A not-for-profit organisation will generally need to make and spend money, if only to cover the costs of providing their services, day to day operations, and to plan and provide for the future. Finances are an important consideration.
Obligations around record keeping, reporting and auditing will depend on your group’s legal structure, the types of transactions you do and your annual turnover.
Each member of the committee (or board) of an incorporated association is jointly responsible for managing the finances of the organisation. This means all committee members need to understand the organisation’s financial obligations and participate in making decisions about your organisation’s finances.
Who is responsible?
For all organisations, regardless of their legal structure, the leadership or management team is responsible (pdf, 254KB) for ensuring that the organisation’s financial transactions and accounts comply with the law.
Even if you have a treasurer in place or have an auditor checking your accounts, the law is clear that members of the management committee of an incorporated association and the directors of corporations are directly responsible for making sure that the finances are accurate and up-to-date.
Financial reporting and auditing
If your not-for-profit is an incorporated association you will need to maintain accurate accounts. You must keep these records for seven years. The financial reporting and auditing requirements for not-for- profit organisations vary depending on legal structure and annual revenue.
Incorporated associations must prepare a financial report to be presented to their members at the annual general meeting (AGM).
Keeping financial records
Maintaining accurate and up-to-date records of financial transactions in your not-for-profit organisation is essential for good governance and ease of reporting when required.
Your association must keep financial records that:
- record and explain its transactions, financial position and performance, and
- allow the preparation of 'true and fair' financial statements.
Financial records include:
- Documents that record the above (including bank statements)
- Working papers and other documents that explain how financial statements are prepared
Your association should maintain and update these records throughout the year as it receives and uses funds. An incorporated association must keep financial records for seven years.
Tax obligations and concessions
Accessing tax concessions and rebates, and making sure your not-for-profit meets its obligations for tax, including GST, income tax, fringe benefits and other employer requirements.
Tax deductible gifts
To be able to offer an income tax deduction to your donors for the gifts or contributions they provide to your organisation, you need to be endorsed by the ATO as a Deductible Gift Recipient (DGR). To be entitled for DGR endorsement your organisation must meet a number of requirements and apply to the ATO.
Withholding in business transactions
Any business or organisation carrying on an enterprise should quote their ABN when supplying goods or services.
Winding up, or ceasing to operate as a not-for-profit can happen voluntarily or may be forced by circumstances.
An organisation may choose to cancel or wind up for a number of reasons, such as:
- lack of members
- loss of interest
- fulfilment of its purposes
Cancelling or winding up will help ensure an association’s assets are distributed lawfully. If you need to wind up your not-for-profit for any reason, you’ll need to consider finances. Unless Consumer Affairs Victoria cancels its incorporation, an association remains legally in existence even after it stops operating
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