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This webinar focused on how the ACNC investigates charities. It explained to charities - and the wider public - the processes the ACNC works through when looking at charities, how we respond to public concerns and the compliance actions we can pursue.

Webinar transcript

Chris Riches

Hi everyone. Happy new year. Welcome back to the ACNC's 2020 webinar schedule. Today's webinar, we will aim to shed a little bit of light on how the ACNC investigates charities.

Today we'll work to explain to charities as well as any members of the wider public that have joined us today the types of steps and processes the ACNC works through when looking at charities as well as how we respond to public concerns and the compliance actions we can pursue.

My name's Chris Riches. I'm from the ACNC's Education team. Joining me today is Ian Parry, who is a Senior Compliance Manager in our Compliance team. Hi, Ian.

Ian Parry

Hi Chris and hi everyone. It's great to have this opportunity to provide information and raise some awareness about how the ACNC investigates charities.

Chris Riches

Indeed, indeed. Now, we've got a bit to get through, as seems to be the case always, so I'm going to quickly cover our usual housekeeping points before we launch in. If you've got any troubles with the audio for the webinar, you can try listening through your phone, you can call the number listed in the email you will have received when you registered. There'll be an access code you can put in and you can listen to the webinar that way.

You can ask a question at any time through the webinar by using the tools in the GoToWebinar panel on your screen. We've got a few colleagues. We've got Matt, we've got Sarah-Jane - who else have we got, we've got Gulnaar - who are all helping out and all going to do some typing and some bits and pieces.

We're going to try to answer all the questions that will come through during the webinar but, depending on the quantity of them, we may not get to every single one. If your question isn't answered through the webinar, we will get back to you later on via email.

Also just a quick reminder that, while we can help answer general queries you may have, any compliance-specific queries that your charity might have might be better directed to our advice support line, and that's 132262.

They can access - they can help out with some more individual queries and give you some individual advice and information too.

We're recording this webinar, as you probably already know. The recording as well as the transcript and the presentation slides, they'll be published on the ACNC website in the coming days.

We will send out a follow-up email to everyone who's registered to let you know that it's available. The follow-up email will also contain all the useful links and all the other resources that we mention through today's webinar.

Now, one thing we do have is some handouts. One of them is the list of useful links and resources. Now, our handouts, if you're interested in grabbing a couple of them, we'll reference them during the webinar today, but they are available. If you have a look on your GoToWebinar interface, you should see a handouts section.

Now, there's four handouts available, including the actual slides that you're about to see. You can view them or download them for later on, depending on what you wish to do. So have a look and, if you want to have a look at a couple of the handouts, feel free.

Finally, we value your feedback. If there's any way that we can improve our webinars, let us know. We have a short survey at the end of today's session.

All right. That's the preliminaries done.

What we're going to cover today. First thing we're going to do, we'll give an outline of the ACNC's regulatory approach; how, as an agency, we go about regulating Australia's 57,000-and-a-bit registered charities. This is an important starting point, important context when it comes to looking at charity investigations.

Ian Parry

Thanks, Chris. Yes, and we're also going to have a look at how the ACNC receives concerns and what the ACNC does with the concerns when we receive them, the processes in place and how we communicate with charities and work with them.

Chris Riches

Third thing we're going to look at is obviously the investigations process; what happens in a situation where there's an investigation? What are the steps, what do we do, how long these things take, the processes and what they involve.

Ian Parry

And we'll also look at the types of actions the ACNC can take in response to the concerns that we receive and the investigations we undertake, as well as explaining in a bit more detail the range of actions that we take when we receive these concerns.

Chris Riches

And the last one: facts, figures and dispelling myths. We're going to dispel some myths about our processes and that sort of thing. We're also going to provide some facts and figures and some clarity about what happens when we obviously receive a concern or investigate your charity.

So, that's the to-do list, that's the rundown.

Now, ACNC investigations and that sort of process are overseen by our compliance team. As we can see here, the compliance directorate and team - we'll call them a team; it's probably a better way of putting it - works to address risks that pose a threat to the trust and confidence in the charity sector. Now, Ian, broadly, what are some of the things that the compliance team do to fulfil this role?

Ian Parry

So primarily it's about identifying concerns and make sure we respond appropriately to address those concerns, but principally the starting point, I think, is about gathering information.

So we get information from a range of sources, including the public. The public can be a wealth of information to help the ACNC understand what's happening in the charity sector in terms of non-compliance. So the public has options to present information to the ACNC.

Our principal resource is a web form that's available on our website. That allows people to submit information to help us understand issues that are affecting charities and non-compliance. They can also present information over the phone if they choose to do so, or through written mail.

Just quickly, in terms of gathering information, I think it's also important to point out that we don't only rely on the public; we also get information from other government agencies who we cooperate with, and also publicly available information. A lot of the information we receive comes to our attention through the media.

Chris Riches

The next sort of, I guess I'll call it step but the next point is the monitoring of charities and whether they are meeting their obligations, and obviously then the response to the charities if they're not meeting their obligations.

Again, sort of a logical flow of behaviour, I suppose, from what the compliance team have to do.

