Integrity of the Charity Register

Our review of charities with DGR endorsement enhances public trust and confidence in the charity sector by ensuring DGR endorsements are reserved for eligible charities.

This work involves reviewing 2% of charities with DGR endorsement annually to ensure they remain eligible for their charity registrations.

For the first cohort of reviews in 2020-21, we limited our selection to charities registered as a Public Benevolent Institution (PBI).

We selected PBIs as the first cohort for review because they comprised the largest group of charities with DGR endorsement. They also receive additional tax concessions and, because they service such a diverse section of the community, have a substantial effect on trust and confidence in the charity sector.

We then filtered our selection by the following criteria:

• Older charities (in recognition that they were more likely to have changed purposes since their initial registration or be affected by changes to case law)

• Charities not already subject to a high degree of oversight by certain other regulators (in recognition of risks associated with less oversight), and

• Other indicators of heightened risk (for example, charities that have not submitted required information or had concerns raised through other work processes). 

These selection criteria ensured that the reviews in 2020-21 were focused on charities that receive the most generous tax concessions and have an increased risk of being ineligible for registration.

The process

There were two stages for each review:

1. We reviewed the charity’s registration with information that was publicly available – most commonly on the Charity Register and on the charity’s own website.
2. If we identified any issue or concern, we contacted the charity for more information and to assist in addressing the issue or concern.

If we did not identify any issues or concerns at stage 1, we finalised the review.

At stage 2, consistent with our regulatory approach, we provided guidance to the charity to help it address any issues or concerns. In cases of serious risks to registration entitlement, when a charity was unable or unwilling to address its issues or concerns, we began steps towards revoking its registration or registered subtype.

The findings

In 2020-21, we selected 303 charities with DGR endorsement for review.

Of the 303 reviews:

• 56% resulted in us closing the review after providing guidance to a charity and, when necessary, requesting that the charity take action to rectify an issue.
• 19% resulted in a charity having its registration revoked or being in the process of having it revoked. Of these, nearly two-thirds were ‘voluntary’ revocations at the request of the charity.
• 9% resulted in a charity having one of its registered subtypes revoked or being in the process of having it revoked. Of these, nearly all were ‘voluntary’ revocations at the request of the charity.
• 15% resulted in us closing reviews with no action required.
• 1% have, at the time of writing, not yet been determined.

Providing guidance or requesting action

For a minor issue with a charity’s registration, we provided the charity with guidance and explained how it can rectify the issue.

In our reviews of 2020-21, the most common issues we found were:

• A charity had not provided its governing document
• A charity had not provided the details of all its Responsible People.

For more significant issues, a charity may need extra time to take necessary action. In such cases, after consultation with the charity, we establish an agreement that outlines the issues the charity needs to rectify and the actions that it stated it intends to take. The agreement includes a timeframe for completing the required action.

Case study - an agreement

XYZ Foundation is registered as a PBI. It provides meals and counselling support to people suffering homelessness. It also provides an education program and a scholarship open to all school age members of its local community.

We reviewed XYZ Foundation and were satisfied that the meals and counselling services demonstrated that XYZ Foundation has a purpose of providing benevolent relief. However, we were concerned that the education program and scholarship, although charitable, did not further the purpose of providing benevolent relief.

We contacted XYZ Foundation to outline our concerns and ask for more information about its work. With more information, we could confirm that the education program and scholarship furthered a non-benevolent (but charitable ) purpose of advancing education. We contacted the charity to discuss its options for a resolution.

The board of XYZ Foundation decided that all the charity’s purposes were important to its local community and that the charity should continue to pursue them. However, the board also acknowledged that the donations the charity received for being a PBI had to be directed to its purpose of benevolent relief. So the board decided to set up a second charity to manage the education program and scholarship.

We supported the charity’s decision and provided guidance and time to restructure its operations. We sent XYZ Foundation a letter confirming the action it had agreed to take and the due date for the action.

Revoking a charity's registration

Our regulatory approach is to work with a charity to help it resolve issues with its registration.

We revoke the registration as a final option when a serious issue with the charity’s registration cannot be resolved.

Revoking a charity’s registration can occur in two ways:

• Voluntary – where a charity agrees to have its registration revoked and completes the required documentation to facilitate it.
• Involuntary – where we revoke the registration of a charity for non-compliance that could not be resolved. For such cases, a charity is given notice and has an opportunity to provide a reason for us to not revoke its registration.

In our reviews of 2020-21, 46 charities had their registrations revoked. Of these, 65% were voluntary. Some of the voluntary revocations occurred after we contacted a charity to discuss its issues. Other voluntary revocations occurred with the charity acting alone, likely instigated by notification it received from us about the upcoming reviews.

