C.2 Annual Reporting

Signatory organisations understand that the provision of open and accurate information concerning an organisation’s purpose and activities is key to effective public accountability.  Signatory organisations are committed to honesty and transparency in reporting to stakeholders, acknowledging successes and failures and sharing the learning from their experience.

The Annual Report is a key tool for transparency as it represents in a consolidated fashion the work that the signatory organisation has been undertaking and how it has sourced and expended its funds.

Increasingly, Annual Reports are being used to strengthen learning and build trust with stakeholders by engaging them in a transparent assessment of how the organisation is performing.  The requirements for what organisations must report on are explained in the Obligations to this Principle.

Section C.2 of the ACFID Code of Conduct includes three sets of Standards each with their respective Principle and Obligations. Standard C.2.1 requires signatory organisations to be accountable through the publication of an annual report. Standard C.2.2 requires the inclusion of financial statements in annual reports. Standard C.2.3 requires that stakeholders are made aware of their right to access the full financial reports of signatory organisations.

Compliance with Standard C.2.2 and its Principle and Obligations is mandatory for all signatory organisations. The Guidance provided is also mandatory.

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C.2.1 Transparency

Principle

Signatory organisations will use their annual report as a key part of their accountability to all stakeholders.

Obligations

  1. A written annual report will be produced and be made available to the signatory organisation’s stakeholders including their members, staff, volunteers, supporters, partner agencies, and members of the public.
  2. The annual report will provide stakeholders with:
    1. A description of the signatory organisation’s purpose, objectives/aims and values;
    2. A plain language summary of the signatory organisation’s income and expenditure and overall financial health;
    3. A description of the most significant aid and development activities undertaken during the reporting period and their impact; and
    4. Information about evaluations into the effectiveness of and the learning from aid and development activity conducted by the organisation.
  3. The annual report will also specifically include:
    1. A report by the management and/or the governing body;
    2. Financial statements prepared in accordance with the requirements of this Code;
    3. A statement of commitment to full adherence to the Code;
    4. Identification of the ability to lodge a complaint against the organisation and a point of contact; and
    5. Identification of the ability to lodge a complaint for breach of the Code with the ACFID Code of Conduct Committee and a point of contact.

Why

Annual reports are intended to give an organisation’s members and other interested people information about the organisation’s activities and financial performance. Preparing an annual report is a key feature of acting in an open and transparent manner and being accountable to others.

Values

This standard reflects the Code of Conduct’s commitment to honesty, transparency, and accountability to all stakeholders.

Practical guidance

Here are some practical suggestions to assist your organisation’s compliance with these Obligations:

  • An Annual Report need not be lengthy, nor need it be of elaborate production quality. The extent of the Annual Report should be appropriate to the signatory organisation’s circumstances.
  • Signatory organisations should ensure that the Annual Report submitted reflects the legal entity that is a signatory to the Code.
  • The ACFID logo is available on the ACFID website for signatory organisations to include in their Annual Report as a symbol of quality and accountability to stakeholders.
  • The Annual report can include references to an international parent body, affiliation, or similar.
  • The Annual Report must be published in electronic form on the signatory organisation’s website (where a signatory organisation has a website). The Annual Report must::
    • be easy to find on the website
    • meet the standards expected by this Code;
    • include a statement that a printable copy is available on request; and
    • be downloadable and be a reasonable file size
  • A plain language summary of a signatory organisation’s income and expenditure and overall financial health can include the following:
    • Discussion and analysis on overall financial performance and position for the year;
    • Revenue stream – discussion and analysis on main streams of revenue, any movements in revenue, factors affecting revenue for the reporting year and future years as applicable;
    • Expenditure stream – discussion and analysis on expenditure stream by reporting categories e.g. program expenditure by regions/projects, community education, fundraising costs, accountability and administration etc. as applicable. These discussions can be enhanced by the inclusion and analysis of financial ratios such as:
      • Accountability and Administration Expenditure ratio (total accountability and administration expenditure/total expenditure);
      • Program Expense ratio (total program expenses/total expenditure);
      • Fundraising Expense ratio (total fundraising costs/total expenditure);
      • Cost of Fundraising ratio (total fundraising costs/total fundraised revenue.
      • Charts or graphs that provide information about the composition of the signatory organisations assets or information about revenue or expenses over a period of time.

The objective of these and other financial ratios is to help show how efficiently a signatory organisation has used their resources. 

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C.2.2 Financial Statements

Principle

Signatory organisations will publish financial statements in their annual report.