Ian Parry

Yeah, that's right, and you mentioned earlier that there's 57,000-plus registered charities, so a principal function that we serve is monitoring those charities to identify those ones that best need to be addressed so that we support that public trust and confidence, and, as I mentioned, when we're responding to those concerns, we're looking at what the appropriate action is to support the charities first and foremost but also, if we need to take some kind of enforcement action, we'll do that.

Chris Riches

And that leads nicely into what you see on your screen at the moment, which is our regulatory approach. Self-explanatory. It's how we approach the regulation of charities. Now, this includes, I guess, the processes and actions that we need to cover.

We're obviously talking about how we investigate charities, Ian, and what is really important in understanding this in context is to understand our regulatory approach and to understand that there are, as you said just then, a number of actions we can take before things actually escalate into an investigation.

Ian Parry

Yeah, that's right.

Chris Riches

Our regulatory approach. What is sort of the general thrust? I mean, you can probably read it off the screen there but, when we talk about information and support and education and guidance, why is that where we start, I guess?

Ian Parry

I think the way I'd respond to that is by saying that we really do want to provide education and support to charities that are wanting to do the right thing and provide a charitable service to support the Australian community. We're certainly not out there to get charities. That's not what we're about.

We will initiate the work that we do with that mindset that, where charities are trying to do the right thing and they may have got off track a little bit, we'll help them stay on track or get back on track, where they actually are responsive to the concerns that are raised.

You know, there are always going to be those number of charities that aren't willing to do the right thing and work with the ACNC and we have to take a little bit more of a forthright approach there, but certainly the starting point in our regulatory approach is education and support, and then it's a more graduated approach where we take more forceful actions.

I should say now that, if you people are interested in looking in more detail at the Regulatory Approach Statement, it is published on the ACNC website if they want to look at that in detail.

Chris Riches

And the link is there at the bottom of the screen there, so definitely go and have a look.

Now, this is one of our handouts. It's again also on the website as well, so, if you can't quite see it on the screen, don't fear. You can go and have a look at it on the website. This is our - we call it our pyramid of support and compliance.

This sort of bears out what we've just - or what Ian has just been talking about. The base that we build upon is education and support, the guidance materials, education advice, capacity building, all of those sorts of things. Even down to things like reminder letters. That's our base point, that's our starting point. So this is the context through which we talk about today.

Now, when we talk about educating and guiding charities, how do we do that? There are obviously website resources, all manner of website resources; there's our Governance Hub on the website; webinars and podcasts like the one you're in right now; our self-assessments and our self-assessment tool; and obviously, again, our advice staff and phone line, who do a great job.

Ian Parry

And I think I'd like to sell some of these resources because I think it can be valuable to assist charities to support them in the governance that they're trying to implement with their charities.

I mean, the Governance Hub is a relatively newer resource where we bring together a lot of those tools to support charities, and I've actually got it open in front of me at the moment, and the Governance Hub has links to Governance Standards, the Governance Toolkit, also a Small Charities Library because we appreciate that it can be challenging for small charities with limited resources to actually take up that governance and implement good governance, but these tools are there to support them to do the work they're doing.

Chris Riches

And again, I mean, these are tools that any charity can access. You don't have to be a charity that might be in contact with the ACNC in terms of any compliance or anything like that. Best to get in and try and have a look at some of these resources before you stray out of the - I guess, from what - between the flags or whatever it is, so yeah, just have a look.

Ian Parry

That's right, and they are designed to actually support charities, and we appreciate that it can be quite daunting for charities and maybe a new volunteer's come into a charity to take on a role.

Where do you start? It can seem overwhelming. But the resources are designed there. You know, we've got checklists and tools similar that allow people to actually understand how to lead into that road to good governance.

Chris Riches

Now, we've talked about the education side of things and all that sort of stuff. We also, as it says here - we will, if we do need to use our powers when charities do not act lawfully and reasonably.

Now, that might mean a response from nearer the top of the pyramid that we just saw and, in that case, it might be some action, some sanction and some revocations there. So we have a basis and we work from a certain point but that doesn't mean that we won't veer somewhere else and perhaps look at something a little bit harsher if required.

Now, we've got a question here. Here we go. How many "in jurisdiction": concerns did the ACNC receive in the 2018/'19 financial year?

Now, answer this one in your heads, those who are with us today. Whilst you're having a think, Ian, when we say "in jurisdiction", can we just - bit of clarification. What does that actually mean?

Ian Parry

Yeah, absolutely. So as a regulator of charities, we have legislation that we adhere to. So anything that's in jurisdiction needs to fall within our legislative powers, so basically looking at complying with the ACNC's Governance Standards.

That can include ensuring that funds and assets are being used for charitable purposes. Where they're not used for charitable purposes, of course that's a concern. Making sure that charities are accountable to its membership. Ensuring that charities have not been involved in fraud or criminal activity.

And they also need to ensure that the Responsible Persons in the charity are following the duties of the Responsible Persons. We often internally refer to that as Governance Standard 5, but that's an important one. They need to make sure they adhere to responsible financial management, act with care and diligence in the best interests of the charity, among other things.

