Commissioner's Policy Statement: Group reporting - Joint and Collective

Policy Statement

This Commissioner’s Policy Statement (CPS 2013/05) sets out the ACNC's policy for applications by two or more registered charities to form a reporting group. It is intended to inform the public of the principles the Commissioner will apply when reviewing such an application.

This policy does not cover the general considerations to be made when deciding what information to collect in an Annual Information Statement. Refer to the Annual Information Statement policy.

• Principle 1: Compliance with Australian accounting standards must be maintained
• Principle 2: The ACNC will balance transparency and accountability with reducing unnecessary regulatory obligations
• Principle 3: The ACNC will consider its ability to assess compliance and entitlement to registration
• Principle 4: The ACNC will consider the relationships and similarities between charities in making a decision
• Principle 5: The ACNC may impose conditions to meet specific concerns about transparency and accountability when approving a request.

Legislative context

1. Division 60 of the Australian Charities and Not-for-profits Commission Act 2012 (the Act) sets out the annual reporting requirements for registered charities.
2. All charities must provide an Annual Information Statement to the ACNC each financial year (section 60-5) or, if it is approved under our substituted accounting period policy, for a substituted accounting period (section 60-85).
3. Division 205 of the Australian Charities and Not-for-profits Commission Regulation 2013 (Cth) (the Regulations) classifies registered charities depending on their annual revenue as small, medium or large (determination of the size of the group is discussed further in paragraph 13). Medium and large registered charities must provide an annual financial report with their Annual Information Statements. The annual financial report consists of financial statements, notes to financial statements, and a Responsible Person's or People’s declaration (section 60.5 of the Regulations) and comply with the relevant requirements (section 60.10 and 60.15). However, Basic Religious Charities are exempt from the requirement to submit a financial report (section 60-60(1)).
4. The Regulations require annual financial reports to be prepared in accordance with Australian accounting standards. The financial statements and notes must give a true and fair view of the financial position and performance of the charity (section 60.10 of the Regulations). Australian accounting standards are the standards set by the Australian Accounting Standards Board (AASB) (refer to section 300-5).
5. If a medium or large charity is the parent of a consolidated group and required to prepare consolidated financial statements under the Australian accounting standard AASB 10, it must submit its consolidated financial report as part of its Annual Information Statement. However, this does not provide an exemption to the charity’s medium and large registered charity subsidiaries from the requirement to submit their own individual annual financial reports. To ease the reporting burden imposed by this requirement, the charity and its subsidiaries can apply for ‘joint’ or ‘collective’ reporting.” (section 60-95).

Difference between joint reporting and collective reporting

6. Joint reporting means that the Commissioner allows two or more charities (a reporting group) for each reporting period to prepare and submit:
   • a single Annual Information Statement (for small charities) or
   • a single Annual Information Statement and a single annual financial report (for medium and large charities) (subsection 60-95(1)).
7. For example, the Commissioner may allow a consolidated group of two or more charities to report jointly and prepare and submit one Annual Information Statement and where applicable one annual financial report (if the reporting group is medium or large) in relation to the financial affairs of the reporting group.
8. Collective reporting means that the Commissioner allows two or more registered charities (a reporting group) to prepare and submit one or more Annual Information Statements and, if required, one or more financial reports on a basis other than an entity-by-entity basis (subsection 60-95(2)).
9. For example, the Commissioner may allow a reporting group of affiliated registered charities that advance religion and relieve poverty to report collectively by preparing and submitting two financial reports: one report for the reporting group’s religious functions, and another report for the reporting group’s welfare functions. In this example, reporting is on the basis of activity type (advancing religion and welfare activities) rather than entity type.

Considerations for the Commissioner

10. In deciding whether to allow two or more registered charities to form a reporting group or change a previously approved reporting group (by adding or removing members), the Commissioner must consider the following (subsection 60-95(4)):
    • How public interest in the transparency and accountability of the charities is best served, including the possible effect on:
      • the public’s understanding of the charities’ activities and the information provided in the Annual Information Statement or annual financial report, and
      • the public’s ability to rely on the information provided in the Annual Information Statement or annual financial report.
    • How the altered reporting arrangements would affect the Commissioner’s ability to assess a registered charity’s entitlement to registration or compliance with the Act.
    • Whether members of the reporting group have access to the same taxation concessions.
    • How the altered reporting arrangements would affect the Commissioner of Taxation’s ability to assess a charity’s compliance with taxation law
    • The possible effect on the compliance and administrative costs of the charities proposed to be included in the reporting group
    • The degree of affiliation, control and proximity of the charities proposed to be included in the reporting group
    • The objects of the Act, and
    • Any other matter that the Commissioner considers relevant.
11. One other matter that the Commissioner considers relevant is the possible effect of group reporting on current ACNC streamlined reporting arrangements with other Australian government agencies (including state and territory regulators). While many individual charities benefit from the ACNC’s ‘report once, use often’ framework and only need to report to the ACNC, certain streamlined reporting arrangements do not apply to members of an ACNC reporting group. In such cases, charities within an approved reporting group no longer eligible for streamlined reporting arrangements may be required to continue to report to other regulators and prepare their own financial reports to meet other regulatory requirements. In these situations, group reporting may not result in reduced compliance and administrative costs, making it less likely the Commissioner will approve a reporting group. The ACNC website has more information on transitional reporting.