Nearly one-third of the revocations (30%) were involuntary and occurred following a regular audit activity run concurrently with our reviews of charities with DGR endorsement.

As a direct part of our review of charities with DGR endorsement, 4% resulted in involuntary revocations.

At the time of writing, we were in the process of determining whether registration should be revoked for 12 charities. These charities have been notified of our concerns and the need to provide us with reasons to not revoke their registration.

Reasons for revoking registration

In our reviews, we found there were 6 reasons for revocation of a charity’s registration:

• It was no longer operating – 34%
• It was a government entity – 25% (a government entity cannot be registered as a charity)
• It had a non-charitable purpose – 3%
• It had failed to submit 2 required Annual Information Statements – 21%
• It had merged with another charity – 13%
• It chose to no longer be registered as a charity – 3%.

In some cases, a charity may have its registration revoked for more than one reason. We found that many of the charities that were no longer operating had simply not applied to have their registration revoked after their operations ceased.

Case study - voluntary revocation of registration

The Greenfields Trekking Association (GTA) is registered as a PBI. Its purposes are to promote its local region as an ideal trekking location, to host treks and barbecues, and to support search and rescue operations for lost or injured trekkers.

We contacted GTA to seek further information about its purposes. After reviewing the information GTA provided to us, we had concerns that the social and recreational aspects of its work indicated that it may not be entitled to registration as a charity.

The chairperson of GTA noted that after receiving notification from us about a possible review, he conducted his own investigation and reached the same conclusion about GTA’s purposes.

GTA applied to have its charity registration revoked shortly after our review.

Case study - involuntary revocation of registration

A review of the Annual Information Statements of Charity Incorporated indicated that, despite meeting its reporting obligations, it had not operated for the last 5 years.

We attempted to contact Charity Incorporated multiple times to discuss its activities and its plans. We did not receive a response from the charity. We issued Charity Incorporated with a notice that outlined our concerns and provided it with an opportunity to provide reasons why its registration should not be revoked.

Because we received no response to the notice by due date, we revoked Charity Incorporated’s registration.

Revoking a charity's registered subtype

In our reviews of 2020-21, 27 charities had a registered subtype revoked. Nearly all of these (92%) were voluntary revocations that followed a discussion with the charity about issues with its entitlement to a specific subtype.

Of the subtypes revoked, 41% were PBI. There were three main reasons why a charity’s PBI subtype was revoked:

• The charity did not focus on benevolent relief or seek to address benevolent needs
• The charity had a non-benevolent purpose of advancing health, and a principal activity of promoting the prevention or control of diseases in human beings. Entitlement was therefore for the Health Promotion Charity (HPC) subtype
• The charity had an independent charitable (but non-benevolent) purpose in addition to its purpose of benevolent relief.

Case study - voluntary revocation of PBI subtype

JKL Institute supports people suffering from debilitating diseases by conducting research and disseminating information about treatment.

We reviewed JKL Institutes activities and decided that the charity should be registered with a subtype of Health Promotion Charity (HPC) rather than PBI. We discussed our concerns with the charity and passed on information about the tax implications of being an HPC.

JKL Institute reviewed the information and agreed with our view. The charity applied to have its PBI subtype revoked and applied to be registered as an HPC.

In addition to the reviews of charities with DGR endorsement, we reviewed a sample of charities and their purposes to ensure they maintained entitlement to registration.

Our selection was based on risks that included:

• charities with purposes that appeared to be not charitable
• charities with registration that may have been affected by changes in case law
• charities with potential concerns about entitlement that were identified through other work processes.

The process

The reviews of entitlement followed a similar process to the reviews of charities with DGR endorsement.

We reviewed a charity’s registration with information that was publicly available. If we identified an issue or concern in this initial review, we contacted the charity for more information and to assist in addressing the issue or concern.

The findings

In 2020-21, we selected 577 charities for review of their entitlement to registration.

Administrative issues

For administrative issues with a charity’s registration, we provided the charity with guidance and explained how it could rectify the issue.

The administrative issues we identified included:

• no governing document submitted
• late reporting
• redundant clauses in the governing document that may affect the charity being not-for-profit and for public benefit.

Entitlement concerns

We escalated the initial reviews that revealed concerns about a charity’s entitlement. These escalated reviews examine the charity’s case in more detail and aim to resolve the concerns with the charity.