Can I also say -you might also work to complement that by saying what is outside the ACNC's jurisdiction, what we can't deal with.

So first and foremost, we regulate registered charities. So it's not mandatory for charities to be registered with the ACNC, though a lot do because the big carrot there is the tax concessions that charities get, but if a charity chooses not to be registered with the ACNC, if we receive a concern about that charity, it would be outside our jurisdiction and we wouldn't be able to act on that.

We may refer that to other regulators who could take action though.

Issues that relate to fund raising is outside our jurisdiction, although we do look at charitable funds when they are received and make sure they're applied for an appropriate purpose, but we can't take action in internal disputes.

Also the quality of services charities provide; again, outside our jurisdiction. They're just examples of others. We have more information on our website but they're the key ones there.

Chris Riches

Definitely, and that's a good explanation because, again, a lot of the enquiries we get and that sort of thing often come to us and there is that line of where our jurisdiction might end and where someone else's might be or what is simply outside our jurisdiction, so that's good to know.

Ooh, now, drum roll. Here's an answer. There it is - 1,500, actually, as you can see on the next slide because we're going to have a look at some numbers - 1,544 concerns were in the ACNC's jurisdiction during that period of time.

Now, 667 of them came to us from members of the general public. Charity employees and charity Responsible Persons were also responsible for a significant number of concerns that were expressed to us.

Now, also on that slide right there we've got some information about what some of those concerns centred around.

Ian Parry

Yeah. So I'm happy to cover that, and those concerns covered a few areas.

Some of the key ones. A lot covered claims of private benefit or where a charity may have been alleged to have had a criminal or improper purpose. Also issues of poor governance and charity mismanagement were also a significant focus for the concerns that we received.

Chris Riches

Now, we just mentioned some key issues here, so how some of those key issues marry up with ...

… Big apologies. We had lost sound and now we're back, so that's lovely.

Now Ian, when we were actually in radio silence, you were speaking about one of the best ways to mitigate some of these things is to have good solid, robust policies.

Ian Parry

Yeah, yeah, that's right. It's about having good governance and strong policies and processes to support that good governance and having policies and processes around conflict of interest and financial management, but also including how your charity provides information to its members.

That can go a long way to mitigating these risks occurring in your charity, and again I'm going to point that to those resources we have on the website. If you're asking questions about how do I do this, how do I have a policy around us, the resources on our website will assist charities to do that.

Chris Riches

And again, that dovetails back to our entire rehabilitory approach where the bedrock of what we're trying to do is education, is helping charities with these policies to put them in place and to make sure that they're the best they can be.

Ian Parry

Yeah, that's right.

Chris Riches

Now, there are, as we've called them here, as they're called, priority areas of compliance as well. These are the issues that are deemed so serious that they are always a priority when it comes to the compliance team's work and the ACNC overall.

Now, thankfully these don't happen very often but their nature is so serious that they are always a priority. Now, you can see them here up on screen.

Fraud and financial management is one, and we're talking serious stuff here. We're talking things like money laundering, tax avoidance.

Private benefit we've mentioned but private benefit can really get into the realms of very serious if there's a lot of - I'll say the wrong stuff happening.

Ian Parry

Yeah, that's right.

Chris Riches

We've got terrorism as the second one.

Ian Parry

Yeah, I should probably clarify that it's about terrorism finance. There are law enforcement authorities that, of course, deal with terrorism and respond to that.

Chris Riches

We don't deal with that.

Ian Parry

The ACNC's about ensuring that the charities have effective governance in place to ensure that they're not at risk of terrorism financing. So we will be involved in those areas if that's a concern that's brought to our attention.

Chris Riches

We've got safeguarding people here and that's a nice antsy term for just making sure that you're doing the right thing by all the people that you have contact with.

It's safeguarding. We talk vulnerable people here. We might be talking children. So if there's a failure to safeguard people, if there's a failure to properly look after charity beneficiaries, charity staff, charity volunteers, we see that as the priority area of compliance. And the last one is political or, obviously, unlawful activities.

Ian Parry

Yeah, that's right, and that's actually a disqualifying purpose, so it's pretty - you know, it happens in rare occasions but it is important to understand that you can actually lose your entitlement to be registered as a charity or disqualified as a charity if you have a political or unlawful purpose.

Ian Parry

Not so much activities, although where there are activities involved we'll look to see if that points towards a purpose, but if a charity actually takes that step and has a purpose to do those things, that can be disqualifying.

Chris Riches

Now ooh, hello. Slip on a banana peel here. We're going to look at risk and risk assessment. Now, this is another step along the way to the investigation side of things.

Risk assessment, we've had a look at some of the compliance work, compliance team, regulatory approach, that sort of context and that sort of background.

Again, this context is important when we are looking at the investigation process. Again, it's probably a good time here to emphasise that when we receive a concern we don't just jump into the deep end and we don't just launch an investigation. One of the key steps that we've got is the risk assessment, isn't it, Ian?

Ian Parry

Yeah, that's right. Prior to commencing any investigation, we'll undertake a risk assessment to get a better understanding of all the circumstances that we need to know so that we can make an informed decision about what's an appropriate response to the concern and the information that we have.

