Matt Crichton:

Hello everyone, welcome to today’s Webinar, which as you can see on the title screen here is called… oh, I’ve lost the screen. There we go. Avoiding charity pitfalls and staying out of trouble. My name’s Matt Crichton and today I am joined by the director of our compliance directorate here at the ACNC, Prue Monument. Hello Prue.

Prue Monument:

Hi, hi everyone.

Matt:

And we’ve got a lot to get through so we’ll just give you a brief overview of what’s coming up. But… actually before that just some sort of admin stuff. We have a couple of colleagues, Chris and Jill, currently standing by to answer your questions as we go through the broadcast. So if you have anything that pops into your mind and you want to ask the question at that time, feel free to use the chat part of your navigation there and you can get a question to them and they’ll be able to respond to you. If you have any trouble with the audio for the Webinar one option is to dial in. The confirmation email that you received when you registered will have had some details about how to do this. You dial the number, you put in the code, and then you can hear the Webinar through your phone instead of the, whatever internet connection you’ve got.

And as we do go through the broadcast, if you’d rather keep your questions to the end then that’s another option. We’re going to set aside a few minutes at the end to address any questions that come up throughout. And yeah, that way you can listen to what we have to say and then ask any questions of stuff that we might not have covered. And finally, there will be a few references to websites and resources on the slides as we go through. There’s no need to jot them all down as we go because we are recording this and it will be published on our website later on and you can go back and have a look at it. And also we’ll send you a follow up email either today or not tomorrow, tomorrow’s a day off, so today which contains all the links in it as well.

Alright, now having said all that we can get back to the presentation proper. And we’ll just give you an overview of what there is to come today. We’ll have a look at first the ACNC compliance report, a compilation of stats and figures and lots of information about what has happened over the last 12 months. We’ll then look at some general charity issues, pitfalls and how best to avoid them if you are involved in a charity. Just some reminders of what the duties for charities are for being registered with the ACNC. And then we’ll have a look at some compliance focuses for 2019 which may give you an indication of the sorts of things that we’ll be looking at and the sorts of things that charities can do to avoid these little particular issues.

And finally, we’ll give you a brief intro to what’s called the external conduct standards, which is a set of governance standards for organisations that do some work overseas.

OK, that’s a lot of talking from me, so I’m going to pass over to Prue to take over. But Prue, can you just give us an overview, as the screen shows here we’ve had this compliance report released this month. Actually in fact it was this week, wasn’t it?

Prue:

Last week.

Matt:

Last week, sorry. The compliance report is released. Can you give us an overview of what, first what the compliance report is and then we’ll get into some of the stats and figures?

Prue:

Sure. So the ACNC charity compliance report is a report that we produce each year. And it looks at the previous calendar years, our compliance activities that the ACNC has undertaken. So we look at how many investigations we’ve run, we look at what enforcement action we’ve taken, and the work we’ve done to get a lot of charities back on track. And we like to where possible, even though we often can’t go into a lot of detail because of our secrecy provisions, we like to share our learning through different scenarios and case studies with the sector.

Matt:

And in the one released last week we’ve got some feature stats and information on the screen here. Can you take us through some of these?

Prue:

Yeah, sure. So we have quite a… the ACNC’s quite a small regulator and we have a fairly small compliance team. But they finalised 90 investigations in 2018 and many of those involved quite a lot of work. So a really great outcome for the ACNC, but the sector more broadly. The bulk of our work is really focused on getting good charities back on track. And most charities are trying to do the right thing but things go wrong. And so you can see that we enter into compliance agreements. So there’s, with 24 compliance agreements, they’re voluntary agreements with charities and we set out some areas that the charity can improve on and we monitor their compliance with those changes. Sometimes we need to use more formal powers and we will issue and enforceable undertaking or we’ve issued a few directions there where we formally require charities to make certain changes or take certain action.

And some details around those where we’ve used those formal powers will be published on our website and people can have a look at those summaries. Also a figure that’s not there that I think is very important is that we issued 71 pieces of regulatory advice. So often when we come out and investigate a matter or sometimes we establish we don’t need to investigate, we can just give the charity some regulatory guidance and advice, clarify something we think that perhaps they don’t entirely understand, and that’s sufficient to get them back on track.

Matt:

Yeah, right. And this is an interesting stat, it shows sort of the significance of the work, the compliance directorate in monetary terms.

