The ACNC understands that operating during the COVID-19 pandemic will be difficult for many charities and we recognise that it may affect them in many ways.
Although the circumstances brought about by COVID-19 will be challenging, the ACNC maintains its role in protecting public trust and confidence in the charity sector.
The ACNC’s regulatory actions are proportionate to the problems we seek to address. If a charity has a minor problem complying with its obligations, we work with the charity to address the problem and get it back on track. This is consistent with our approach to provide guidance and education to help charities comply with their obligations.
However, we will act swiftly and firmly in situations where vulnerable people or significant charity assets are at risk, where there is evidence of serious mismanagement or misappropriation, or if there is a serious or deliberate breach of the ACNC Act or ACNC Regulation.
The ACNC’s approach to monitoring compliance with the Governance Standards is outlined in our Regulatory Approach Statement and Commissioner’s Policy Statement: Compliance and Enforcement.
Changes in response to COVID-19
The ACNC recognises that some charities may be in a position to help with the community response to COVID-19, and may be called upon to do so by the Government.
This may have implications for a charity’s compliance with certain obligations under the ACNC Act, other legislation including state legislation and its responsibilities to its members and donors.
In recognition of the unique challenges brought about by COVID-19, the ACNC Commissioner has decided that the ACNC will not investigate certain breaches of the Governance Standards and the External Conduct Standards that occur from 25 March until 31 December 2020. This approach is explained in detail below.
However, if the ACNC identifies significant breaches that harm the public interest, even if it involves activities related to COVID-19, we may still investigate the issue and take regulatory action. The ACNC believes this short-term position is appropriate to allow charities to operate effectively and to enhance public trust and confidence in the sector.
The table presents a summary of the changes:
|Standard||Circumstance||Conditions on which action will not be taken|
|A charity seeks to operate outside its purposes.||
|Governance Standard 5: The charity requires Responsible People to ensure it does not operate while insolvent.||The charity incurs debts such that it becomes insolvent.||
The Commissioner’s approach to this issue will follow the amendments made to the Corporations Act 2001 (Cth) by the Coronavirus Economic Response Package Omnibus Act 2020 (Cth), except that it will apply to all charities and not just those that operate as companies limited by guarantee.
The debt is incurred:
The charity must ensure that its Responsible People are aware of the issue and have an achievable aim to return to viability when the crisis has passed. The charity must continue to follow relevant federal and state legislation.
|External Conduct Standard 2: A charity is required to obtain and keep records for its operations outside Australia||The charity is unable to obtain reporting from its overseas operations or partners.||
Governance Standard 1 & External Conduct Standard 1: Charities cannot operate outside of their charitable purpose
A charity is required to pursue its purposes, as set out in its governing document. A charity’s activities are required to align with its purposes or be incidental or ancillary to its purposes.
Although a charity may have specific skills, expertise or resources that can assist with the community response to COVID-19, its purposes may not allow it to provide this assistance.
However, for activities undertaken from 25 March until 31 December 2020, the ACNC Commissioner will accept a charity applying a broad interpretation to its purposes, as long as the charity is acting in good faith to assist in the response to COVID-19.
The Commissioner will consider that an activity to assist with the response to COVID-19 is aligned with a charity’s purposes on the following conditions:
- The charity can reasonably show that its members would approve of the activity, and
- The charity documents how it believes the activity to assist in the response to COVID-19 aligns with its purpose prior to undertaking the activity.
Before deciding to undertake a new activity that assist the response to COVID-19, a charity’s Responsible People should review the charity’s purposes as set out in its governing document.
If the activity does not align with the charity’s purpose or purposes, the charity may need to amend its governing document.
Governance Standard 5: A charity requires its Responsible People to ensure it does not operate while insolvent
The ACNC approach to interpreting this governance standard will align with the amendments made to the Corporations Act 2001 (Cth) by the Coronavirus Economic Response Package Omnibus Act 2020 (Cth).
These amendments provide a temporary, six-month period of relief for directors from their personal liability to prevent insolvent trading if a relevant debt is incurred:
- in the ordinary course of business
- during the period of 25 March until 31 December 2020, and
- before any appointment of an administrator or liquidator.
The ACNC will apply this approach to cover all charities, not only charities that are structured as companies limited by guarantee.
A charity that is not a company limited by guarantee must also consider other legislation relevant to its legal structure, such as legislation administered by state or territory governments.
In applying this approach, the ACNC requires a charity to:
- ensure that its Responsible People are aware of the issue and have an achievable aim for their charity to return to viability when the COVID-19 crisis has passed, and
- continue to follow relevant federal and state legislation.
External Conduct Standard 2: A charity is required to obtain and keep records for its operations outside Australia
The records must include information necessary for a charity to be able to prepare a summary of its activities and related expenditure outside Australia on a country-by-country basis. Charities are only required to provide these records upon request.
The ACNC will not investigate breaches of External Conduct Standard 2 where a charity cannot obtain records for the period from 25 March until 31 December 2020 due to the effects of COVID-19 as long as:
- the charity records the reasons it cannot obtain records, and
- the charity obtains any outstanding records from its overseas operations and partners as soon as practicable.