On September 25, 2024, Melville "Mel" Yates, FCPA, former acting Assistant Commissioner of the Australian Charities and Not-for-Profits Commission (ACNC), presented the 85th CPA Australia–University of Melbourne Annual Research Lecture.
This is the oldest continuous lecture series in the University’s calendar and the world’s longest-running annual lecture in the accounting discipline.
The formalities commenced with the chair for the evening, Associate Professor Brad Potter, Head of the Department of Accounting, inviting Professor Paul Kofman, Dean of the Faculty of Business and Economics, to summarise the history of the lecture and introduce the speaker.
The theme of the lecture was the role and nature of charitable organisations and the financial reporting challenges they faced. Mel opened his address by challenging the audience to think of a single word that the word ‘charities’ evoked. He then outlined the key characteristic of charities, namely, that to be registered they had to possess a clear public benefit. The host institution, the University of Melbourne, was cited as an example of a charity (albeit a particularly large one), as were religious organisations. The public-benefits purpose distinguished charities from more general not-for-profit organisations like professional organisations (CPA Australia itself being one example) and sporting bodies.
Key metrics demonstrating the importance of charities were that they:
- benefited from the efforts of 3.5 million volunteers nationwide;
- employed some 10.5 per cent of the national workforce;
- and received donations and bequests amounting to almost $14.5 billion annually.
Within these aggregates, the size of charities varies enormously. One-third of all charities receive annual revenue of less than $50,000, with the median figure being $250,000. At the other end of the spectrum, the largest 0.5 per cent (including the University of Melbourne) receive in excess of $100 million. These differences in scale and command over resources have resulted in a range of financial and program reporting requirements. Financial (and other) reporting requirements are determined by which of three revenue thresholds charities fall, specifically:
- Small charities: Those having annual revenue below $500,000. These entities have to report only basic financial measures, which can be in cash rather than accrual form.
- Medium charities: Those having annual revenue exceeding $500,000 but below $3 million must submit a financial report based on accrual principles that are subject to either review or audit.
- Large charities: Those having revenue of $3 million or more must submit audited financial reports.
Against this background, Mel then focused on several developments and challenges relating to the charities sector. One was an inconsistency between updates to ASIC and ACNC databases, particularly relating to the identities of responsible persons. The ACNC required this information to be up-to-date but ASIC did not. Another inconsistency was jurisdictional. How charities were defined was a matter for individual states and territories with no consistency between the separate jurisdictions.
Current reforms impacting financial reporting in the charity sector included alterations to the ATO’s self-assessment income tax exemptions for not-for-profit organisations (NFPs) and potentially climate-related financial disclosures. Future changes were also expected, particularly from revisions to the AASB’s standards in relation to the financial reporting framework for private-sector NFPs and service-performance reporting.
Evolutionary changes to ACNC reporting requirements since the Commission’s inception in 2012 were also highlighted. Most recently, these embraced increases to charity sizes for the purposes of reporting thresholds, disclosing the remuneration of key personnel by large-size charities and providing information concerning related-party transactions. Another evolutionary change was in the nature of charities. For example, the proportion of the total charities’ population represented by religiously affiliated charities was declining. In contrast, the shares of charities focused on health and social welfare were increasing.
The final part of the lecture was devoted to the question of whether the red tape burden of charity reporting was unduly onerous. For this purpose, Mel drew on a question put to ChatGPT: “Is charity reporting necessary for trust and confidence or unnecessary burden?”
The downside was that it imposed administrative costs on charities and increased the complexity of their operations. The upside was that the transparency provided by the compliance requirements enhanced accountability and donor confidence. ChatGPT’s final words were that, in the end, charity reporting “is a vital component of the trust and confidence necessary for a thriving charitable sector”.
Following the presentation, Professor Potter moderated a lively Q&A session, which included the question of whether the jurisdictional problem was soluble (the answer was only with extreme difficulty given Australia’s federal structure).
In closing proceedings, Georgina Fordham, President of the Victorian Division of CPA Australia, complimented Mel on his presentation and drew attention to the role of governance in charity operations and disclosures.