A charity’s Responsible Persons must understand their responsibilities and charities must take reasonable steps to ensure that their Responsible Persons are meeting the duties set out in Governance Standard 5.
The duties can be summarised as follows:
- to act with reasonable care and diligence
- to act honestly and fairly in the best interests of the charity and for its charitable purposes
- not to misuse their position or information they gain as a Responsible Person
- to disclose conflicts of interest
- to ensure that the financial affairs of the charity are managed responsibly, and
- not to allow the charity to operate while it is insolvent.
Responsible Persons therefore have a duty to ensure that funds sent overseas are managed responsibly. They should also feel comfortable to ask questions about the charity’s financial transactions, and should not take anything for granted.
When sending money overseas, charities may face the risk of having their funds diverted or misused, even if they are working with a local organisation with similar charitable purposes.
The ways to reduce this risk will vary according to circumstances such as the size of the charity, the sources of funding, the nature of the activities, and the needs of the public.
However, it will be necessary to make sure that the charity has clear rules that stipulate who is authorised to handle funds and approve transactions.
Your charity should assess the risks it faces and weigh these up against the benefits of working in another country. It should then work out ways to manage and reduce these risks if it conducts activities overseas.
Your charity should also carefully plan, monitor and evaluate all aspects of its overseas operations. It should have clear processes for how it sends and collects money overseas and ways to track how these funds are being used.
Your charity may be more exposed to financial fraud when working overseas, particularly if it uses cash instead of the banking system to make transactions.
Having clear procedures for managing bank accounts and finances sent overseas is essential to protect the charity’s funds from fraud.
Some financial risks for charities operating overseas include:
- frequently moving money, goods and people to areas of conflict or political instability
- having complex financial operations including multiple donors, investments and currencies
- receiving and using cash, accounting for high volumes of small transactions and using informal money transfers
- passing funds through various intermediary partners
- unpredictable and unusual streams of income and expenditure
- being subject to different and, in some cases, weaker levels of regulation in different parts of the world
- inadvertently providing a ready-made social network and platform for criminal activity.
You should think about the policies, procedures and practices of your charity and how they can work to protect it from financial fraud and misuse.
Charities should use the formal banking system to send funds. However, when this is not possible, charities should make sure they use alternative remittance service providers registered with the Australian Transaction Reports and Analysis Centre (AUSTRAC) on the Remittance Sector Register.
When deciding how much money to hold locally, your charity should think about the risks it could encounter in each country. For example, your charity could lose money if the local banking system collapses, or if the exchange rate drops suddenly. You should aim to retain locally only the smallest amount of funds your charity needs.
Protecting staff and beneficiaries
Underdeveloped regions, politically unstable environments or conflict zones may be dangerous for your charity’s staff and beneficiaries. Particularly in areas of widespread unemployment and poverty, representatives of a charity are often in a position of power and this can present a higher risk of exploitation and abuse
Your charity and its Responsible Persons should check that anyone working with vulnerable people is suitable, and should have procedures that work to protect vulnerable people. We recommend that charities regularly monitor staff and volunteers abroad.
Children are considered a particularly vulnerable group. Charities that work with children should have a policy that clearly sets out procedures for protecting children and preventing, identifying and dealing with abuse. Your charity’s Responsible Persons should also ensure that they check the suitability of all people who might have access to children.
Charities operating overseas are also responsible for the safety of their staff and volunteers. Depending on the country, activities such as assisting refugees or persecuted minorities, helping women escape violence, promoting human rights or advancing a religion may increase the risks to your charity’s staff and volunteers. There is risk of danger to staff and volunteers through natural events such as disasters, disease and climate, as well as through other acts such as kidnapping, arrest and armed conflict. Think about the risks involved and how the charity and its Responsible Persons can protect staff, volunteers and beneficiaries.
Questions to answer:
Does your charity…
provide training to its Responsible Persons on their duties and obligations?
consider the risks involved in:
each country’s political, economic and social environment?
ensuring the health and safety of its representatives?
effectively monitoring the charity?
have strategies to mitigate risk?
have a risk register?
have policies and procedures that protect vulnerable beneficiaries and the health and safety of its staff and volunteers?
Steps you can take
- Make sure your charity’s Responsible Persons understand all the risks associated with overseas activities.
- Develop strategies to mitigate the risks your charity identifies.
- Prepare a project plan with policies and procedures for evaluating and monitoring the use of funds and the outcomes of overseas projects.
- Only send money through the formal banking system or services registered with AUSTRAC. Always check the remittance sector register to make sure your charity’s remittance service provider is listed
- Read and share our publication Protect your charity from fraud: a guide for charities
- Check the suitability of Responsible Persons, partner organisations, volunteers, employees and anyone connected with the charity who might have access to children or vulnerable adults.
- Develop a child-protection policy.
- Assess the risks to vulnerable people and develop strategies to mitigate these risks.
- Organise basic security training for all staff and volunteers working in an unstable environment.
- Provide staff and volunteers with a written assessment of security and health risks, emergency evacuation procedures and insurance arrangements.
Meet record-keeping obligations
The ACNC requires charities to keep two types of records: financial records and operational records. A record is an account of facts, events or transactions that shows your charity has acted in a particular way, or spent or received money or other assets.
Keeping good records of your charity’s financial and operational activities overseas will make it easier to detect if funds are being misused or diverted to a non-charitable purpose.
Steps you can take
Meet notification obligations
Charities must notify the ACNC when they believe they or one of their Responsible Persons are not meeting an ACNC obligation, including compliance with the Governance Standards.
People who work or volunteer for a charity are often the best people to identify potentially suspicious activities, or identify situations where processes are not being followed.
Make sure that your charity’s Responsible Persons, employees and volunteers are aware of their obligations and know what issues of concern are, including suspicious activity overseas, and how and when to report them.
Steps you can take
Call: 1800 1234 00
From outside Australia: (+61) 1300 1234 01
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TTY: 1800 234 889.