Prue:

Absolutely. And you know a part of our risk based approach, we look at the potential harms that are occurring when things go wrong but we also look at the scale of the matter. So while not all of our compliance and investigation work will focus on large charities, in many instances it does. And we all know that the charity sector is substantial and is the second largest employer to retail. So many of the organisations that we’re working with have substantial revenue and assets.

Matt:

Yeah, right. And just some other details, you mentioned that it’s not always the high profile stuff where a charity’s lost its registration or is on that page on our website where we publish some of the formal powers that we’ve used. There’s a lot of work that goes into some of the stuff that isn’t seen, right?

Prue:

Absolutely. And so every year the number of concerns that the ACNC receives continues to increase. We can’t investigate everything so we do put, apply quite a lot of rigor in terms of a triage and risk assessment process to determine what we are going to investigate or where we can apply a more minimal intervention such as providing some regulatory advice and we recently introduced a self-evaluation tool that we’re sending to more charities as well. So boards can contemplate their own governance practices.

But you know the reason we’re receiving more concerns I don’t think it is that there’s more problems in the sector, I think people better understand the role of the ACNC and the more action we take it generates further interest and understanding about our role in the sector. Now large charities do tend to be over-represented in our work, and we feel the reason for that is also due to the fact that there’s more people involved in larger charities. People, more people that have chances to identify or escalate concerns to us.

Matt:

Right. Well there are, as the compliance report has shown us, there are a few key areas of concern that have popped up through our work. And this may apply, well you might recognise some of these just broader issues in your own charity. We hope they’re not you know major issues that you have to deal with but you may recognise just some of the broader issues that come up out of these.

So the first one is private benefit. Conflicts of interest is another one that has popped up a fair bit in our work and our compliance work over the past 12 months. And also financial mismanagement. Prue, can you just take us through some of these? We’ll start at the top, we’ll start with private benefit, what does that mean?

Prue:

Look, private benefit is where we see charity’s resources being used to benefit people that are linked to the charity or other individuals other than the charity’s funds being used for the charity’s beneficiaries or to advance the charity’s purpose. And that gives us great reason for concern because charity’s must maintain their not for profit status and must be for the public benefit.

Matt:

Yeah, right. And that comes… well obviously there may be cases where there is deliberate private benefit involved but it can also come unknowingly, right? Just with some, maybe some poor practices or poor governance or poor understanding that leads to troubles of private benefit that maybe people in the charity didn’t quite know they were getting down that route?

Prue:

Absolutely. And look, in our investigations work we do see unfortunately some instances of wilful private benefit where the charity’s been structured knowingly in a specific way to afford individuals a private benefit. But as you say, in many cases it’s just because there was some poor governance or misunderstanding that these things have happened and we’re able to rectify these problems and get charities back on track.

Matt:

And some of the issues or some of the unknowing private benefit I suppose is related to this concept of related parties which has a connection to private benefit. Can you… this might be an unfamiliar term for a lot of people but once it’s explained they may recognise the concept. What is a related party?

Prue:

Look, a related party is really a person or an organisation that has potential to have influence over the charity, the charity’s finances, or the charity’s operations. While often we see it as involving a family member or a friend of someone that’s working in the charity or runs the charity and a related party can be a person or an organisation.

Matt:

Right. And what can charity’s or people involved in charities do to address private benefit or even better avoid private benefit when it comes up?

Prue:

Look, I think that there’s a number of important things that charities can do to avoid private benefit. Need to always be mindful or ensure that the charity is… any expenditure of charity funds is in pursuit of the charitable purpose and that the charity needs to remain not for profit. It shouldn’t be delivering any individual’s that private benefit or profit.

Conflicts of interest need to be carefully managed. Now I know we’re going to talk a little bit further about conflicts of interest in a moment, but really where we see organisations trip up here is that they often think that they’re making decisions based on trust.

So for example, if I was operating a charity and my brother had a merchandise business I think, OK, that’s great, I know my brother, I’m going to engage his merchandise business, and a lot of charity funds go over to his business to produce the merchandise. Now look, this doesn’t have to be a problem as long as the charity goes through a considered process of, and we would call this due diligence. Look at what other options are out there, who else can produce merchandise for the charity? And do some cost benefit analysis. Who’s going to deliver the best value for the charity? And certainly then when you have a few options and you can weigh those up, you can make a more informed decision. And if it did relate to my brother of course I would have to remove myself from that decision because there would be that direct conflict and that related party arrangement in place.

So it’s practical things like that and we will talk about conflicts of interest as we move forward.

