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Compliance reporting to the Board

Directors often complain about how much time they spend on compliance when they would prefer to focus more on strategy. For other boards, there is debate about how much time is spent on operational matters.

The board oversees the full range of risks to the organisation, so legislative and regulatory compliance is one element for them to  look at.

Ensuring that you have an adequate compliance program in place is one important part of risk management.

In my experience, one of the matters that Directors struggle with is finding the right balance in knowing that the important compliance matters are attended to.

It can seem demanding that Directors are responsible for creating a safe workplace environment when they might only go in to that workplace a couple of times a year. Or, Directors can be held personally liable for unpaid superannuation but don’t see the regular transaction reports to verify that this is taking place.

In my work with different organisations, I have seen numerous failures in basic compliance activities, including:

  • One NFP organisation where three years’ worth of financial statements and the last two versions of the Constitution approved by the AGM had not been submitted to state government authorities as required under the local Associations Act.
  • Another NFP that was using the wrong ABN and the stamp of their company seal did not match the company’s legal name.
  • Grant conditions not met and grant funds needed to be handed back.

So what is the right level of involvement and oversight for a Director to make sure these matters are being attended to, but without having to do it all themselves? I believe that it starts from Directors having a reasonable understanding of what is required compliance-wise, what is important and why.

It can be difficult for directors of not for profits to keep up with all the myriad requirements on them and the organisation, and we have seen how some (e.g. Aged Care and NDIS standards) are continually changing.

The best example I have seen is where the CEO/CFO/Company Secretary include a table in the management report to the Board which lists key legislative requirements and comments on what is being done against each item. I’ve seen one other organisation do it more like a calendar where they show month by month what needs to be done.

The table below provides an example for a not for profit.

Document Period Lodged / Paid
Business Activity Statement Oct to Dec Paid X January
Instalment Activity Statement January Paid X February
Superannuation December / January Prior months are up to date. Paid 11 January Paid 8 February
Workcover Monthly Monthly auto-payments made through financial year. Annual reconciliation due in July.
ACNC Information Statement Annual Last financial year’s statement lodged in October. Next statement to be lodged no later than November.
Change of directors/officers – lodge with ACNC As required Up to date with latest appointment (John Smith).
Insurance renewals Annual Completed last September for current financial year. Next due Aug/Sept.

Every organisation is unique and subject to different requirements in their own context, so the above example and the list below are indicative  starting points you might find useful in determining your own list of key compliance items that warrant reporting to your Board.

List of things to consider including (as appropriate) to your organisation:

  1. PAYG and FBT tax paid
  2. ATO compliance – PBI or DGR status
  3. ACNC submissions – Annual Information Statement, Financials, changes in Directors
  4. Superannuation paid
  5. Fundraising license compliance
  6. Grant funding deadlines/compliance
  7. Childsafe or Worker Screening
  8. NDIS or Aged Care audit timing and outcomes
  9. Staff qualification reviews such as AHPRA registrations (e.g. with allied health staff)
  10. Lease expiry dates and security deposits
  11. Licenses, permits or other reviews appropriate to your activities – such as fundraising, liquor license, food safety audit

It is also worth noting the importance of work health safety which Directors need to be aware of. It might be that you include a WHS report in a similar part of the board papers as this compliance report.

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