Australian charities have an overly complex and inconsistent financial reporting regime which is failing to promote accountability or efficiency and is in need of reform, according to research conducted by the Australian Accounting Standards Board (AASB) and the Australian Auditing and Assurance Standards Board (AUASB).
There are currently 18 sets of regulation and ten regulators at federal and state level for charities, which involve different reporting thresholds and requirements for location, entity type and historic reporting choices. Charities have complained of reports not being focused on the needs of their stakeholders.
The research found that despite ongoing simplification efforts there are challenges with; having multiple regulators, varied and unclear requirements, and self-assessment which does not provide significant judgement. According to the research, Australia is the only jurisdiction where charities are required to self-assess whether they need to produce full financial reports of special purpose financial reports.
The Australian Charities and Not-for-profits Commission (ACNC) was set up in 2012 to reduce unnecessary regulatory obligations but even though the ACNC has harmonised financial reporting across some states and territories, the reporting framework for charities still has underlying issues, according to the AASB.
Australia has the most complex regulatory environment when compared to New Zealand, United Kingdom, Hong Kong, Singapore, South Africa and Canada, yet charities in Australia make up a significant portion of the society and economy (with net assets of $180bn and income of $134bn).
The AASB will release a consultation paper later this month with the aim to inform stakeholders that will feed into the ACNC legislative review starting in December.