Matt:

And of course there are the governance standards which underpin all the operations of a charity registered with the ACNC.

Prue:

That’s right. And governance standard one is about purpose and not for profit, which we’ve already talked about. Now governance standard five is the steps that the charity must take to ensure its responsible persons act in certain ways. And one of the obligations is around care and due diligence. And this is where it’s really important when working with related parties, that you do take care and you do go through a due diligence process and make sure that you’re always acting in the best interests of the charity.

Matt:

Now we have a lot of information about all of these concepts on the website and there are a few links here to specific resources. But as I said at the beginning, you don’t have to jot these down right now, you’ll receive the follow up email with all of these links in them. OK, let’s get onto finance, financial mismanagement. Now this is something that I think a lot of people would automatically think of when they’re thinking of charity problems, charity issues and a regulator getting involved. Finances is one of the things that pops up. It is a wide ranging term as the slide says, but what sort of things does it cover?

Prue:

Look, financial mismanagement can happen in any organisation and it’s certainly not just limited to the charity sector. But it does cover a very wide range of behaviours, inappropriate use of money, it can be fraud, misappropriation, embezzlement, inadequate or not budgeting and a lack of any sort of proper financial controls.

Matt:

And again, similar to the private benefit thing and conflicts of interest, avoiding this or addressing financial mismanagement really rests heavily on the policies or processes and procedures maybe that a charity has in place to be able to manage funds transparently, responsibly, and openly.

Prue:

Absolutely. An I think that you know obviously in the sector there’s charities of all different shapes and sizes and so each charity has to understand its risks and has to have policies and procedures and processes in place to articulate those risks and mitigate those risks. But really it should be clear for an outsider to see based on policies and procedures how a charity is protecting its finances. And it might include things like how many approvals required, having more than one person with control over the finances and making sure you have multiple people that have to approve expenditure. And things like financial delegations and approvals. Who within the charity is authorised to spend money and how far does that spending extend and who’s going to approve that spending ahead of that money being applied?

I think also another important aspect is that the board or the committee, the people responsible for operating the charity have regular and sufficient oversight of the financial reports and receive regular financial reporting updates. And I think security around your password, access to bank accounts, minimising cash wherever possible is also really important. But one thing that we haven’t got listed there which is also really important is appropriate reconciliations. Because that really helps you identify where things may be going wrong. You know if people are spending money then they should be required to produce receipts and there should be a formal reconciliation process to match spending and for the charity to have full confidence that that spending was A, approved, and was required to progress the charity’s purpose or align with the charity’s purpose.

Matt:

Yeah, and an interesting one here, a culture of financial questioning. An interesting turn of phrase, what do we mean by this when we’re speaking of people involved in the charity? What should they be questioning, what are we talking about?

Prue:

Look, I think that it’s really important, policies and procedures and these things are all well and good but if you don’t have a culture that questions things that appear a little bit out of the ordinary or if reconciliations don’t seem appropriate, then there’s a problem. And I think also the board or the committee, if they’re receiving financial reports or audit reports they should feel empowered to question the information they’re receiving and make sure that they’re fully comfortable with it, that they understand it. Because that’s the best way to pick up problems early.

Matt:

Yeah, certainly helps to contribute to the broader transparency if everyone knows that everyone else is looking for things and is happy to question things. Then it’s much, much harder for things to go undetected.

Prue:

Absolutely.

Matt:

Again, some more information about the financial stuff in particular which will be include in the follow up email. There’s a particular, there’s a resource on fraud in particular and also managing charity money broadly which you may find useful for your charity.

Now you did mention earlier Prue that we were going to talk about conflicts of interests, the time has arrived. You did give it a description before, just once more a brief overview for people that might be unfamiliar with the term. I think even if the term conflict of interest isn’t familiar at least the concept will certainly ring true.

Prue:

Yeah, and look, I think that this is an area that we often find charities really struggle with. So as you can see there I think that’s quite a neat definition of a conflict of interest when someone’s personal interests perhaps conflicting with their responsibility to act in the best interest of the charity where they have a role. So it’s really important that people are mindful of this and that it’s managed effectively.

Matt:

Now we have a few types of conflicts of interest and there may be some subtle differences but nonetheless important differences here which are worth teasing out a little bit. The first one here we have actual conflicts of interest. Prue, can you give an overview of what this means? It probably sounds self-explanatory but it’s worth just teasing it out a little bit.