Obligations

  1. Signatory organisations will publish an annual report which will contain:
    1. Financial statements prepared in accordance with the Guidance to this Principle and the Financial Definitions at Section F of the Guidance. This requirement is not withstanding any other legal or parent body requirements.
    2. A reference to the availability of the full financial report (if the full financial report has not been included in the annual report).
    3. An audit report on the Code of Conduct Summary Financial Report or, if the full financial report has been included in the annual report, on the full financial report.

Why

The publication of ACFID compliant annual financial statements to a particular standard will enable fair disclosure and comparability and therefore enhance transparency. 

This Principle and its Obligations are mandatory for all signatory organisations.

Values

This standard reflects the Code of Conduct’s commitment to honesty, transparency, and accountability to all stakeholders.

Practical guidance

Note: The Guidance for the Financial Statements below forms a part of the Code of Conduct and is mandatory.

  • All signatory organisations will publish ACFID-code compliant financial statements in their Annual Reports.  Subject to their size and circumstances, there are options and specific requirements that apply (detailed in guidance below). 
  • Signatory organisations may choose to publish their full statutory financial statements in their Annual Report, instead of just the ACFID Code compliant financial statements.  The Annual Report must include an auditor's report as an integral part of the Financial Report (see D.4.2). The Annual Report must be lodged with ACFID (E.2.3).
  • The following pages set out the information required by this Code for both publishing and lodging with ACFID.  Definitions for the Financial Reporting Guidance are at Section F.
  • Code compliant financial statements format options:
    • As a minimum, all signatory organisations to the Code must present their ACFID code compliant financial statements in their Annual Report in a format that complies with either Option 1 or Option 2 of the Code of Conduct Financial Report Format as detailed below.
    • The governing body must review and approve the signatory organisation’s financial statements and the governing body’s declaration must be signed and dated. The governing body declaration must be submitted to ACFID, either within the Annual Report or as a separate document.
    • If an organisation chooses to publish only the ACFID code compliant financial statements (and not the organisation’s full statutory financial statements) in the Annual Report, a reference to the availability of the full statutory financial report must be included in the Annual Report.
    • Signatory organisations must include a note stating that the ACFID code compliant financial statements comply with the presentation and disclosure requirements of the ACFID Code of Conduct and refer readers to the ACFID Code of Conduct website for further information.
    • The inclusion of the following words would be appropriate:  ‘The following financial statements have been prepared in accordance with the presentation and disclosure requirements set out in the ACFID Code of Conduct. For further information on the Code please refer to the ACFID website www.acfid.asn.au’.
    • Auditing requirements as detailed in Principle D.4.2 of the Code of Conduct must be adhered to.
  • This flowchart is provided to help signatory organisations determine which ACFID Code of Conduct reporting option and consequent annual financial reporting requirements apply. The decision will be based on the signatory organisations’ amount of international aid and development revenue and then on the legal structure of the signatory organisation (the entity type).

Option 1 – For Signatory organisations with small international aid and development programs

  • Small signatory organisations whose international aid and development revenue is below $250,000 can prepare Option 1 reporting. The minimum level of disclosure required and the template to be used is set out below.

  • Signatory organisations may include additional headings where this improves transparency. The reasons for adding additional headings must be explained in a note which must be included in the Annual Report.  

  • Large signatory organisations with international aid and development revenue below $250,000 may also prepare Option 1 reports. The required Short Form Income Statements can be disclosed as a note to their full financial statements.

  • Small signatory organisations whose revenue falls into this category may choose this format for their primary Income Statements, if it complies with other regulatory requirements.  It will not be necessary for signatory organisations in this category to prepare the organisation’s Annual Reports in accordance with Option 2 of the Code of Conduct Financial Report Format.

Option 1 format: International Aid and Development Short Form Income Statement template

  • The categories selected for the Income Statements have been based on common activities of signatory organisations in the sector.   If a signatory organisation has experienced nil transactions during the financial year for a particular category, there are two options:
    • The signatory organisation can still include the line item on the face of the statement, but record a zero next to the category, or 
    • Alternatively, the signatory organisation may include a note at the foot of the Income Statements, which lists and/or explains items for which there were no transactions.
  • Comparative figures for the previous reporting period must be disclosed
  • A Table of Cash Movements as detailed in Option 2 is mandatory.
  • A separate International Aid and Development Balance Sheet or Statement of Changes in Equity is not mandatory. All other Code compliant annual reporting requirements apply (as set out in C.2).
  • Definitions for this Income Statement are at Section F.2 - Financial Definitions.

Option 2 All other signatory organisations

  • All signatory organisations that do not fall within the criteria for Option 1, shall comply with the Option 2 requirements set out below:
    • Income Statements (or as appropriate for the signatory organisation, Statements of Income and Expenditure, Profit and Loss Statements, Statements of Financial Performance, or Statements of Profit or Loss and Other Comprehensive Income).
    • The Income Statement discloses the revenue and expenses of the signatory organisation during the financial reporting period. Organisations can include more information than the minimum templates, i.e. adding in headings where this improves transparency. Comparison figures for the previous reporting period must also be disclosed.

