Charities Fail Transparency Test

By Andrew Heaton
Image Source: Nonprofit Business Advisor

Image Source: Nonprofit Business Advisor

A large number of not-for-profit organisations throughout Australia fail critical accountability tests and providing inadequate levels of financial information to enable donors to assess their position whilst many others were running unsustainable losses, according to the latest report.

Unveiling its assessment of almost 900 charities, charity assessment web site ChangePath has reported that:

  • 28 percent have no annual or financial reporting available on their web sites
  • 20 percent lack a privacy policy which outlines what they do with donor’s personal information
  • 8 percent have lost money during at least three out of the last four years.

The analysis looked at critical data including financial details for each of the charities involved and assigns each a star rating based upon its transparency, privacy and financial management.

Disappointingly, only eighteen percent of organisations which were looked at received a full seven out of seven stars which were available.

All charities registered with the Australian Charities and Not-For-Profits Commission (ACNC) are required to lodge an annual information statement (AIS) each year outlining their activities and basic financial information.

From 2014, medium and large sized charities have been required to include full financial reports with their AIS.

However, the number of charities which fail requirements in this area remains concerningly high.

On August 26, for example, the ACNC revokes the charitable status of 503 organisations on the basis that they had failed to submit their application for two consecutive years.

A further 1,100 avoided revocation only by submitting their AIS after warnings about revocation.

That said, a number of organisations are making gains in this area.

A survey conducted by the Australian Institute of Company Directors earlier this year indicated that 78 percent of all directors believed that governance within the not-for-profit sector had improved over the past three years.

ChangePath founder Sam Thorp said the most concerning aspects of the result revolved around the number of charities that were losing money. That eight percent of charities which had lost money in three out of the past four years had in fact lost a combined total of $200 million in combined losses.

“Many of them have a large rainy day fund to help deal with this kind of pressure, but it goes to show just how hard it has been in the Australian charity sector over the last few years,” Thorp said.

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