Prue:

Yeah, so look, an actual conflict of interest is a situation where without a doubt you are being influenced by a conflict that you have. And it might be your personal involvement in a matter or your relationship to an individual. So for example, if the board or the committee were making decisions around increasing your remuneration and you’re part of that board and you think that it’s appropriate to remain in part of that discussion and vote in favour of increasing your salary, well that is without a doubt an actual conflict because you are being influenced by your own self-interest in this decision.

Matt:

And just contrast that to the next one which is a potential conflict of interest, there’s a subtle difference here.

Prue:

Yeah, look, I think that a potential conflict of interest is far more subtle. And a little bit more difficult to manage. So a potential conflict of interest might be one where you have a friendship or a relationship with a professional organisation that is providing some subject matter expertise to the charity and so there is a potential should you have to make decisions in relation to that professional relationship for there to be a conflict. So it hasn’t actually occurred yet but there’s the potential if the charity is going to engage this organisation and you are friends with or you know the people that operate that accounting firm or that law firm, for example.

Matt:

Yeah, it might not be as clear cut as the first example we described, but certainly there’s a possibility and at least the other people involved could see that there’s a potential that it’s going to be an actual conflict of interest. Which does bring us to the third one, this concept of perception. Now the perceived conflict of interest as it says here, it says you could appear to be influenced by conflicting interest. How does this differ from the other two?

Prue:

Well look, I think that the perceived conflict of interest is a situation where we are confident that a conflict of interest hasn’t actually occurred but perhaps because there’s a lack of transparency around how the situation was managed, to an outsider there’s still a perception that there was a conflict.

So for example, if the charity decides to engage the accounting firm where your friend worked but you removed yourself from anything to do with that consideration and other accounting firms were considered in that process but nonetheless a decision was made to engage with that firm where your friend works, if people aren’t aware of how that process was managed to A, acknowledge the potential conflict existed and remove yourself from any of the decision making, make sure there was adequate due diligence, then for others there may be a perception that a conflict has actually occurred and you’ve been part of that decision making process. And it’s really important that charities are transparent around this stuff because the perceived conflict of interest can damage the reputation of a charity just as much as an actual conflict.

Matt:

Yeah, right. And in that sense it’s effectively the same thing. Whether or not there is an actual conflict or not the perception is such that it damages the charity’s reputation and image and it may as well have been an actual conflict of interest.

Prue:

Absolutely.

Matt:

Now this is an important point though, we talk about conflicts of interest and how they can be a problem for a charity depending on how they’re managed, but of course they don’t have to be a problem, right?

Prue:

They don’t have to be a problem, that’s right. And it all comes down to how you manage this. And having your processes well documented so there is that transparency for members, beneficiaries, the broader community in relation to how you record, recognise, and deal with potential conflicts.

Matt:

And if it’s not to be a problem there are some things that a charity can do to address it so that if they do come up against a conflict of interest, which it’s worth pointing out are pretty common.

Prue:

Very common.

Matt:

Yeah, you don’t have to avoid them at all costs and treat them like a real blight on your charity’s operations. It’s something that you’ll just have to come across every now and then. There are some things that a charity can do. Prue, what are some of the best things or at least some of the things the ACNC compliance team will advise charities on?

Prue:

Yeah, look, we will encourage charities to have a written policy that explains how they manage conflicts of interest and that you know is a good flag for others to outline what we can expect of the charity. And the charity should also have a register of interest. So for the people that, the responsible persons of the charity, so the people on the committee or the board, there should be a register that lists their interests and particularly where there may be a potential conflict. And that should be reviewed regularly.

Matt:

So is that just a sort of a list that’s kept somewhere where you jot down all the potential or the interests that people have which may then at some point may become a conflict?

Prue:

Yeah. Yeah, they may conflict with the charity’s best interests at some point. So that’s exactly right. And a good way to do this and to keep that register fresh is at board meetings, to have a standing agenda item around conflicts of interest. And so you then are asking the board members or the committee, are there any new interests that people declare, need to declare. And it’s also a really good practice to ask them to declare whether they have any conflicts with the agenda of that particular meeting.

Matt:

Right, yeah, that’s a good idea. And this third point, think carefully, if in doubt, declare.

Prue:

Absolutely. You know if…

Matt:

There’s no harm in declaring.

Prue:

No, there’s no harm and there should be no reason for embarrassment or concern about declaring potential conflicts.

Matt:

And of course do it beforehand. It’s no good post-hoc deciding that it would have been good to declare, so I declared it… do it at the beginning, get it upfront.