Option 2 format: Income Statement template 

  • The categories selected for the Income Statement have been based on common activities of signatory organisations in the sector. If the organisation has experienced nil transactions during the financial year for a particular category, there are two options:
    • The signatory organisation can still include the line item on the face of the statement, but record a zero next to the category, or
    • Alternatively, the organisation may include a note at the foot of the Income Statement, which lists/explains items for which there were no transactions.  
  • The purpose of using defined categories of income and expenditure is to allow the reader of the financial report to determine and make comparisons on areas such as fundraising costs, accountability and administration, and community education. Additional headings may be used on the face of the statement if required (especially under the domestic programs expenditure heading). Additional headings will depend on the signatory organisation’s activities.

Balance Sheet (also known as a Statement of Financial Position)

  • The Balance Sheet details the financial position of an organisation at a specific point in time.  It is a record of an organisation’s assets, liabilities and equity. Signatory organisations can include more information than the minimum templates. Additional headings may be used on the face of the statement if required.

Balance Sheet

  • The categories selected for the Balance Sheet have been based on Australian Accounting Standard AASB 101 Presentation of Financial Statements.  If a signatory organisation has a nil balance at the end of the two financial years in a particular category, the signatory organisation can choose to exclude that line item from the face of the statement the organisation but include a note at the foot of the Balance Sheet, which lists/explains items for which there were no balances.  

Statements of Changes in Equity

  • Each organisation’s Statement of Changes in Equity will be slightly different and signatory organisations are strongly encouraged to discuss the choice of appropriate format with their accountants and/or auditors. The template provided below is an example only. Columns with zero balances can be omitted.
  • The Statement of Changes in Equity provides a reconciliation of movements in equity during the financial reporting period, specifically:
    • The operating result for the period,
    • Each item of other comprehensive income, and
    • The effect of changes in accounting policies and errors on each component of equity.

Statements of Changes in Equity

The total of the equity balances at the end of the year should match the Equity Total in the signatory organisation’s Balance Sheet.  

Table of Cash Movements for Designated Purposes

  • Note: These statements do not replace the Statements of Cash Flows which is required for companies that must comply with the Corporations Act 2001.  This is a separate statement required to comply with the ACFID Code of Conduct.
  • The purpose of the Table of Cash Movements is to ensure the accountability of cash raised for designated purposes.  The Table of Cash Movements is used to disclose the amount of cash that has been raised, disbursed and remaining unspent at the end of year for a designated purpose.
  • Cash raised refers to cash donations, government and other grants and any other income actually received during the year.  Cash disbursed refers to expenditure actually paid out during the year.
  • The Table of Cash Movements is only required if cash raised for a designated purpose in any one financial reporting period exceeds 10% of total international aid and development revenue.  If a Table of Cash Movements is not required due to this clause, the signatory organisation must include the following statement or words to this effect in the financial section of the organisation’s Annual Report: ‘No single appeal, grant or other form of fund raising for a designated purpose generated 10% or more of the signatory organisation’s international aid and development revenue for the financial year’.

Designated purposes include:

  • Public appeals for emergency relief funds in a particular country or region (for example, appeal for assistance with emergency response to a country’s floods);
  • Public appeals for particular programs or responses (for example, appeal for assistance with disaster preparedness programs); and
  • Cash received for a specific project under a contract with the government or other funding agency (for example, funds received from Department of Foreign Affairs and Trade for the annual Australian NGO Cooperation Program (ANCP)).
  • Signatory organisations should replace the labels ‘Designated Purpose A’ and ‘Designated Purpose B’ in the Table template with descriptions appropriate to their own operations in similar wording to the examples above. Additional lines should be added as required for multiple instances of specific designated purposes.
  • This Table of Cash Movements is to be prepared on a cash rather than an accruals basis.
  • If the cash raised for a designated purpose qualifies to be on the organisation’s Table of Cash Movements and has an unspent balance at the end of a financial year, the balance of cash for that designated purpose must be shown in the Table of Cash Movements in subsequent years until all of the cash for that designated purpose has been disbursed.

