Australian charities make up a significant sector of Australia’s society and economy, managing net assets of over $180 billion and generating $134 billion total income. They provide essential social, cultural, community, education, health and other charitable services, employing 1.2 million people and an estimated three million volunteers to do so.
Accountability for the assets these charities control and the services they perform is clearly important. The efficient functioning of the sector also matters: many charities deliver services using taxpayer and donor funds, and any unnecessary red-tape diverts funds from those services.
Yet it has been apparent for many years that the financial reporting framework governing the charitable sector is in need of reform. Charities complain of unnecessary complexity, inconsistent and uncertain requirements, and financial reports that are not focused on the needs of their stakeholders.
To understand more about the basis for these criticisms, the Australian Accounting Standards Board (AASB) has documented in this Report financial reporting requirements applicable to charities in Australia. The Report also documents the requirements in some international jurisdictions. That information can be used as a benchmark and as input for future discussions about options for overcoming the criticisms.
This Report is part of a larger project by the AASB and the Auditing and Assurance Standards Board (AUASB) to assist in reforming the financial reporting framework in Australia for all sectors. The goal of the project for the charitable sector is to achieve financial reporting that is clear, objective and comparable, balancing user needs and preparer costs. It also aims to reduce the burden on preparers by simplifying the requirements and ensuring the information they are required to provide is useful to them and their stakeholders. This Report will be followed by an AASB Consultation Paper detailing potential options for change, and an extensive program of consultation with the charitable sector and its stakeholders.