Prue:

Absolutely, absolutely.

Matt:

OK. And of course as Prue mentioned, don’t be embarrassed to declare. And this comes back to the point we mentioned in the financial mismanagement bit about a culture of questioning. The same concept applies to conflicts of interest, have a culture of openness, of transparency so that the idea of declaring a conflict of interest is just merely an administrative task that you do every board meeting. It’s not anything to be embarrassed about or anything to worry about. Again, we have lots of information on conflicts of interest on the website, so we will include this in the follow up email. It’s worth printing out maybe some of these guides if you think that your charity, it’s something that will benefit your charity or you think that it’s something that your charity needs to deal with because you’ve come across this, problems with this in the past.

Let’s have a look at some charity duties now. These are some of the things that a registered charity must do to remain registered with the ACNC and to, as the title of the Webinar suggests, avoid pitfalls. Prue, can you take us through some of these? The first one here says governance standards.

Prue:

Sure. So under the ACNC regulation there is a set of governance standards that any charity registered with the ACNC must comply with. And where a lot of our investigation work focuses is in relation to governance standard five, which is really pertains to what steps the charity’s taking to ensure its responsible persons are exercising their responsibilities appropriately. So things we’ve already talked about, you know due diligence, acting in the best interests of the charity, ensuring proper financial controls. Charities are also required to report annually to the Australian Charities and Not For Profits Commission and that’s through an annual information statement. And charities are also required to keep records so that well, I mean it’s just… they’re required to keep records and it makes it certainly easier if we have a need to engage with a charity for them to explain their operations, to have minutes of meetings, to have some written policies and procedures.

And look, we do appreciate that that will look quite different for each charity. And what that looks like for a small charity will be very different to what it looks like for a really large charity. So I think it’s important that you know people on the line realise that you know we know that one size doesn’t fit all but the key is really about understanding your risks, having some processes in place to mitigate them and to respond if things do go wrong.

Matt:

Yeah, so to think about what you do as a charity and apply this idea of keeping records to your activities and operations. That’s why we sort of can’t be prescriptive when we say keep records. It really does depend on many factors within your organisation and what it does. But it does need to keep records that show its operations and its finances and that sort of thing.

And finally there is one more here to talk about, notifying of changes.

Prue:

Yeah, and look, it’s really important that a charity let us know if there’s any changes to the responsible persons that are managing the organisation.

Matt:

And beyond just the legislative requirement that you have to do this if you want to remain registered with the ACNC, it’s a good idea for a charity to, in facing the public, to be open, transparent, and to have these sorts of details up to date on the public facing charity register. You want to have your current address, your current list of responsible persons, and your annual information statement submitted on time and there for view. It shows a commitment to accountability and transparency that the knock-on effect of which is that it’s a good reputational thing for your charity.

Prue:

It is a really good reputational thing for the charity. And I think for charities that have websites and most charities do these days, I think that if the charity has written policies around conflicts of interest or how it controls its finances then they should really publish those on their own website as well because I think that if someone within the charity has a question or a concern they can go there, they can have a look, they can get a better understanding of how the charity manages these issues.

Matt:

And just at the bottom there you’ll see a link to, this is a new thing actually, the website acnc.gov.au/selfevaluation, the resource that Prue mentioned at the very beginning of the Webinar, a new little self-help resource. But you could call it sort of a checklist, sort of a guide that helps you get your head around these sorts of things and how you can apply some of these rules and some of these best practice principles to your own charity. And again, this link will be in the follow up email. So if you want to wait for that one that’s good. But if you wanted to jot this one down it’s a good new one to have a look at.

OK, let’s have a look at the focus for 2019, which will have been shaped by what we found in 2018 I presume.

Prue:

Yeah, look it is. And you know I think that our focus, we still focus our compliance resources around four key risk areas. So as I touched on earlier, we receive a huge number of concerns. And so we want to make sure that we’re investing our time and energy in those issues that we think are going to undermine trust and confidence in the sector. And so we focus our compliance and investigation work around fraud and financial mismanagement. So this includes money laundering, tax avoidance, private benefit. We also focus on terrorism. And that can be the misuse of a charity for terrorist purposes or to foster extremism and that includes supporting terrorism financially or otherwise.

