If your community organisation is a registered charity you must complete annual reports to Charities Services. The Charities Act 2005 requires all charities registered with Charities Services to file an Annual Return within 6 months of their balance date (financial year end).
Charities Services have four tiers of reporting to allow each charity to prepare financial statements based on their situation. This involves three steps:
- Preparing a Performance Report (Tiers 3 and 4) or Financial Statements (Tiers 1 and 2) that comply with the reporting standards
- Completing an Annual Return form (it’s easier and cheaper to do this online, by logging into your charity’s dashboard )
- Submitting the Performance Report/Financial Statements AND Annual Return form to us, and paying the Annual Return fee (if your charity’s gross income is $10,000 or more)
Which tier to use?
Your community organisation should make a decision about which tier you report under, or by default you will have to report under Tier 1 which has the highest reporting standards. Your reporting tier is determined by your annual expenses or operating payments over the previous two financial years. Whether you have public accountability is also considered. A charity may have public accountability if they hold cash or assets on behalf of others as one of their main activities. Having public accountability means you have to report under Tier 1. For a full list and more information, visit the Charities Services website.
Tier 1
- full standards
- more than $30 million annual expenses
- or has public accountability
Tier 2
- reduced disclosure regime
- ess than $30 million annual expenses
- without public accountability
Tier 3
- Simple Format Report – accrual
- less than $2 million annual expenses
- without public accountability
Tier 4
- Simple Format Report – cash
- less than $125,000 annual operating payments
- without public accountability
Financial reporting
Financial reporting needs to outline what a charity does, the resources used in doing this, and how well positioned the charity is to continue doing this. Tier 1 and tier 2 charities must provide financial statements, including profits and loss and a balance sheet that lists all assets and liabilities. Tier 3 and tier 4 charities must provide a performance report which includes non-financial information. This can include information about your mission statement and strategic purpose alongside financial information. A performance report may be similar to your annual report.
Control relationships with other legal entities
If your community venue has governance power over another legal entity and receives benefit from this entity they may have a “control relationship”. An example of a control relationship is where a charity establishes an incorporated society to run a second hand shop on their behalf, with profits returning to the charity.
Whether there is a control relationship is dependent on a context based assessment that takes into account the power relationship between the two entities and the benefits each receives from the other.
If a tier 1, tier 2 or tier 3 registered charity has control relationships with other organisations, these organisations are considered part of the charity’s ‘reporting entity’. They will need to include consolidated financial statements in their reporting. These statements combine information about a charity and the organisation it controls.
Tier 4 registered charities do not need to prepare consolidated financial statements and control relationships will not affect their reporting tier. A tier 4 charity needs to describe its structure in the performance report, including the nature of any control relationships it has.
Charities Services has further information on their website and can be contacted to answer questions about the new reporting standards.