Chris Riches

Now, risk assessment. The aim of a risk assessment is, as it says here, to identify the highest priority risks and intervene before either initial or further harm can be done.

Now, the ACNC conducts both proactive and reactive risk assessments.

Ian Parry

Yeah, I'm happy to explain that a little bit further.

Chris Riches

We've got it here but what's the difference?

Ian Parry

Yeah, as it says on the screen, a proactive risk assessment is where the ACNC initiates an examination of a charity. So we'll actually look at the information that we have on hand through the information that we gather from charities. Could be the Annual Information Statements.

It can be the financial records. And a key one, again - I think I mentioned it earlier - is we do cooperate with other government agencies to ensure that we do have a whole-of-government approach to make sure that the charity sector is operating in the best interests of the Australian community.

So they're the proactive risk assessments. The reactive risk assessments I think people can understand just by the term itself, is one where we undertake action in relation to concerns that we receive from the public, so things are brought to our attention.

I'd also throw information that comes to our attention through the media as a reactive risk assessment as well. That's coming from the public, in a way, but it's not coming from individuals. Concerns are being brought to our attention to the media.

Chris Riches

Now, a thinking person here. What does a risk assessment involve? Now, we've got - the next couple of slides probably give a bit of an explanation as to what risk assessments involve.

The first step or the first thing to think about is the consideration as to whether there are threats or vulnerabilities within a charity.

Ian Parry

Yeah, that's right. I'm happy to talk to this point a little bit and give a little bit of clarification there. So really there what we're looking at is does the charity have robust governance to mitigate these threats and vulnerabilities, and I might use an example here.

An example where a charity might be sending funds overseas to support operations or charitable initiatives overseas. What kind of governance do they have in place to ensure that that money is used for the purpose that it's intended and it's not being diverted for purposes that it isn't intended?

Worst case scenario, could be diverted for terrorism financing, but it can just be diverted for private benefit as well.

Chris Riches

So that sort of step, I guess, is the idea, perhaps, of taking a wide view and having a little bit of a look at the charity and saying what is their situation, what do they do, what might they encounter or what could they encounter? So it's that wide view, I guess, isn't it?

Ian Parry

Yeah, that's right.

Chris Riches

The next step and the one on the next screen - determining how likely it is that the harm will occur in the future and considering the consequences if the harm occurs in the future. They sort of go a little bit hand in hand, I suppose, don't they?

Ian Parry

Yeah, that's right. I mean, we're looking at the level of severity and the likelihood that that will occur, but certainly where situations are severe and the harm can be significant, that's something that would elevate the risk assessment and actually lead to a more likely outcome of investigation.

Chris Riches

And determining risk levels and the intervention needed, which we've sort of discussed around there.

Ian Parry

Yeah, that's right, yeah. I mentioned the likelihood that it can occur. It can range from being unlikely to likely or certainly, and also the consequences. Consequences may be insignificant.

The charity may have already had things in place to mitigate the consequences that may be negative, but there can also be major consequences as well.

Before you raised one of our priority harms, which is safeguarding vulnerable beneficiaries. The threat to public trust and confidence if there are issues where vulnerable beneficiaries are being harmed is significant, so that's an example of where we would certainly step in and take action.

Chris Riches

Now, our thinking person is back again asking another question. How does a risk assessment determine if an investigation occurs, and again there's some considerations.

First one - and we talked about in jurisdiction before, so this is sort of a little bit linked to that - is there another regulator or agency better placed to act?

Now, that might be because it's clearly outside our jurisdiction but it also might be that that regulator - what's the phrase - is in a better position, is at the front of the queue when it comes to trying to act on something like that.

Ian Parry

Yeah, that's right. People may be familiar with the term "red tape reduction", which is something that we keep in the forefront of our minds at the ACNC.

We certainly don't want to make life difficult for charities where it's not necessary and, if a charity is already actively working with another regulator to address concerns, the ACNC can follow in the trail of that and certainly receive that information to inform what decision we would take. We wouldn't expect a charity to go through that entire process again and absorb all their time in administration.

Chris Riches

And the other two points, as you can see here on the screen: is the charity capable or willing to work with the ACNC and address the issue, and what is the most efficient response to deliver the desired outcome?

So they're three key things that are considered when we look at whether the risk assessment then leads to an investigation and that happens pretty much every way, every time that you're looking at this sort of stuff, doesn't it?

Ian Parry

Yeah, that's right, and I mean that second dot point - is the charity capable and willing to work with the ACNC to address the issue - that's such an important factor.

That's where education and support becomes a significant consideration if we do have charities that are transparent and accountable and willing to address the issues and work with the ACNC.

Where they're not, of course, then the ACNC may need to take a more forthright action and that can lead to more severe outcomes, but yeah, again I'd like to continue to reiterate the education and support that is available to charities.

What is the most efficient response to deliver the desired outcome?

I think it's really difficult to give a definition around that because it can be case by case depending on the circumstances and I think it's important that we do take the time to consider the individual circumstances of the charities that we're dealing with.

