Understanding the new best practice guide for financial disclosures for charities

Donors, funders, supporters and the public want to know whether a charity received funds from government, precise government sources and the amounts. Nearly half of charity sector revenue comes from the government and, increasingly, people are viewing financial details on the ACNC Charity Register, often to inform decisions on charitable giving. The guide, Annual Financial Report Disclosures − Best Practice, will help charities provide useful, consistent information, enhancing transparency and accountability across the sector.

We recommend the use of the disclosures to ensure that the information a charity provides in its annual financial report supplements and corresponds with the information it submits to us in its annual information statement.

This will improve the consistency and comparability of the financial information available on the ACNC Charity Register, which had 3.2 million searches last financial year. And an added benefit of disclosing such information is that it may allow us to explore more ways to cut red tape for charities.

We provide three recommended disclosures of government funding in a charity’s annual financial report.

1. Disclose information about the sources of government revenue

For a charity that received 10 per cent or more of its total revenue from the government, it should disclose the following information about the sources of its government revenue: the total revenue it received by each level of government; the names of the government departments or agencies from which it received revenue (up to 10), as well as the total amounts it received from each; and the revenue from providing goods and services to beneficiaries who receive related government financial assistance (for example, payments from the National Disability Insurance Agency).

2. Disclose economic dependency on government revenue

For a charity dependent on the government for significant revenue or financial support, it should include an economic dependency note in its financial statements.

3. Disclose funding received from the government but not yet recognised as revenue

For a charity that prepares Special Purpose Financial Statements and does not make the disclosures required by AASB 15 and AASB 1058, the ACNC recommends disclosing funding from the government that has been received but not yet recognised as revenue.

To ensure the financial statements are clear and easy for users to read and understand, we recommend making the majority of these disclosures in the notes to the financial statement rather than on the face of the financial statement.

The recommended disclosures are not intended to replace existing disclosure requirements under the Australian Accounting Standards; for some charities, the recommended disclosures are already required. Instead, they provide the ACNC’s view of best practice in disclosing this kind of financial information and encourage charities to adopt this approach.

Consider these recommendations as you prepare your charity’s annual financial report.

Anna Longley assistant commissioner − general counsel, Australian Charities and Not-for-profits Commission