Not for profit compliance matters

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Depending on the structure of the organisation, Not-for-profits may have multiple reporting obligations to different authorities. The level of reporting required and the fact that there is more than one authority regulating not-for-profit organisations can make compliance difficult. It is important that Not-for-profit organisations are able to achieve their compliance and regulatory requirements to maintain their status. GLG Legal can assist in ensuring your not-for-profit organisation meets the compliance requirements specific to its structure.

Incorporated associations

Incorporated associations are registered under the relevant state or territory legislation and are regulated by the Office of Fair Trading (OFT). The benefits of incorporating your not-for-profit come with several responsibilities and in Queensland, you must comply with the Associations Incorporation Act 1981 and the Associations Incorporation Regulation 1999. Each year the organisation’s finances will need to be audited, and you will be required to provide your rules and financial statements to the OFT which will then be made available to the public.

Under the Act, a set of rules is required to be drafted in line with the legislation that includes the minimum requirements of the association. There are model rules available under the regulation that can be used, however it is recommended that you obtain legal advice to determine whether the rules are appropriate for your specific organisation.

The object and purpose of the association must also be included in the rules. This could have legal implications in the future as if you are not acting within the objects of your association your registration could be at risk. Therefore, it is important that you seek legal advice to ensure your object covers the scope of your operations.

As an incorporated association, your auditing requirements depend on the current assets and revenue of the organisation. You may be required to have a full audit of the financial statements by an auditor or certified accountant, or the financial statements may just need to be verified.

As you can see it is important to seek legal advice to ensure your incorporated association is complying with any relevant legislation. There are also other requirements under the Act, and GLG Legal can assist you in ensuring you meet each of these obligations.

Company limited by guarantee (CLG)

CLG’s are incorporated under the Corporations Act 2001 (Cth) and are regulated by the Australian Securities and Investments Commission (ASIC). Generally, if a CLG is also a charity, it will report to the ACNC rather than ASIC and will only have to report to ASIC in some situations.

A CLG has numerous obligations under the Corporations Act. Firstly, CLG’s must keep written financial records that record and explain the transactions, financial position and performance of the organisation and allow for the preparation and audit of the financial statements. These financial records must be kept for 7 years.

The reporting obligations of CLG’s under the Corporations Act will depend on the category of the organisation. Tier 3 organisations will be required to prepare an annual financial report and have it audited, prepare a directors report and provide annual reports when requested by members. However, there are less obligations under the lower tier levels.

The reporting requirements to ASIC include; lodging financial, directors and auditor’s reports as required, paying an annual review fee to ASIC, as well as notifying ASIC of changes to the company details. Charities will not usually be required to report to ASIC.

If your CLG is also a charity you will be required to comply with reporting obligations under the ACNC Act. Charities have significantly less reporting requirements than CLG’s that are regulated by ASIC.

Co-operative

In Queensland, Co-operatives are required to comply with the Cooperatives National Law Act 2020 (Qld) and Cooperative National Law Regulation 2020 (Qld). They are regulated by the Office of Fair Trading and must report to the ACNC if they are also a charity.

Before you can register a co-operative, rules must be written to govern the organisation. It is recommended that you seek legal advice on the rules of your organisation as they must comply with the Cooperatives National Law Act. The rules will be reviewed by the OFT to ensure they comply with the legislation.

Depending on the type of co-operative you are operating you may need to form a disclosure statement. As with the rules, this must comply with the legislation and will be reviewed by the OFT. It is therefore recommended to obtain legal advice to assist in drafting your disclose statement.

Under the legislation co-operatives are considered either small or large and have different reporting requirements depending on the classification. Small co-operatives will only need to submit an annual report to the OFT. Large organisations have more complex reporting requirements and must submit a financial report in line with Australian Accounting Standards as well as a director’s report and an auditor’s report.

Charity

Charities are regulated by the Australian Charities and Not-for-profits Commission (ACNC). There are a number of obligations imposed by the ACNC; you must be a not-for-profit and for a charitable purpose, this status must be maintained, the ACNC must be notified of changes, you must keep financial and operational records, you must submit an annual information statement, and you must comply with governance and external conduct standards. There are also a number of reporting requirements with the ACNC. As well as the annual information statement, medium or large charities must submit a financial report annually.

You will be required to keep records which explain how the charity spends money as well as explaining the financial position of the charity. If you fail to comply with the ACNC’s reporting and other obligations, they may potentially revoke your registration meaning that you cannot access the charity tax concessions that are available.

Final note

There are numerous acts and regulations you must comply with depending on the structure of your NFP organisation. Compliance can be difficult for not-for-profit organisations given that there are numerous regulating authorities. It is recommended to seek legal advice and GLG legal can assist in ensuring that your organisation complies with all the required legislation and regulatory requirements.

 

 

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