Chris Riches

Oh, absolutely. And yeah, charities are all shapes and all sizes and all bits and pieces, so, to have a one size fits all is just simply not going to work. So yeah, to look at individual charity situations is a very important part of what's done.

Now, as you can probably guess by what's up on the screen, the process comes to formal investigation. So we've covered the processes through the ACNC receiving concerns, risk assessments. That's the context. That's the background.

Formal investigations. Now, if you remember, the number we noted earlier on in our little quiz, the ACNC received just over 1,500 in-jurisdiction concerns in the 2018/'19 financial year.

As you can see on the screen right now, we finalised 100 investigations during that same period. So you can see the contrast, the contrast between the two numbers. We've gone from 1,500-and-something to 100. Why is there - what is the contrast?

Not everything clearly goes from concern to investigation. We've talked about risk assessment so obviously there'd be ways and means of addressing things through that process and communicating with charities. What do compliance do in that respect, I suppose?

Ian Parry

I think the key point to make there is when the ACNC will act, we'll act in situations where there's a serious risk to public trust and confidence and it relates to a charity's compliance with its obligations under the ACNC legislation.

But there's a couple of funnels that our concerns go through before we actually get to a point where we would consider commencing an investigation.

I think the first funnel is those concerns in jurisdiction which we have a large number of - over 1,500, as you mentioned. We'll actually look at the details of those concerns on face value initially and actually identify whether we feel the concern is a low, medium or high risk.

Again, when you think back about our priority risk areas - terrorism, finance and significant private benefit, amongst others - they're the kind of things that would lead to a higher risk.

Now, once it passes through that funnel and we've actually got down to a more manageable number, that's when we'll actually undertake the risk assessments for those high-risk concerns.

That's where we'd bring in a lot more information. We may reach out to other government agencies. We'll do a little bit of a scan of information that's publicly available through the media. We'll even look at websites, open source information, including open source information that relates to the charity itself, so if they've got Facebook pages where they're raising money and things like that.

We'll take all that information into consideration when we're conducting a risk assessment, and again we spoke about risk assessments previously but we'll be looking at the likelihood and the consequence, actually have a look at those risks following the risk assessment which are more high risk.

That's where we would be considering to commence an investigation.

Chris Riches

And, as it says here, there is a set process the ACNC adheres to when it comes to investigations but, like each charity is different, each investigation is different. So again, not a one size fits all, and that's very important to note.

Now, first, I guess, step here: gathering information, again. It's an important part of, I guess, any investigation process. Now, I'm guessing that we probably can't tell everyone any detail about how we gather information, because obviously we can't. Generally speaking, you've mentioned a couple of things about information gathering. Anything that you wish to add in addition to that?

Ian Parry

Yeah, well at the risk assessment stage, like I said, we'll try to bring together as much information as we can to make an informed decision about whether we will commence an investigation.

When we do commence an investigation and it is necessary to do that because of a high risk concern, we will commence an investigation and send a notice of that investigation to the charity. There's two ways that we can do that and that's what that first dot point on the slide's alluding to.

Chris Riches

Formal powers versus voluntary requests.

Ian Parry

Yeah, by and large we will look to work cooperatively with charities and give them an opportunity to voluntarily respond to an information request and submit information to the ACNC so we have a better understanding of the circumstances and we understand the charity's perspective of the matter.

Where it's necessary, we can actually use our formal powers through a formal notice, which requires a charity to provide information to the ACNC.

Chris Riches

And that sort of leads to the next point here too: engagement with the charity during the process. What do we look for when we engage with the charity? There's obviously a couple of little cheat notes there on the screen. Things like its responses and its willingness to address issues. These are things that are taken into account, aren't they?

Ian Parry

Yeah, I think so, and we appreciate the charities will have their side of the story and it's important for us to understand that but I think what we're looking for is we're looking for transparency and accountability from the charity, and if they have that opportunity to respond to the concerns that are presented to them and actually present evidence then that's a really strong basis for us to consider whether it's appropriate to finalise an investigation with education and support.

So we're really looking at that cooperation from the charity, to be open and accountable and actually let us know what's happening in their charity.

Chris Riches

Now, we've talked previously - in the last few minutes, actually - about high risk concerns. We will investigate high risk concerns, and again, when we do, we will engage the charity, we will gather information, we'll assess the charity's responses, which is that process, again, I suppose, so we won't go into that again because we've gone into that.

Important note here, and we've said it a couple of times and we'll emphasise it here again: charities will usually have the opportunity to reach compliance during an investigation rather than have an adverse finding made against them.

So when we investigate, the ACNC will still, through its constant contact with the charity, still say, "Hey, get right with us. Do the right thing and, if you're doing the right thing, well then, thumbs up to you." That's the way we work?

Ian Parry

Yeah, that's right. I mean, we, of course, can't make a promise that that outcome will eventuate where there are serious concerns and significant non-compliance. Even if the charity says, "Oh well, we want an opportunity to do the right thing," the circumstances may require that we take a forceful action, but it's part of our toolkit that we will consider whether education and support is an appropriate outcome.

