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The Australian Charities and Not-for-profits Commission (ACNC) has released a summary of a review into charities operating within a complex structure, identifying how these charities practice good governance and manage risk.
The term ‘complex structure’ isn’t defined and covers various types of arrangements. We’ve included examples of this in our guidance. Typically, it covers those operating as a ‘group’, where there are multiple entities, perhaps with more than one type of legal structure and/or entities with various purposes (for-profit and charitable).
ACNC Commissioner, Sue Woodward AM said charities operating within a complex structure need to be mindful that this often comes with more complex governance matters to consider and manage.
‘Without careful management, these issues can lead to inadvertent non-compliance with relevant laws,’ Ms Woodward said.
‘We know that most charities are trying to do the right thing, and pleasingly, our review confirmed this. There are often good reasons for the establishment of multiple entities, maybe even a requirement for it. We understand this.’
‘We looked at how charities are managing the governance and compliance challenges that come with operating within a complex structure. We found excellent examples of charities complying with the law and we wanted to share these back to the sector.’
The review found charities achieved satisfactory governance by:
- demonstrating why their use of a complex structure assisted in fulfilling their charitable purpose
- tailoring their governance practices to their specific structure, often with the support of specialist advice
- periodically reviewing their structure and governance practices to ensure arrangements and practices were fit for purpose.
Some ways charities are managing issues around risk and governance include:
- holding separate board meetings for each entity within the group and ensuring record-keeping is well managed for each entity
- establishing group policies and governance frameworks – where appropriate – to apply consistent risk and compliance practices
- providing on-going training on governance and directors’ duties to ensure obligations are understood
- obtaining independent, specialist advice for specific legal, financial or governance matters that may impact the entire group or a specific entity within it
- periodically reviewing the structure to ensure that it remained suitable for the charities’ needs, and that governance and compliance requirements were being appropriately managed.
‘It is heartening to see the results and the steps charities are taking to ensure they are compliant, and we thank each of the charities that participated in the reviews,’ Ms Woodward said.
‘Our compliance and enforcement reviews shine a light on practices that demonstrate how charities are managing risks and draw our attention to areas of concern where we need to act. While enforcement is part of our role, our primary focus is on supporting charities to achieve compliance through an education-first approach.’
The ACNC recently published detailed guidance on good governance in complex structures.
Read the complex structures review summary.