Governance standard 1: Not-for-profit and working towards charitable purpose
This standard requires charities to be able to:
- demonstrate that they:
- were set up as a not-for-profit with a charitable purpose
- run as a not-for-profit and work towards that charitable purpose, and
- provide information about their charitable purpose to the public.
Purpose of this standard
To be registered with the ACNC, all charities must be not-for-profit and have a charitable purpose. This standard requires charities to remain not-for-profit and to work towards this purpose, which provides reassurance to the public that the charity has good reasons to be entitled to the tax concessions and other benefits it receives.
Ways to meet this standard
Common steps your charity can take to meet this standard are to:
- include charitable purpose and not-for-profit clauses in your governing documents (such as your charity’s constitution, rules or trust deed) upload the governing documents with these clauses to the ACNC Register using the Charity Portal (this makes them public)
- run your organisation as a charity (by following its purpose and being a not-for-profit), and
- provide information about your charity's purpose and how it meets it on a website or through social media.
Demonstrating your charity is not for profit has charitable purposes
Charities can meet this part of the standard by including their charitable purpose and a rule requiring them to operate as a not-for-profit in their governing documents.
Most registered charities will already have governing documents that include clauses or rules relating to charitable purpose or not for profit nature. The ACNC usually requires this as part of the registration process. Once registered, these governing documents will automatically be published on the ACNC Register.
Attention:You need to know! If your charity’s governing documents are not published (because it was endorsed for charity tax concessions prior to 3 December 2012, for example), you can upload a copy of your governing documents to the Register using the Charity Portal.
However, having governing documents is just one way of meeting this part of the standard. Your charity does not have to use a formal document, or even something in writing to demonstrate its purposes and not-for-profit character, if this is reasonable for your situation. For example, a small charity might save a copy of an email of an agreement between members on the charity’s purpose. Or, your charity’s mission statement may clearly outline its charitable purpose.
Operating as a not-for-profit and for its charitable purpose
A charity must run as a not-for-profit and work towards the charitable purpose it was established to achieve to meet this part of the standard.
A not-for-profit is an organisation that does not operate for the profit, personal gain or other benefit of particular people. This can include people such as its members, the people who run it (its responsible persons) or their friends or relatives. Charities must be not-for-profit both while they are operating and if they close down.
There are some practical steps you can take to help your charity meet this part of the standard. For example, set up processes that protect and control what happens to your charity’s donations or any profits it makes, so that these are only used for its charitable purpose. This includes having rules about who has access to money, and who decides how it is used.
Attention - Important information!Read our quick tips on strong financial controls and our guide to protecting your charity from fraud.
Making information about your purposes available to the public
A charity can generally meet this standard if a copy of your charity’s governing documents contain clauses about its charitable purpose and they appear on the ACNC Register.
There are also other ways to meet this standard, provided these steps are reasonable for your type of charity. For example, you could:
- explain what your charity does on its website, through social media or an annual report (particularly if it is a larger charity)
- if your charity does not have a website or social media presence, provide the information on request by phone, email or in writing, or
- display your charity’s purpose in writing at its office.
Return to the governance standards.
Jennifer is setting up a new charity using the Victorian model rules for incorporated associations, which include a clause which clearly sets out its purposes and a not-for-profit clause. She registers the charity with the ACNC, which puts up the contact details and governing rules of the charity on the ACNC Register. As long as Jennifer’s charity follows these rules, it meets this standard.
Vivien and four other parents from her daughter’s school run a small, unincorporated charity that provides second-hand books to school libraries. The charity does not have any rules written down yet but lists its telephone number in a public telephone directory. When they are contacted by telephone, they can explain their purpose and how the charity’s money and resources are used. They feel confident that all of the charity’s assets are only used for the purpose of helping libraries and not for private benefit. The charity meets this standard.
The Spirit Moves, a small religious group, has a short statement on who they are and what they believe on the noticeboard at its place of worship. They use this on leaflets and to explain to people who ask about their group. Any money that is donated is managed by their treasurer, who makes sure it is only used for the group’s purposes. The charity meets this standard.
The Appleby Foundation, which raises money for medical research, has rules that set out that it is a not-for-profit and its purposes. It publishes its rules and its annual report on its website. However, the CEO of the foundation uses the trust’s money to pay for excessive fees for IT services that the foundation received. These services were provided by a company owned by her husband. This charity does not meet this standard.