We will certainly consider doing that where it actually is in the best interests of the charity and the charity is willing to get back on track and it actually - it mitigates those concerns about significant non-compliance if they do want to get back on track and are able to do so.

Chris Riches

A couple of other points worth mentioning when we're talking about formal investigations: information management and secrecy. I might get Ian to expand on a couple of these.

Ian Parry

Yeah, I'm happy to respond to those.

Chris Riches

What do we mean when we mention this?

Ian Parry

Yeah, I guess the word that jumps out at me there is the word "secrecy" because the ACNC does have secrecy provisions which require us not to disclose information about the investigations that we are undertaking.

We have ACNC-protected information, which we means we can't disclose that information, unless there is a lawful provision in our ACNC Act to do so. In certain circumstances, we are able to share information with other Australian government agencies where it falls within the powers and functions of that other government agency but otherwise the general public, the response would be no.

There are very limited circumstances where we can disclose information to the general public. I mean, that gives charities a little bit of reassurance that, while an investigation is on foot, that information isn't going to be disclosed prior to an outcome.

However, it does have a little bit of a two-edged sword kind of approach where a lot of times the ACNC is taking action but, because we can't actually say what's happening, the public perception might be that we're not actually taking action.

Our approach is that we need to adhere to the secrecy provisions and we will wear that feedback but certainly the secrecy provisions, of course, don't prevent us from cooperating with the charity and sharing information with the charity.

Chris Riches

Now, charities engaging legal representation. Is that something they do? Is it a common thing? What happens there?

Ian Parry

There's no obligation for charities to seek legal representation when they are under investigation by the ACNC but it's something that the charity may wish to consider to support them to be able to respond to an investigation by the ACNC as the charity's regulator.

It does come at a cost to the charity, of course, unless you can get pro bono legal advice. However, it's just one of those things that charities need to weigh up the circumstances that they're involved in and what is it in the best interests of the charity to do, but certainly, if charities are feeling overwhelmed and they feel that it is appropriate to get legal representation, they're entitled to do so.

Chris Riches

And the third point: communicating investigation outcomes. Now, we've probably touched on that with what was just discussed a little while ago. When it comes to communicating investigation outcomes to the charity, however, what is the process there?

Ian Parry

So when an investigation's finalised, we will send out a finalisation letter to the charity letting them know what the outcome is and that can range through a number of different actions in our toolkit, which I think we'll go into later. I won't chat about it now. But certainly we do share the outcome of an investigation with the charity.

As I mentioned before in secrecy, we don't more broadly talk about the outcomes of investigations to the general public. Only in certain circumstances are we able to publish information on our ACNC Register.

Revocations is a good example where we'll publish or revocations on the ACNC Register but not the actual details of the reasoning behind the revocation. We can also publish some summaries of information of our enforcement powers. There have been a number of occasions in the past where we've done that.

Again, if people are interested in more detail about that, they could go to our website and actually search up the compliance actions and there's a list of information that we have published on investigation outcomes.

Chris Riches

And I think that might be also a link that's in, perhaps, the handout. We'll also send that link through when we send out the email afterwards.

Now, how long we take to investigate a charity can vary. Investigations are not set down for a predetermined length of time, but we do have some guidelines on progressing investigations and they come through our service standards. They're the targets we strive for when conducting or completing certain tasks. There are service standards that cover charity investigations. They're pretty straight forward as you can see on the screen.

Investigations finalised within six calendar months, our target is 60%. Investigations finalised within 12 calendar months, our target is 90%. is the place to go if you want to have a look at those.

Ooh, hello, that's bright. Action. There we go. Before we go any further now - we've gone through, again, the logical steps towards this end of the process.

What this shows and what all this context shows is that there is a lot of work that goes on from a compliance perspective before we get to a point where we actually take action.

It's the iceberg under the water. It's the duck paddling on the pond. The actions we can taken in response to an investigation, they're many and varied and they can range from perhaps something that might seem minor to something that's rather more significant.

These two statements are significant, and again they reflect our regulatory approach. Our response to non-compliance is proportionate. We are committed to helping genuine charities get back on track after they encounter compliance issues.

Keep these thoughts in your mind as we go through the next few slides because, again, it provides context when we discuss the actions that the ACNC can take.

Ian Parry

Yeah, and Chris, can I jump in and say it's been a bit of a theme of the webinar today where we've focused on education and support and I would say that that's true.

We are committed to helping genuine charities get back on track after they encounter compliance issues. I think the slides that are upcoming are going to look at those consequences where charities aren't willing to cooperate and we take some more forceful action, but I would say that yes, we do have in our mind that regulatory pyramid which the foundation is education and support, and we're not really about punishing charities twice.

We don't want to - as a regulator - we don't want to come in where a charity's been through a difficult situation and they've been a victim of fraud. If they've responded to that appropriately, have taken action themselves and have been transparent and accountable, as a regulator we'll come in and we'll have an understanding of that.

It's situations where charities try to sweep matters under the carpet that are a little bit concerning. I think everyone appreciates that that is a reasonable approach to take, and we'll talk more in the coming slides about some of those more forceful actions.

