Section 111L – Financial Reports & Audit

Did you know that section 111L of the Corporations Act 2001 (Cth) also switches off key financial reporting and audit provisions for companies that are registered charities under the Australian Charities and Not-for-profits Commission Act 2012 (Cth)?

For a public company limited by guarantee that is also a registered charity, section 111L means that Parts 2M.1, 2M.2 and 2M.3 of the Corporations Act do not generally apply. Those Parts deal with financial records, financial reports, directors’ reports and audit obligations. In practical terms, the charity’s annual reporting and assurance obligations are primarily governed by the ACNC framework, rather than the ordinary ASIC financial reporting regime that applies to companies that are not registered charities.

This does not mean that registered charities have no financial reporting obligations. Rather, the reporting pathway changes. All registered charities must submit an Annual Information Statement to the ACNC each year. Medium and large charities must also submit an annual financial report, unless a specific exemption applies. Small charities are not required by the ACNC to submit an annual financial report, although they may choose to do so and may still be required to do so under their governing document, funding agreement or another regulatory framework.

The audit or review requirement also depends on the size of the charity, as per the Table 1 below. Medium charities must have their annual financial report either reviewed or audited. Large charities must have their annual financial report audited. Where an audit or review is required, the auditor or reviewer’s report must be submitted to the ACNC with the annual financial report.

The practical point is that boards of registered charities should not rely on the standard Corporations Act company reporting timetable or ASIC annual review process as their main compliance framework. Instead, they should confirm the charity’s ACNC size category, reporting due date, financial statement requirements, and whether an audit or review is required.

Boards should also remember that section 111L does not remove the need for sound financial governance. Responsible People must still ensure that the charity’s financial affairs are managed responsibly, and charities may have additional reporting obligations under their constitution, grant agreements, fundraising licences, state or territory laws, or other regulatory arrangements.

Further details are available on the ACNC’s guidance pages, Reviewing and auditing of financial reports and Annual financial reports.