12. The Commissioner may impose conditions on a decision to allow joint or collective reporting (subsections 60-100(1) & (2)). If a reporting group fails to comply with its conditions, the approval for it to report as a group may be revoked (subsection 60-100(4)). See Principle 5 below for the conditions that the Commissioner may impose. The ACNC will notify the reporting group of the reason its approval is revoked and from when the approval no longer applies.

How the size of a reporting group is determined

13. A reporting group will take the same size classification as the largest charity within the group (section 60-105). For example, if a reporting group includes a large charity, it will be classified as 'large', regardless of the sizes of the other charities in the group. If the largest charity in a reporting group is medium, the reporting group will be classified as medium. The ACNC website has more information about determining charity size.

Principles

14. The Commissioner will apply the following principles when determining whether to allow two or more registered charities to form a reporting group or change a previously approved reporting group (by adding or removing members).

Principle 1: Compliance with Australian Accounting Standards must be maintained

15. The Commissioner will consider whether forming a reporting group will affect compliance with the Regulations for financial reports. Financial statements and notes must comply with Australian accounting standards and must give a true and fair view of the financial position and performance of the charity.
16. The Regulations allow non-compliance with the accounting standards to the extent they are inconsistent with this type of joint or collective reporting (section 60.25). Depending on the circumstances, joint or collective reporting may diverge from the requirements of particular accounting standards, such as allowing a reporting group to provide a set of aggregated financial statements on the basis other than AASB 10 Consolidated Financial Statements but must comply with the Australian accounting standards to the full extent possible. In such cases, the possible impact of any divergence from the accounting standards will be carefully considered.

Principle 2: The ACNC will balance transparency and accountability with reducing unnecessary regulatory obligations

17. In performing functions and exercising powers, the Commissioner must consider the need for transparency and accountability in the not-for-profit sector by ensuring that the public has access to information about not-for-profit entities and the benefits gained from providing that information to the public (subsection 15-10(b) and (c)).
18. To maintain public trust and confidence in charities, the Commissioner will consider whether the information provided by a reporting group in its Annual Information Statements and annual financial reports is transparent, complete and accountable (subsection 15-10(a)). This helps to ensure that the public can get sufficient and relevant information to understand a reporting group's activities and to facilitate accountability. In general, compliance with Australian accounting standards ensures the transparency and accountability of annual financial reports.
19. The Commissioner will balance the need for public trust and confidence with the object of promoting the reduction of unnecessary regulatory obligations (section 15-5). In particular, the Commissioner will consider the benefits of enabling a reporting group to reduce the number of individual Annual Information Statements and annual financial reports it would have to prepare for its member charities.
20. The Commissioner will consider whether, in the case of medium and large charities, allowing group reporting will reduce the compliance and administrative costs of preparing financial statements and engaging auditors or reviewers.

Principle 3: The ACNC will consider its ability to assess compliance and entitlement to registration

21. In allowing a reporting group, it is essential that the Commissioner maintains the ability to assess each charity’s compliance with the Act and Regulations and its ongoing entitlement to registration. The Commissioner will consider this in deciding whether to allow joint or collective reporting.

Principle 4: The ACNC will consider the relationships and similarities between charities when making a decision

22. The Commissioner will consider how closely the charities in a proposed group are associated by looking at a number of factors, including:
    • the degree of affiliation, control and proximity of the charities in the reporting group
    • whether the charities share a common purpose or objective
    • whether the charities are of a similar type or conduct similar operations and activities
    • the location of the charities as well as the sphere of operations (including overseas operations), and
    • whether the charities have access to the same taxation concessions.
23. The ACNC Commissioner’s assessment could involve weighing competing considerations.
24. For example, the Commissioner would be more likely to approve a reporting group in which the charities:
    • had common purposes
    • conducted similar activities
    • had a common binding set of governing rules
    • shared a centralised administration function responsible for the day-to-day management of the whole group
    • followed common fundraising, accounting and reporting processes.
25. Approval for such a group would be likely even if some of the group received different taxation concessions from others and some of the group conducted different fundraising activities.
26. The Commissioner would be unlikely to approve a reporting group in which the charities:
    • did not share a centralised administration function responsible for the day-to-day management of the whole group
    • used different forms of fundraising in different locations with different processes.

Principle 5: The ACNC may impose conditions to meet specific concerns about transparency and accountability when giving approval

27. The Commissioner may impose conditions on a decision to approve joint or collective reporting (subsection 60-100(3)). All approved reporting groups will be subject to a set of standard conditions published on the ACNC website. However, the Commissioner may also separately impose other conditions on a group and any later time to mitigate the risks to transparency and accountability concerns.

References

• Australian Charities and Not-for-profits Commission Act 2012
• Explanatory Memorandum to the ACNC Act 2012
• Australian Charities and Not-for-profits Commission Regulation 2013
• Commissioner's Policy Statement 2013/02 Annual Information Statements
• Commissioner's Policy Statement 2012/08 Substituted Accounting Periods
• Australian accounting standards
• ACNC Policy Framework
• Basic Religious Charities