One of the challenges facing Not-For-Profit (NFP) organisations is how to ensure strong governance practices are followed given the nature of these types of organisations being made up of volunteer committee members that can change regularly.
As accountants assisting many NFP organisations in relation to their financial and taxation affairs, we have come across a number of common matters that are often overlooked when there is a change in the people or structure of an organisation.
We have listed some of these matters below along with some tips to help you improve your governance practices.
Notifying Changes to the Organisation
Changes to your NFP organisation in relation to your entity name, authorized contact persons, committee member changes and bank account changes need to be notified to relevant the governing bodies. The risk of not making these changes in a timely manner is that the organisation has no authorized contacts to act on its behalf that can cause issues for those trying to take over operations of the organisation.
Subject to the changes being made this may including updating one or all of the following bodies:
- Australian Charities and Not-for-profits Commission (ACNC)
- Australian Taxation Office (ATO)
- Australian Business Register (ABR)
- Australian Securities and Investment Commission (ASIC)
- Banking institutions (for changes to account holders/signatories)
To ensure notifications are made in a prompt and accurate manner contact information for your committee members should be reviewed and updated on a regular basis. This could be done as part of a rotating agenda item at committee meetings as one example.
At a minimum we recommend that you implement an annual structure review to assist in documenting and notifying the required bodies of any changes.
Access to Documentation
It is important that documentation relating to your organisation is stored in a safe and secure place and that this is communicated to the relevant committee members and or advisors. Documentation may include your governing documents (eg. Constitution), accounting records, banking records, contracts and agreements as well as details regarding online tools such as website access and social media accounts.
It is quite possible that some of your information will be stored in multiple locations. Accordingly, it is important that as the people in the organisation change that the handover of this information is completed so as to minimize the risk of any loss or control over the information.
We recommend that you document where your various types of information is held and where possible, try to keep it or the records of where it is held in a central location.
Understanding reporting obligations
Subject to the type and tax concession status of organisation there will be various lodgement and disclosure obligations for the organisation to follow.
From an ATO perspective this may include completion and lodgement of tax returns, fringe benefits tax returns and activity statements in addition to continually assessing your exemption eligibilities.
From an ACNC perspective this may include completion of an Annual Information Statement and lodgement of financial reports subject to the size of the organisation.
From an ASIC perspective this may include completion and lodgement of renewals and lodgement of financial reports subject to the size of the organisation.
It is important that the people governing the organisation are aware of the organisation’s annual reporting obligations and which bodies they report to. Further, it is important that the relevant reviews and disclosures are documented by the organisation on a regular basis.
We recommend that you prepare and maintain an annual governance calendar to ensure these obligations are scheduled and raised for attention and action at relevant committee meetings.
The ATO have published a number of checklists to assist NFP organisations with their governance. We have highlighted two of these checklists below that we recommend should be used to improve your governance practices.
The ATO’s Handover Checklist is a one stop shop of the information that you should maintain on your organisation that can be handed over to new people as your committee changes.
We encourage you to download this checklist and complete it for future use. This checklist should be reviewed each year to ensure it remains up to date and accurate and should form part of any handover process you have in place for the introduction of new committee members.
The Self-Governance Checklist is a checklist that will help you understand and manage your NFP’s tax obligations and review eligibility to exemptions. It should be used annually as well as at any point in time when your structure changes. We recommend that completion of this checklist is built into your annual governance calendar.
If you require any assistance in relation to your governance practices or management of your taxation affairs, please contact our office on 03 52216399 or at email@example.com.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.