And our focus in 2019 is around charities that also fail to safeguard people. And safeguarding is a word that really, what it means is protect people. Keep people safe from harm. And so in previous years our focus has been very much on protecting the charity’s beneficiaries, children and vulnerable adults in particular. But we’ve broadened it out and our expectation is that charities should protect anyone that comes into contact with the charity, whether they be a volunteer, a beneficiary, a formal employee, a contractor, et cetera. And when I say that they should protect these people, we understand at the ACNC and a theme that really ran through the compliance report this year is that we understand there can never be zero risk. There can never be zero risk in charities, there never can be zero risk in any organisation. But the key is to understand your risk, have strategies in place to manage and mitigate those risks, and respond swiftly and appropriately when things do go wrong, to address these matters in the best possible way, and to learn. To continue to review and learn from these situations where things do go wrong and how you can improve your processes further.

The compliance report had a great, there’s a great case study in there from Guide Dogs Victoria, a fantastic example of things going wrong but a great zero tolerance approach to addressing it. Look, the one other priority area we focus on is political or unlawful activities. So charities can’t have a political purpose. Very important this time of year, going into an election period, charities can’t promote or oppose one particular candidate or party for office and they shouldn’t have an unlawful purpose either.

So look, that’s where we focus our attention. But we’re also getting better at proactively identifying and addressing risk. And what we mean there is that we don’t just wait for the community or people within charities to tell us there’s a problem. The more we understand about charities and the more data we have from charities and we can often get data from other government agencies as well, we think about what the risk indicators are and we use that data to try and identify risks that are not yet known to us or haven’t been raised with us. And in 2017 8% of our compliance work was proactively identified by us. Sorry that was in 2017. In 2018 20%. So we’re really increasing our capability in that regard which is a fantastic result.

Matt:

What is the Financial Action Task Force is something that features in the compliance priorities for the year and in the report. What is this and what do we have to do?

Prue:

Sure. Look, the Financial Action Task Force is an international organisation that most countries around the world are signatory to and Australia is signatory to the Financial Action Task Force. The Financial Action Task Force have a number of recommendations for countries that they should implement to reduce the risk of terrorism financing or money laundering. And there are some specific recommendations that relate to the charities and not for profit sector. And why it’s a focus for us this year is that they’re coming back to Australia this year to conduct a five year review of how effective we are at identifying terrorism financing and money laundering risks and addressing those risks. So the ACNC has done a lot of great work in this regard. We have some excellent resources on our website but we also do very targeted outreach to charities that we think might be at a higher risk of misuse for these purposes.

Matt:

And this one if something to look out for, a suite of new resources that will be published soon which will help lots of charities in a range of areas, or four main areas of concern, which as it’s called here, the governance tool kit, will provide some easy to use resources, fact sheets, and other templates for charities to be able to turn their mind to a few key areas of governance, potential risk or failures or issues that they might not have otherwise. And it will help them to you know focus their own work. Do you want to just have a, give a quick overview of the four key areas that we’re going to provide some resources for with the governance tool kit?

Prue:

Sure. So the four key areas that we’re going to provide guidance to is around protecting people. So I mentioned about the safeguarding. Cyber security, so we know that many charities are increasingly struggling to manage cyber security risks, so we’ll have some great resources there. We’ll have resources in relation to working with partners. So some of those challenges we discussed, conflicts of interest, related party transactions. We really hope the resource supports charities to navigate that, those challenges and financial fraud, financial wrongdoing and some of the steps charities can take to better protect their money.

Matt:

OK, and finally the external conduct standards is a new set of effectively governance standards for charities that have some work overseas. And that doesn’t necessarily mean you know on the ground operations overseas, it may be something as remote as sending funds overseas. But it’s a set of again governance standards, for lack of a better description, for that particular work overseas. So if you’re involved in a charity that has some involvement overseas, whether that be sending some funds for use by another organisation overseas, or you have some significant operations yourself overseas, the external conduct standards will apply for, will apply to your organisation and will be something that we will at the ACNC look out for. And the compliance directorate in particular is working very hard to get their head around what these are, what they cover, and how we’re going to apply them.

Prue:

Yeah, and I think that there’s no need to panic. I think that what we expect of charities now through our governance standards that this is really an extension of that in the overseas context and it’s still very much going to be focused around what steps the charity’s taking to ensure that it’s minimising the risk of fraud and corruption, that it’s protecting vulnerable people and so on. But we’re busy working across the ACNC to make sure that there’s really practical guidance for the sector ahead of those conduct standards coming into place later this year.

