The Registration and Accountability of Organisations Schedule (Schedule 1 to the Workplace Relations Act 1996) [the RAO Schedule], generally comes into operation on 12 May 2003. The RAO Schedule contains most of the matters previously dealt with in the body of the Workplace Relations Act 1996 [ the Act], which relate to the registration and functioning of organisations of employers and employees under the Act. The Workplace Relations Legislation Amendment (Registration and Accountability of Organisations) (Consequential Provisions) Act 2002 [the RAOCP Act], deals with various transitional provisions arising from the introduction of the Schedule.
What are the information needs of members?
Members of organisations need information to enable them to gauge the performance of the committee of management and other holders of office in relation to the financial management of the reporting unit having in mind the nature of registered organisations.
Generally organisations are mutual, not-for-profit entities1 which are exempt from income tax. They provide services to their members in line with their objects and the purposes of registration as organisations under the RAO Schedule. Organisations are dependent on the continued support of their members to provide economic resources through periodic subscriptions and levies so as to conduct their activities. The motives of members who provide these resources are different to the owners of business enterprises. So too are the information needs of members different.
The members of organisations need information so as to gauge:
How are the information needs of members to be met?
The RAO Schedule requires that each reporting unit2 of an organisation must keep proper financial records (s252), and after each financial year of the organisation the reporting unit must:
These obligations apply generally unless the reporting unit is exempted for the year because it had no financial affairs (s271). Also, reduced requirements may apply to a reporting unit:
What are proper financial records?
Each reporting unit is required to keep proper financial records with respect to its transactions and financial position and in such a manner as will enable (s252(1)):
To the extent that they relate to finances or financial administration, financial records includes a register, other record of information, financial reports or financial records however compiled, recorded or stored, and documents (s6). The financial records would include a ledger organising entries regarding its transactions into proper accounts so as to enable:
Where an organisation consists of more than one reporting unit, records of the units must be kept in a consistent manner (for example the adoption of consistent accounting policies and a common chart of accounts), to the extent that this is practicable (s252(2)).
Records may be retained on a cash or accrual basis (s252(3)).
Membership records may be kept on a cash basis, even if other records are retained on an accrual basis (s252(4)).
Records must be retained for 7 years from the date of the transaction to which they relate (s252(5)).
What is a General Purpose Financial Report?
The general purpose financial report comprises several components including (s253):
1. Financial statements including a profit and loss statement (or statement of financial performance), a balance sheet (or statement of financial position), and a statement of cash flows;
2. Notes to the financial statements (containing disclosures required by the Australian Accounting Standards as well as the reporting guidelines of the Industrial Registrar); and
3. A committee of management statement (required by the reporting guidelines of the Industrial Registrar).
Where a reporting unit obtains a certificate from a Registrar that it is the whole of the organisation and has income not exceeding $100,000 for a particular financial year, the reporting unit is:
required to prepare the general purpose financial report in compliance with the form and content specified in the reporting guidelines of the Industrial Registrar for purposes of section 270 (para 255(3)(b));
Australian Accounting Standards apply
The general purpose financial report required under section 253 must be prepared in accordance with Australian Accounting Standards. These are the accounting standards issued by the Australian Accounting Standards Board (AASB) or issued by CPA Australia and by The Institute of Chartered Accountants in Australia and adopted by the AASB as in force, or applicable, from time to time (s6).
Standards and background material can be downloaded from the AASB website - www.aasb.com.au .
The Industrial Registrar has a discretion to exempt an organisation or a class of organisations from all or part of the requirements of a particular Australian Accounting Standard (s241 and Reg 152). In determining whether to grant an exemption, the Registrar must have regard to:
While there is no legislated requirement to comply with the Australian Accounting Standards in the preparation of a general purpose financial report under section 270, it should be noted that:
The Registry considers that the following Australian Accounting Standards have most relevance for all reporting units to which section 270 applies:
Reporting Guidelines issued by Industrial Registrar
The Industrial Registrar must publish in the Gazette reporting guidelines for the purposes of sections 253 and 270.
The reporting guidelines are directed towards meeting the information needs of members in line with the discussion above. Also, where an organisation has 2 or more reporting units the reporting guidelines seek to improve the quality of information available to users of the general purpose financial report about the reporting unit's economic support of, or economic dependency on, other reporting units of the organisation.
The reporting guidelines require:
The additional disclosure requirements are mainly based on the provisions of former Regulation 107 of the Workplace Relations Regulations though there some new requirements relating to:
Where the reporting guidelines require additional disclosure of an item of expense only transactions that are directly associated with the expense description should be aggregated for this purpose. It is not necessary to apportion indirect expenses. For example, legal costs and other expenses related to litigation or other legal matters would include costs for services provided by external legal practitioners or firms, application fees and other charges by courts etc. It is not necessary to apportion employee costs or other general administrative expenses of the reporting unit.
The reporting guidelines also require preparation of a committee of management statement which is a different statement to the operating report required under section 254 and is mainly based on the directors' declaration required under section 295 of the Corporations Act 2001.
The committee of management statement must contain declarations in relation to:
What is a concise report?
A concise report for the financial year may only be provided to members instead of the full report if under the rules of the reporting unit the committee of management resolves to do so. The concise report consists of (para 265(3)(a)):
The committee of management or an officer of the reporting unit responsible (whether alone or with others) under its rules for undertaking the functions necessary to comply with the accounting, auditing and reporting requirements must prepare an operating report for the financial year (s254(1) and (3)).
The operating report must contain details as follows (s254(2) and Reg 159):
Additional information to be provided to members or Registrar
A reporting unit must provide on the application of a member or a Registrar at the request of a member specified prescribed information in relation to the reporting unit. The information is to be made available to the applicant within the period specified in the application which must not be less than 14 days after the application is given to the reporting unit (s272(1), (2), (3) and (4)).
The application to a reporting unit of an organisation must be made in writing addressed to the secretary or any other executive officer of the organisation and delivered by hand at, or sent by prepaid post to, the office of the organisation.
The information that may be sought under section 272 is prescribed in Regulation 166 and relates only to the last financial year in respect of which an auditor's report was made.
This material has been prepared by the Australian Industrial Registry as a general guide to the Workplace Relations (Registration and Accountability of Organisations) legislation. This material should not be treated as advice on the circumstances of any particular case. This material does not have any legal status; the relevant law is set out in Schedule 1 to the Workplace Relations Act 1996 (the RAO Schedule), the RAO Schedule Regulations, the reporting guidelines of the Industrial Registrar issued under s255 of the RAO Schedule and the Workplace Relations Legislation Amendment (Registration and Accountability of Organisations) (Consequential Provisions) Act 2002.
1 the objective of general purpose financial reporting by not-for-profit entities is discussed in Chapter 3 of the CPA Australia Policy Paper Financial Reporting by Not-for-Profit Entities (see http://www.cpaaustralia.com.au/01_information_centre/13_ext_report/1_13_0_0_ext_rep.asp)
2 see s242 for the meaning of a reporting unit - this meaning is discussed in the Registry's FACT Sheet Accounting, Auditing and Reporting Obligations (see http://www.airc.gov.au/fact_sheets/06_fact_sheet.htm)