Chris Riches

Now, as has been mentioned, we've got a lot of tools in our toolbox when it comes to our role as a regulator. The key thing for us to determining the right tool to get the best result.

So again, our starting point is with education and guidance. Some charities may receive education or a request to complete a self-evaluation. This aims to, as it says here, educate a charity so it arrives at voluntary compliance rather than attract further compliance activity.

Now, that self-evaluation, again there's a link there at the bottom of the screen. That is a really useful tool and it's also a tool that is a proactive one, isn't it?

Ian Parry

Yeah, that's right, Chris. So it's all about supporting charities to have good governance and our use of a self-evaluation tool in the compliance team - we will communicate with charities and send out the self-evaluation tool or a link to it asking charities to complete the tool themselves - that may or may not be part of an investigation process.

So we can actually do it as a predecessor to an investigation if we think that the concern is not of a higher priority.

Just giving a charity an opportunity to understand how to get on the right track to good governance and steps that they can take to do that.

Where it does happen with an investigation, that's probably a response where a charity is able to respond to the concerns that we have raised with them and actually evidence to us that by and large they are attempting to do the right thing or get back on track.

We will just issue a self-evaluation letter to allow them to be aware of their broader obligations as a registered charity.

And I think the point you made about that link there is, while the compliance team may send out a self-evaluation letter to a charity in response to information or concerns that we receive, it's a valuable tool for all charities.

Chris Riches

Yeah, it is.

Ian Parry

So they can jump on the website just to use it as an opportunity to improve their governance or respond to maybe a transition in personnel. That's a really good tool to help charities understand their obligations.

Chris Riches

Now, if we're not satisfied with the charity's actions or response during the investigation, there are different tools that we maybe - they might be slightly sharper tools that we can grab from the toolbox and use.

We can impose an enforcement action or a compliance agreement. We can also revoke the charity's registration. Now, briefly, what's an enforcement action, what's a compliance agreement?

Ian Parry

So there's a lot happening on this slide, I think, the different actions that we can take in response to an investigation, and I probably would point people back to that pyramid. I think it's a really good visual and kind of shows the different times that we would take different action.

At the top of it is revoking a charity's registration. In the most serious circumstances where a charity isn't able to get back on track and they're non-compliant and concerns are significant, we are able to revoke the charity's registration.

I guess people would be interested to know what the consequences of that, and it can be a loss of tax concessions through the Australian Tax Office, so that can have a significant impact on a charity if that is to occur.

Probably down the pyramid a little bit in terms of our graduated and proportionate sanctions are our enforcement actions and compliance agreements.

So in doing that - enforcement actions are available to a certain type of charity. That's probably the reason why they aren't widely used. There are a limited number published on our compliance actions.

But certainly, as part of the investigation process, we would be communicating to charities if they are subject to enforcement actions in response to work that we are taking.

The pyramid has - there's a number of enforcement actions we could take, including enforceable undertakings, directions, even suspending or removing Responsible Persons or directors of the charity.

Compliance agreement is probably something where, if we see that the circumstances that the charity is dealing with are significant but it's appropriate to allow a charity to remain registered, we can actually work together with the charity to implement some expectations or terms that we would expect them to adhere to.

We could do that over a three, six or 12-month period to allow the charity to get back on track and report back to us.

Of course, it is important, if we do give charities that opportunity to enter into a compliance agreement, that they actually use that opportunity and get back on track, because the investigation remains ongoing and, if they don't and the non-compliance is still a problem, then we would consider continuing the investigation and then that could lead to other use of enforcement actions or even revocation.

Chris Riches

Second question. Quiz question, there we go. How many charities had their registrations revoked after an ACNC investigation during the 2018/19 financial year? We will give you a couple of seconds of think music. Have a bit of a look and think.

Again, gives us an opportunity to reflect on the numbers. 1,544 in-jurisdiction concerns. 100 investigations during the same period. So again we're working down the numbers here. Drum roll. There we go. It's 12. There we go. So we've gone from 1,500 or more concerns to 100 investigations being finalised to 12 charities having their registration revoked.

What it shows is the number of the themes that we've been talking about here, the proportionality of our compliance work, the ways and means - we've got various tools in the toolbox and how we go about using them, and it's only an end point, I guess, where we're looking at this figure of 12. So that gives you a bit of a context as to where we head when it comes to these numbers.

Ian Parry

Yeah, I mean, what I would say there is I think the fact that we start out with more than 1,500 concerns in our jurisdiction and that funnels down to 12 revocations, I think it emphasises that we take steps to work together with charities who are willing to do the right thing, and it's only in those circumstances where there are serious and significant issues where charities are not willing to be transparent and accountable or work with the ACNC that it winds up with a revocation.

Chris Riches

Now, we've got some numbers here again. We'll whip through these ones relatively quickly because we're getting towards the end of proceedings here. 100 investigations, as we know. 12 registrations, charity registrations revoked. 25 compliance agreements. 52 charities received regulatory advice. Super quickly, what is regulatory advice in this context?

Ian Parry

So regulatory advice - I mean, I think the important word there is "advice".

