26 November 2015
CPA Australia Ltd
ABN 64 008 392 452
Level 20, 28 Freshwater Place
Southbank VIC 3006
Australia
Mr Scott Bloodworth
Director
Compliance and Reporting Directorate
Australian Charities and Not-for-profits Commission
GPO Box 5108
Melbourne Vic 3001
GPO Box 2820
Melbourne VIC 3001
Australia
Phone 1300 737 373
Outside Aust +613 9606 9677
Website cpaaustralia.com.au
Submission via email: [email protected]
Dear Scott
Public Consultation Paper: 2016 Annual Information Statement (AIS)
CPA Australia welcomes the opportunity to respond to the above Consultation. CPA Australia represents
the diverse interests of more than 155,000 members in 120 countries. Our vision is to make CPA
Australia the global accountancy designation for strategic business leaders. We make this submission
on behalf of our members and in the broader public interest.
CPA Australia’s responses to the questions raised in the Consultation are provided below.
1. Revenue/other income categories (small)
Should information distinguishing revenue from other income be included within the financial
information categories for small charities, as proposed in Attachment (ii)? If not, why not?
Small charities can use either the cash or accruals basis for calculating the financial information included
in the AIS. For charities choosing to use the cash basis, the Australian Charities and Not-for-profits
Commission (ACNC) may still not be able to asses the charity’s size, as the threshold calculations are
based on the accruals basis. We would therefore consider the proposed requirement to distinguish
revenue from other income of somewhat limited utility to the ACNC where the cash basis is used. Also,
we note line item c is “other income/receipts” and the proposed new line item e is “other income (such as
gains)”. The similarity in headings could be confusing to small charities completing the AIS.
For the reasons stated above, we suggest the ACNC retains the status quo for financial information
required from small charities in the AIS.
2. Audit/review reports (medium and large)
Do you agree that medium and large registered charities should answer questions about the
existence of an audit/review report and provide an indication as to whether it has been modified,
as proposed in Attachment (iii)? If not, what approach would you suggest and why?
As the financial statements of medium charities must be reviewed or audited, and the financial
statements of large charities must be audited, we suggest that for a “no” answer to the question “were
the financial statements audited or reviewed?”, a warning message should be displayed stating the
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charity’s review/audit obligations under the ACNC legislation. We would also expect the ACNC to follow
up any “no” responses with the charity to ascertain reasons and potential implications.
We agree with the proposal to include a question for the charity to indicate whether the review/audit
report was modified.
An additional question raised by the ACNC outside this Consultation was whether the charity should
identify the nature of the modification, except if the modification is a qualification relating to
fundraising/donations. This is to address a commonly held view within the sector that such “standard”
modifications often arise due to the inherent limitations in obtaining adequate review/audit evidence for
fundraising/donation revenues. In our view, although qualifications on fundraising revenue and cash
donations may occur more frequently in review/audit reports in the charities sector, we would not
characterise such qualifications as “standard”, as they are still qualifications which represent risks to the
users of the financial statements. Further, we do not believe identification of the type of modification
through the AIS will provide sufficient insight into the nature of the modification described by the
reviewer/auditor in their report. Hence we do not support inclusion of an additional question as
proposed, instead we suggest the ACNC should review any modified report.
3. Consolidation (medium and large)
Do you agree that medium and large charities disclose information about whether they are part of
a consolidated group for reporting purposes (except in the case where they are part of an ACNC
approved group), as proposed in Attachment (iii)? If not, what approach would you suggest and
why?
We presume the question seeks to identify whether a charity is the parent of a consolidated group,
rather than part of such a group, as subsidiaries can also be part of a consolidated group.
It is our view that ACNC should signpost to a reader of the AIS financial information that the information
relates to an individual charity, and the reader should be able to identify from the financial report
prepared in accordance with Australian Accounting Standards if it is a consolidated financial report.
Accordingly, we believe this question is unnecessary.
4. Related party transactions (medium and large)
Do you agree that medium and large registered charities should answer a question in respect of
responsible entity and related party transactions and indicate whether their financial report
discloses related party transactions, as proposed in Attachment (iii)? If not, what approach
would you suggest and why?
