Bookkeeping for not-for-profits

This guide's ACNC requirements concern charities registered with the ACNC. Other not-for-profits, including unregistered charities, need to confirm their own record-keeping obligations. The ACNC says a registered charity's record-keeping obligations depend on its size, its complexity, its activities, how it receives and spends money, and whether state regulators impose extra obligations. It adds that other laws, such as those on health records or privacy, can bring their own record-keeping requirements.

If you are unsure which financial or operational records your organisation should keep, the ACNC suggests getting professional advice. Your accountant can tell you which rules apply to your organisation.

The ACNC describes two kinds of record. Financial records must correctly record and explain the charity's transactions, meaning how it receives and spends its money or other assets, and its financial position and performance. They must also allow true and fair financial statements to be prepared and, if required, audited or reviewed.

Operational records are the other documents about how the charity runs, including those that show it is entitled to its status as a charity and its subtype, and that it meets its obligations under the ACNC Act. The ACNC also says a charity:

• can keep records in any format, on paper or electronically, as long as they are in writing and easy to find
• must keep them in English, or in a form that can easily be translated into English
• must keep them for 7 years
• doesn't have to give them to the ACNC unless asked
• must obtain and keep records about any activities overseas.

Size doesn't remove the duty. The ACNC says a charity that doesn't have to submit financial reports to it, such as a small charity, still needs financial records that meet these requirements, and that the ACNC Act or the ACNC Commissioner could require it to prepare financial statements.

Funders, donors and members want to know what happened to their money, and the ACNC lists preparing reports for donors, funders and members among the reasons to keep good records. Set up the books so the answer is easy to produce:

• Keep separate income accounts for each main source, such as donations, grants, membership fees, fundraising events and sales.
• Give each grant or appeal with a stated purpose its own project code, and use that code on every payment made from it.
• Keep the grant agreement or appeal wording with the records, so anyone can check what the money was meant for.
• Keep a list of goods and services received free of charge, even where no money changes hands, and ask your accountant whether they appear in the accounts.

How grant money received but not yet spent is treated in the accounts is a question for your accountant. The project codes make sure the figures exist when the question is asked.

Money that passes through several volunteers' hands is easy to lose track of. The ACNC lists fraud or financial misconduct, including charity funds being used mainly for the private benefit of its Responsible People, and poor management of conflicts of interest among the governance problems that can come with poor record keeping. A few written steps protect both the organisation and the people handling its money:

• Have two people count cash from collections and events, and both sign a count sheet showing the total.
• Bank cash as collected, without paying expenses out of it first, so the deposit matches the count sheet.
• Reimburse volunteers only against a receipt and a signed claim, signed off by someone other than the claimant.
• Record any decision where a committee member has a personal interest, and note who stepped out of the discussion.

For paper records, the ACNC suggests files, boxes, folders or envelopes that make records easy to find, separated into categories such as bank statements, communication, bills and receipts, and then by reporting period, such as a financial year from 1 July to 30 June. The same structure works for digital folders.

It also suggests backing up computers and keeping the backup in a different, secure place, and printing a paper copy of important documents. After 7 years, the ACNC says a charity with no record-keeping obligations to other regulators can destroy the records it kept for ACNC purposes, after checking its records policy and other legal obligations such as privacy.

Where a treasurer or volunteers keep records from home, the ACNC says record-keeping duties don't change, and lists the risks that come with it: records not being kept, versions of a document multiplying, records stranded on someone's personal device or storage, and backups not being made properly.

It suggests setting clear expectations about how records are created and managed, and moving records into the organisation's official systems. business.gov.au's record-keeping guidance for businesses makes a similar point: digital records should be on a device you can access, with all passwords, that is backed up and whose information you control. In practice, keep the books and documents in storage the organisation owns, rather than in a volunteer's personal email or drive, so a change of treasurer doesn't take the records with it.

The ACNC says good records help a charity understand whether it is in good financial health, judge whether the right decisions are being made, and communicate about its activities and finances. A short monthly report for the committee usually covers the bank reconciliation, income and spending against the budget, and the position of each grant or appeal.