPFS, which organisations design themselves and only need to comply with six accounting standards, a general purpose financial statement (GPFS) must comply with all accounting standards.

Justice Connect COO, Sophie Gordon-Clark, told Pro Bono News the changes may cause problems, in particular for small charities with a low overhead.

“A big issue is the capacity for small not for profits to be able to do that especially when they’re reporting on a cash basis and they haven’t even gone down the path of accruing accounting,” Gordon-Clark said.

She said smaller charities didn’t often have the resources to deal with large audits such as this.

“It puts a massive burden on the people who are running NFPs, especially volunteer-run organisations which may not have the knowledge and the resources to comply,” she said.

Ouch:@AASBaustralia is proposing to remove special purpose financial statements. This will have big impact on small charities & NFPs eg, charities that currently submit a special purpose financial statement to ACNC.

— Not-for-profit Law (@nfp_law) August 28, 2018

While Gordon-Clark understood the proposed changes were designed to align Australia’s accounting standards internationally, she said creating a “blanket policy” was the wrong way forward.

“If this was a move to build on the standardisation… and making it specific to NFPs as opposed to business, then that might be something that would be useful,” she said.

She added it was important the sector understood what these changes would bring, and made their “voices heard”.

“Otherwise there are decisions being made by AASB without the knowledge of what that impact actually is, by the people who are making and preparing those SPFS,” she said.

“Until it came up to their annual audit or their annual report they probably wouldn’t even pick it up… It’s one of those things that we sort of think ‘oh that’s not really us,’ and you don’t worry about it.”

The chair of AASB, Kris Peach, told Pro Bono News there was more than “one type of GPFS” and for the charity and NFP sector, it would be separated into three tiers depending on the organisation’s revenue.

“We’ll be working with the ACNC to work out what is the appropriate reporting for each of the different tiers,” Peach said.

She said this was just the beginning of the consultation period however, as they needed to see where the “ACNC legislative review goes” before making any firm decisions.

Peach also said the NFP and charity sector would play a big part in the process.

“One of our key objectives is to make sure that we get extensive input from this sector,” she said.  

“The message to the sector is, don’t panic yet… there’s no intention there will be any removal [of the SPFS] for a little while.”