Matt:

Yeah, so look out for those if you’ve got any involvement overseas. We’ll make them known on the website. OK. We just spoke about that and I didn’t get to the slide. There we go. They will cover, they will cover activities overseas including funds, annual… just reviewing of overseas activities, anti-fraud, anti-corruption, many of the themes that Prue has spoken about throughout the Webinar and again, this… it’s really becoming a prominent theme in amongst regulation within charity sectors worldwide and even more broadly this idea of protecting vulnerable people. So there will be some rules and regulations about what a charity must do to meet these sorts of, meet these obligations.

OK, we’re coming towards the end of the formal presentation now. We do have a few questions that have come through but we will give you just a brief overview of what we covered today. Number one, private benefit is a problem. We’ve found it through our compliance work here, it features in the compliance report fairly prominently, so be familiar with the ways to address it. Number two, Prue, can you just give them an overview of the second point?

Prue:

Yeah, so make sure that you have clear, practical financial controls and help to prevent mismanagement. And you know transparency around what those controls are and really driving that culture of questioning and being confident that you know it’s not just about setting and forgetting about your policies and procedures but people understand their responsibilities and they’re reminded regularly and that they’re actually being implanted on the ground.

Matt:

Yeah, and the culture’s a really good point. That’s something that people forget. It’s easy to write a policy and save it somewhere, put it in a folder, but if the culture’s not there it’s effectively useless.

Prue:

Absolutely, and I think you know the Banking Royal Commission has demonstrated that in a very strong way. You can have the best policies and procedures in the world but if there’s a problem with culture it’s going to produce some really bad outcomes.

Matt:

Yeah, for sure. Conflicts of interest are an important thing. They always feature for a charity and for lots of organisations, but for charities in particular it’s something that they need to be wary of and just be confident that they have the right processes and procedures in place to be able to deal with it. So don’t think of it as a bad thing or something scary that you really need to avoid at all costs. Just think more about how you are going to deal with the one that pops up. And of course there are certain rules that charities must comply with if they want to remain registered with the ACNC, including rules for governance, reporting, and certain record keeping rules as well. And the last points that we just mentioned.

Prue:

Yeah, look, so there will be more information coming up on our website shortly in relation to the introduction of the external conduct standards. We don’t have a set date for the introduction yet and because that’s been complicated by the election and but you know we anticipate it will be the second half of this calendar year and as soon as we know the date we will share that with the sector. And I encourage you to download the compliance report. It provides not only a great overview of the work we’ve undertaken, it explains our regulatory approach and it also outlines your obligations from a governance and reporting perspective. And of particular value are the scenarios and case studies.

Matt:

Yeah, for sure, definitely. OK, we have had a few questions come in so before we do finish we’ll just run through some of these because I think they might, the answers might be useful for our broader audience. An interesting one, Prue, we got is in relation to compliance with a low admin in-cost. So I think the person’s asking about what can they do if they’re in a charity that either has too few resources or too few people to be able to put lots of complicated stuff together to maintain compliance. Are there any sort of tips and suggestions that we would have for these sorts of organisations to help them ensure that they are avoiding pitfalls?

Prue:

Yeah, look, I think that this does come back to each charity understanding its own context. The environment in which it operates and what the risks are in that environment and what their capacity and capabilities are within the organisation. And so if it is a small charity we’re not going to expect to see you know 50-page policies and documents, et cetera. But we are going to want to see… the key aspects we were going to want to see is that you understand your risk. So I think every charity should have a risk register and it can just be a basic Excel document. It does not have to be super sophisticated for the smaller organisations. But some kind of Excel list that shows you’ve thought about what the risks are. And then once you have identified the potential risks you then link that to well what are your strategies currently to mitigate those risks? Is it that you separate the financial controls? Is it that you have a safeguarding policy to protect children? And so on.

And there’s some fantastic resources, not only on our website but others, that help small and medium charities in particular with the template policies, template procedures. And I encourage people to look at that and not feel that they have to recreate the wheel. That is onerous and that is inefficient. So I encourage people to look at what options are out there.

Matt:

And sometimes even get right to the real simple things as well. You don’t even need to have any real budget or lots of people to have a simple reminder set in your shared calendars or something about submitting an annual information statement, having things like annual information statements or updates to charity details with the ACNC as a standing agenda on board meetings or your, even your weekly Monday morning meeting, whatever it may be. Just having these constant little reminders about the things that you have to do to comply with ACNC obligations is a really simple but effective way of making sure that you’ve done a few things to meet those obligations.

