Not-for-profit reporting

There are about 27,000 registered charities in New Zealand. Their financial reporting requirements are set out in the Charities Act 2005 (the Act) and accounting standards issued by the External Reporting Board (XRB). (Not-for-profits that are not registered charities are subject to the legislation that governs their legal forms.)

Section 42A of the Act requires all registered charities to prepare general purpose financial reports (GPFRs) in accordance with the XRB’s accounting standards.

There are four reporting tiers in the XRB’s standards, ranging from highest to lowest in terms of entities’ levels of public accountability and expenses. The accounting standards become simpler as you move down the tiers. This balances the costs and benefits of financial reporting in relation to the size and complexity of the charity.

TIER	CRITERIA	NFP ACCOUNTING STANDARDS
1	Public accountability; or Expenses >$30m	Public benefit entities (PBE) standards
2	No public accountability; and Expenses ≤$30m	PBE standards – reduced disclosure regime (RDR)
3	No public accountability; and Expenses ≤$2m	PBE simple format reporting standard – accrual (SFR-A (NFP))
4	No public accountability; and Payments <$125k*	PBE simple format reporting standard – cash (SFR-C (NFP))

* Operating payments for the preceding two periods.

A charity’s tier is determined by:

• its annual operating expenses, or operating payments for its two previous periods; and
• whether it has public accountability.

Public accountability means that a charity holds cash or assets on behalf of others as one of its main activities. For example, a charity would have public accountability if it carries out budgeting services in which it holds clients’ money.

Under section 42C of the Charities Act 2005, a charity’s size determines whether its financial statements require an audit or review by a qualified auditor. A charity’s size is determined by its annual operating expenses for the previous two financial years. These thresholds are much lower than the reporting tiers discussed above.

Charity size	Definition	Assurance
Large	Expenses ≥$1m*	Audit
Medium	Expenses ≥$500k* but <$1m	Audit or review
Other	Expenses <$500k	None

* For the preceding two periods

All registered charities must complete annual reporting to the Department of Internal Affairs (DIA) Charities Services within 6 months of the balance date.

Preparing the annual return requires checking and updating some details, answering a few questions, entering some financial information and submitting financial statements. The financial information can be taken from the financial statements.

Charities’ compliance with the legal requirements for reporting and assurance are monitored by Department of Internal Affairs (DIA) Charities Services.

Non-compliance can lead to revocation of charitable status and fines of up to NZ$50,000 on a charity and, in some cases, every officer who willingly and knowingly does not comply.

There are about 55,000 registered charities in Australia. Their financial reporting requirements are set out in section 60 of the Australian Charities and Not-for-Profits Commission Act 2012. (Not-for-profits that are not registered charities are subject to the legislation that governs their legal forms.)

Charity size	Definition	Type of report
Large	Revenue ≥$1m	Reporting entity = general purpose financial report (GPFR)     Not a reporting entity = special purpose financial report (SPFR) that complies with at least AASBs 101, 107, 108, 1048 and 1054
Medium	Revenue ≥$250k but <$1m	Financial reporting requirements same as large charities
Small	Revenue <$250k	None

Section 60 of the Australian Charities and Not-for-Profits Commission Act 2012 sets out the assurance requirements for registered charities. 

Charity size	Definition	Assurance
Large	Revenue ≥$1m	Audit
Medium	Revenue ≥$250k but <$1m	Audit or review
Small	Revenue <$250k	None

A registered charity must submit an annual information statement to the Australian Charities and Not-for-profits Commission (ACNC) within 6 months of the balance date.

Preparing the annual information statement requires answering between 9 and 15 financial information questions, depending on the size of the charity.

In addition to supplying an annual information statement, a large or medium-sized charity also needs to submit a financial statement.

The Australian Charities and Not-for-profits Commission (ACNC) monitors charities’ compliance with the legal requirements for reporting and assurance.

Penalties of one year imprisonment and/or 50 penalty units can be imposed against the charity and, in some cases, every officer, for those who willingly and knowingly do not comply, along with revocation of charitable status.

Learn more about what the ACNC does.