We found that concerns about entitlement to registration fell into four main categories:

• Disconnect between a charity's purpose and the activities it undertook to achieve that purpose.
• Governing document that was out of date and contained clauses that contradicted the not-for-profit and public benefit requirements of a charity.
• Being registered with subtypes that are not appropriate for the charity’s purpose.
• Not having charitable purposes.

Of the 577 charities we reviewed, we escalated 413. We conducted 61 of these escalated reviews in 2020-21, with the remaining 352 to be reviewed in 2021-22.

Of reviews escalated in 2020-21:

• 34 charities retained their full entitlement (30 of which were given guidance resources to help them meet their obligations)
• 15 charities voluntarily applied to have their registration revoked
• 1 charity voluntarily applied to have a subtype revoked
• 3 charities had their registration revoked involuntarily
• 8 remain in progress.

Case study - Charity Law Entitlement

The Tinkler Association provides welfare and support to disadvantaged people in rural communities. It works to help families in distress and improve health facilities and access to health care services.

The review of the Tinkler Association revealed:

• incomplete reporting
• not all its Responsible People listed on the Charity Register
• inappropriate subtypes based on its activities.

The Tinkler Association had multiple subbranches also registered as separate charities. However, our analysis of the governing document identified a clause stating that the subbranches are not independent and are part of The Tinkler Association. Therefore, the subbranches did not meet the definition of ‘legal entity’ under the ACNC Act and were not entitled to be registered.

We contacted The Tinkler Association to discuss the administrative issues. The board discussed the issue at its state conference.

The Tinkler Association worked with us to have the registrations of the subbranches revoked. It updated the record of Responsible People on the Charity Register, submitted the required Annual Information Statements, and provided up-to-date financial reports. It also submitted a request to have its subtypes reviewed to reflect its charitable purpose more accurately.

In 2020-21, we reviewed the details of charities on the Charity Register. Our reviews focused on elements of a charity’s details that could compromise the integrity of the Charity Register and possibly indicate that a charity is no longer entitled to registration.

The reviews found the following issues:

• Charities with cancelled ABNs
• Charities incorrectly reporting as a Basic Religious Charity (BRC)
• Charities without an appropriate governing document
• Charities that had not listed all Responsible People
• Charities with information withheld from the Charity Register.

The findings

Charities with a cancelled ABN

A charity must have a valid ABN to be eligible for registration. Our reviews identified 543 charities with a cancelled ABN.

At the time of writing:

• We had revoked the registration of 165 charities
• We had received applications from 130 charities to have their registration voluntarily revoked
• We had issued formal notices to 248 charities that asked them to reactivate their ABN or to apply to have registration revoked.

Charities incorrectly reporting as a Basic Religious Charity (BRC)

A ‘Basic Religious Charity’ (BRC) is an ACNC category for a particular type of religious charity. To report as a BRC, a charity must meet 6 criteria. If a charity meets the criteria, it is exempt from the need to report financial information in its Annual Information Statement.

Our reviews found 96 charities that incorrectly reported as a BRC.

We contacted these charities to notify them of their error and to ask that they submit their Annual Information Statements again, complete with financial information and annual financial reports if required.

Charities without an appropriate governing document

A governing document is the formal document that sets out a charity’s rules, charitable purposes, not-for-profit character, and the way it is run and makes decisions.

Without appropriate governing rules, an organisation is not eligible for registration as a charity.

A registered charity must notify us of any changes to its governing rules within a set period and it must also provide us with a copy.

In 2020-21, our reviews found 2,470 charities that had not provided us with their governing document.

We contacted 594 of these charities to notify them that they need to provide a governing document. From this group, 261 charities provided one. We are working with the remaining 333 to address this issue.

Of the initial 2,470, we will contact the remaining 1,876 in 2021-22.

Charities that had not listed all Responsible People

A Responsible Person is a member of the governing body of a charity. A registered charity must provide a list of all its Responsible People. The list of Responsible People is displayed on the Charity Register, showing the public who is responsible for the charity.

The number of Responsible People a charity has varies and is usually determined by its legal structure and governing document.

A charity must notify us of any changes to its Responsible People.

In 2020-21 we began reviewing charities that we found did not have the correct number of Responsible People listed on the Charity Register. We will contact these charities to address this issue in 2021-22.

Charities with information withheld from the Register

A charity can request certain information be withheld from the Charity Register under specific circumstances.

When a charity submits a request to have certain information withheld, its record is automatically removed from the Charity Register until we decide on the request.

Our reviews examined 5,226 of these requests to ensure that they were valid. Of these, we found that 2,513 were invalid and have since been withdrawn or deleted.

We will continue to review the remaining requests in 2021-22.