Table of cash movements for designated purposes

  • The Total Cash Available at the End of the Financial Year must reconcile to the ‘Cash’ asset line(s) in the Balance Sheet.  For signatory organisations that hold some of their designated purpose funds in Investments or other Balance Sheet lines, transfers from these other accounts should be recorded in the Table as cash raised, and transfers to these other accounts should be recorded in the Table as cash disbursed during the year, with accompanying footnote to explain to report users this reconciliation. Variations from this approach should be recorded in a footnote explaining any reconciliation required.
  • The ‘Total for other non-designated purposes’ row of the Table of Cash Movements is where all other cash raised and disbursed is to be included (such as any cash relating to general purpose appeals and other non-designated purposes). This is to allow for the total ‘Cash Available at the end of the financial year’ to balance with cash assets in the Balance Sheet.
  • All headings listed in the template for this report should be used even if they have a zero balance. 
  • Signatory organisations are encouraged to use footnotes to explain specific circumstances that apply to their organisation that will enhance the understanding of readers.
  • Where a designated purpose has a negative cash balance at the end of the period, it is suggested that a note be added to give clarity to this situation. For example, ‘all expenses were made in accordance with their designated purpose however we have experienced a timing delay with our funding, which is due to be received in the new financial year. The shortfall was covered by our unrestricted cash reserves.’

Declaration by Governing Body (Directors/Management Committee/Trustee—as appropriate)

  • Signatory organisations are expected to provide a declaration from their governing bodies stating that their financial statements are in accordance with relevant legislation, accounting standards, provide a true and fair view of their financial position and performance (or ‘presents fairly the financial position’ if in South Australia), and that the organisation can pay its debts as and when due.  As a minimum, this declaration must be included in the statutory full financial report. Some signatory organisations may also choose to include this declaration in their Annual Report.
  • The Governing Body Declaration for public companies is prescribed in the Corporations Act 2001, and company and trustee company signatory organisations are expected to follow that format. The following template is intended for incorporated association and trustee incorporated association signatory organisations as a guide.

Governing Body Declaration

Full Statutory Financial Reports

  • Code of Conduct signatory organisations are required to submit a copy of their full statutory financial report at the same time that they submit their Annual Report to the Code of Conduct Committee – within five months of the end of their financial year.  If a signatory organisation’s full statutory financial report forms part of the Annual Report (as opposed to the inclusion of only the ACFID Code compliant Summary Financial Report in the Annual Report) then a separate submission of the full statutory financial report is not required.
  • This requirement allows the Code of Conduct Committee to:
    • Verify that ACFID Code compliant Financial Report information is obtained from the full statutory financial report; and
    • View signed governing body declarations to ensure that governing bodies are fully aware of the financial position and financial performance of the signatory organisations that they govern.
  • The content and layout of full statutory financial reports are determined by a range of authorities and professional pronouncements.  Depending on how the signatory organisation is structured and where the particular organisation is based the requirements may differ.  The signatory organisation’s governing body is responsible for preparing the report in accordance with relevant requirements. The signatory organisation’s auditor is responsible for reporting on whether the organisation’s financial statements have been prepared in accordance with applicable requirements. Guidance on these requirements is available from auditors, professional associations and state/territory and federal industry regulators.
  • Full Statutory financial reports can include:
    • Governing Body Report (eg Directors' Report)
    • Income Statement (Income and Expenditure Statement, Profit and Loss statement, Statement of Financial Performance, Statement of Comprehensive Income)
    • Statement of Changes in Equity (only for companies and trustee companies)
    • Balance Sheet (Statement of Financial Position)
    • Statement of Cash Flows (not to be confused with the Table of Cash Movements required under the Code to be included in the Annual Report for relevant organisations)
    • Notes to the financial statements
    • Governing Body declaration
    • Auditor’s Report
    • Auditor’s Independence declaration (only for companies)

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C.2.3 Access to full statutory financial report

Principle

Signatory organisations will ensure that in any references to financial performance, stakeholders are made aware of their right to access the full financial reports.

Obligations

  1. Where an organisation publishes only the Code of Conduct Summary Financial Report in their annual report, the annual report will make it clear that the full financial report is available on request.
  2. Any other publications that refer to financial performance, in summary, in an extract of detail or in commentary, will make it clear that the full financial report is available on request.

Why

This standard seeks to ensure that stakeholders have access to information about the financial performance of your organisation, thus increasing your organisation’s accountability and transparency.

Values

This standard reflects the Code of Conduct’s commitment to honesty, transparency, and accountability to all stakeholders.

Practical Guidance

  • Making available the full statutory financial report from which figures are summarised or commented, ensures transparency of reporting to members and the public and contributes to raising the level of trust and confidence in the financial operations of signatory organisations.
  • It would be sufficient to include words such as: ’For a copy of the full financial report for the year ending … please contact …’ in the financial section of the Annual Report or in any document where information gained from the full financial reports is detailed, summarised or commented on.
  • If relevant, provide details of where the full statutory financial report can be found on your organisation’s website including a hyperlink.

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