We agree with the proposed three questions on related party transactions. In question (i), we
recommend including the word “other” before related parties, as responsible persons are also related
parties.
5. Other comprehensive income (medium and large)
Should information on Other comprehensive income be included within the financial information
categories for medium and large charities, as proposed in Attachment (iv) and (v)? If not, why
not?
We support inclusion of information on Other Comprehensive Income as proposed. We suggest that line
item e in Attachment (iv) refers to “other income” rather than “other income (such as gains)”. The use of
the word “gains” in line item e could be confusing as line item m under Other Comprehensive Income
also refers to gains. We suggest the existing heading of “other income” be retained for line item e.
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6. Rotational questions (small, medium and large)
Do you support the removal of the optional questions and the possibility of these types of
questions rotating back into the AIS within the future? If not, why not?
We support removal of the optional questions as we agree that these questions do not provide any
information value at present to the ACNC.
7. Charity activities and outcomes (small, medium and large)
Is the current wording of Q10 in previous AISs (asking for a description of charity activities and
outcomes) the best way to capture this type of information? If not, why not and can you suggest
an alternative?
The current wording of Q10 requires a charity to describe how its outcomes helped achieve the charity’s
purpose. Identifying and/or measuring outcomes can often prove difficult, particularly for smaller
charities with limited resources. We therefore recommend amending the question to remove the
reference to outcomes and just require a description of how the charity’s activities helped achieve the
charity’s purpose.
The Consultation notes the project currently being undertaken by the Australian Accounting Standards
Board (AASB), ED 270 Reporting Service Performance Information. We believe that if these proposals
are adequately developed they could result in a consistent set of principles and guidance for not for
profits (including charities) to report information on their service performance. We recommend the
ACNC works closely with the AASB in ensuring the proposals in ED 270 are sufficiently aligned with the
information needs of the ACNC and other users of charity information lodged with the ACNC.
8. Amendments to non-financial questions (small, medium and large)
Do you support the proposed modifications to the existing questions relating to beneficiaries
and charity activities, as proposed in Attachment (i)? If not, why not? Please be specific.
Question 9 – The revised question appears to limit the information provided on a charity’s primary
activities to five. It is possible that larger charities can have more than five primary activities and such
information will not be captured under the proposed question 9. As an alternative, we suggest retaining
the activities currently listed, but require the charity to highlight the top five activities (ranked 1 to 5)
based on effort expended. This will allow the charity to indicate all relevant activities applicable to them
and also highlight the top five primary activities. We also suggest providing some guidance on what is
meant by “effort”.
Question 12 – For the reasons stated in our comments on question 9 above, we suggest a similar
approach of retaining the current list of beneficiaries but require the charity highlight the top five
beneficiary groups (ranked 1 to 5).
9. Information required by other government agencies
Do you support the inclusion of a supplementary section for collection of information required by
other government agencies in order to streamline reporting? If not, why not?
We do not support the inclusion of a supplementary section as proposed. In our view this will further
increase the compliance burden on the charity concerned, as it will not only have to provide the required
information to another government agency, but also provide the same information to the ACNC. We
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believe this proposal would be of value if an entity is required to provide information only to the ACNC
which can then made available to other agencies as required.
10. General comments – proposals (small, medium and large)
Are there any other comments you wish to make about the proposed additional questions,
amended questions, omitted questions or any other proposals in this consultation document?
Please be specific.
We suggest inclusion of a question that requires confirmation from the charity that they have complied
with the five governance standards. If the ACNC believes a separate question on governance standards
is not warranted, we suggest including a statement on compliance with the governance standards as
part of the declaration made at the end of the AIS.
11. General comments - existing (small, medium and large)
Are there any comments you wish to make about any of the current questions in the 2015 or 2014
AIS, not already dealt with in the above consultation questions? Please be specific.
We have no further comments.
If you require further information on any of our views expressed in this submission, please contact Ram
Subramanian, CPA Australia by email at [email protected].
Yours sincerely
Dr Eva Tsahuridu
Manager – Accounting Policy
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