Prue:

And the self-evaluation checklist is really helpful for that. And you know kitchen table governance can work. And you know and I think having a tool like that where you are constantly asking yourself those questions and what are we doing to understand this and manage it, that’s the key.

Matt:

Yeah. Someone’s asked about working with other NGOs or not for profits or charities with or without an agreement or an MOU. I suppose getting at the heart of the question is should we or do we have to operate with or without an MOU. And I suppose I’ll let you continue in a moment, Prue, but it’s a common answer with many of these things is that it depends on the nature of your work with a partner, what you’ve engaged them to do, how the roles of both organisations work. It will depend on all those details and for some absolutely an MOU or a written agreement is essential because of the nature of what you’re trying to do together. But for others maybe it’s a little bit different and you might be able to work without that depending on the closeness of the organisation. But in general terms I think it’s always best practice to have something written to be able to, to help you manage it.

Prue:

Look, I agree. I think it is wherever possible to have something, some form of agreement in writing. Because I think it also comes back to that transparency point that we’ve talked a lot about today. It tells other people about well why you’re engaging with this other organisation, how does that relate to your own charitable purpose, particularly if you’re committing charity funds to this other organisation to deliver certain programmes or outcomes. How are you going to track that those outcomes and programmes are actually going to be delivered? Because you have to constantly be assuring yourself that you’re pursuing your own charitable purpose. So to see how, to articulate how these things align, how you’re going to monitor, how you’re going to ensure that the funds are spent as you intend them to be is really important. And it’s important for both parties to be clear on that.

Matt:

Yeah. And it’s an important point of even protection, too. You never know what might happen in the future. And we hope that agreements run perfectly as planned but some things change, different people get involved, and there may be conflicts later on. You want to be able to point to something in writing that outlined exactly what you set out to achieve in the beginning. And it’s really hard to deal with those sorts of troubles or conflicts later if you have nothing in writing to back it up.

Prue:

Absolutely. It will help avoid any sort of future disputes.

Matt:

One last one before we finish. What, someone’s asked about…

Prue:

The one I thought was really important was about the ideas or tips for organisations to help ensure they stay up to date with all legislative changes. It is really challenging. Charities are subject to considerable regulatory oversight, particularly if they’re fundraising, there’s the state jurisdiction, Commonwealth jurisdiction, many compliance obligations. So I think some of the useful tips is for charities to subscribe to relevant regulators or peak body news and we certainly have our regular commissioners column and we would include in that any updates in relation to legislative change. So that’s a really practical way to keep up to date.

We have a list of regulators that may affect charities on our website. So that might help people decide where they should start and what they can sign up to. You can check regulator’s websites for any updates. And really important, again it can be a basic Excel form, maintain a register of your, of the obligations you’re subject to and who the relevant regulatory is. And regular… and review that on a regular basis. It’s a really good way to keep track of your obligations and to feed into those regular discussions about well is this still relevant? Do we need to update this? Do we need to… are we meeting our obligations?

Matt:

A lot of government regulations, regulatory bodies have social media, too. So that’s another cheap and easy way. You just follow one of their social media accounts and if there’s a legislative change no doubt it will be broadcast on all the social media channels of government regulators. So that’s a really simple, easy way of staying across some things as well.

Prue:

Absolutely.

Matt:

OK, well that brings us to the end of today’s Webinar. It’s been almost a full hour. We thank you very much for all your attention over the 50 or so minutes and we hope you’ve got a lot out of it. Ways to stay in touch with the ACNC, just that’s a nice segue from the last answer to the question is to sign up to email updates on our homepage and the commissioner’s column. We’ve got lots of web guidance, video content, and podcasts on the website, too. Webinar’s such as this on other topics of course. And if you have any questions you can email us, questions about your charity and operations and that sort of thing, email us at advice@acnc.gov.au and of course we’re very active on social media, too. And if you have any comments, questions, or feedback about the Webinar specifically then shoot us an email to education@acnc.gov.au, we’d love to get your feedback on these Webinars and ways to improve them and make them more useful for everyone.

And on that at the very end of this once you close your Webinar there will be an option to do a very short survey. I think it’s only two, maybe three, questions. It takes maybe 15 seconds. If you could do that, that’s really helpful, too. We get a lot out of that and you can give us your comments about today’s Webinar in particular.

So once again, thank you for attending. We look forward to seeing your attendance again at a Webinar in the future. Thanks Prue.

Prue:

Thanks, thanks very much everyone.

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