If we're identifying issues in an investigation and then we see that there are steps that a charity could take to address that and they are not significant or serious issues that we would allow and trust the charity to respond to that, then we will issue them with some regulatory advice.

It may relate to them needing to adopt some policies and processes around a range of issues. Could be record keeping, financial management, those kind of things.

Chris Riches

And these figures, by the way, are contained in our annual report. There's a link to the annual report there down the bottom of the screen.

Last bit. Myths versus facts. So we've got four myths and a couple of them we've already covered, so we're going to get through these pretty quick, I think, but just, again, clarify some of the myths, some of the beliefs and what the actual facts are.

Charities will receive information about the concern against them. That's one myth. The fact is, as we've discussed, we have to protect the privacy of people or agencies referring information to us, but, if the information is being relied on to make an adverse finding against a charity, we will put that information to them.

So we're not going to conduct it in radio silence. We will put that information to them so they have the chance to, I guess, respond, won't they?

Ian Parry

Yeah, that's right. I think there's two kind of ways to look at this kind of myth and the answer is right in terms of charities may be interested to know the source of the concern but certainly, as the ACNC compliance team, we have an obligation to protect the privacy of individuals and we can't disclose that information to a charity.

However, the flip side of that is the detail of the concern itself where it doesn't disclose any information about the source of the concern.

We would be open and transparent, as we would expect charities to be, and present that information to them so that we can make an informed assessment of the concern.

Chris Riches

Second one: charities have no chance for input in response to concerns or during investigative processes.

Ian Parry

I think I just answered that.

Chris Riches

Yes, I was going to say, and I think we've spent a good portion of the last 40 or 45 minutes answering that one.

So look, you can see the screen. Investigations give charities a chance to provide information and evidence - and evidence is misspelt so there you go - to help the ACNC understand their particular circumstances.

Ian Parry

That's right. Can I say that we do appreciate that it can be a little bit daunting or maybe come as a shock to charities when they receive an investigation notice but that doesn't mean that it's the end point and it's all doom and gloom for the charity.

It really is an opportunity at the start of the investigation for the charity to tell their story and respond to the concerns and take an approach that's open and transparent so that we can actually understand their circumstances.

Chris Riches

Third myth: the ACNC will help resolve charities' internal disputes. We've already covered this one. So answer is no, we do not.

Ian Parry

Yeah, outside our jurisdiction, yeah. But, having said that, there are options available to charities that are caught up in internal disputes -

Chris Riches

Absolutely right, yes, yeah.

Ian Parry

- to assist them. The first thing that charities should turn to is their constitution to work out how they should deal with matters and they may wish to seek some support that is available to manage dispute resolution.

Chris Riches

Fourth one: ACNC regulates charities' fundraising. Again, we've covered that and generally no. However - there's always a however - we will look into it when considering charity Governance Standards, including compliance with Australian law because, if a charity is not operating lawfully, big red flag.

So generally no. Some circumstances we will.

Ian Parry

Yeah. We certainly don't regulate fundraising. That sits with the different state and territory government authorities.

However, when funds are raised through fundraising, they become charitable funds and they must solely be used for the charitable purpose, otherwise that becomes a breach of the ACNC's Governance Standard 1, which is ensuring that charities have a not-for-profit purpose.

So yeah, there is a little bit overlap there with fundraising but the basic answer is that no, fundraising matters are outside our jurisdiction.

Chris Riches

Now, we'd normally pause here for questions. Due to our sound outage earlier on, what we might do is we might just gloss over that just quickly. I know that a number of you have been sending questions through to us and thank you very much for that, and we've had our friends answering them and typing away madly.

Again, if you've got any questions that don't get answered, feel free to perhaps email them through to us and we'll do our best to get back in touch with you.

So we'll wander on from that on, because what we're going to do is we're going to wrap up because we've taken up just about an hour of your time and we appreciate everyone hanging with us and putting up with the little bit of radio silence and generally joining us for a bit of an explanation about our processes and that sort of stuff.

What we've got, as you can see here, these are the ways that you can get in touch with us. There's all manner of ways you can get in touch with us. We will be uploading a recording of this session to our site before the end of the week. That will be our aim. All our past webinars are available too. Part of our whole education and guidance aim that we have.

So have a look at the past ones. While you're there, we've got a couple of others that are upcoming. If you want to register for one of them, go for it.

Stay in touch through these methods: our advice line, our advice services line, there's an email address. They're available from 9:00 till 5:00 Monday to Friday (that's Melbourne/Sydney time). You can email them there.

Before we finish, if you've got a few seconds, we'd really appreciate you complete the survey that pops up after the webinar. I think it's two or three really quick questions. It'll only take you a couple of seconds. We enjoy getting your feedback, so that would be great.

Thank you to everyone. Thank you to everyone - to Matt, to Sarah-Jane, to Gulnaar, who are all tapping away madly. Thank you, especially to you, Ian. Very informative. So thanks heaps for sharing that information and for your time.

Ian Parry

Thanks, Chris. Yeah, I really appreciate it and I appreciate everyone's participation today. I hope it's been a useful resource for you.

Chris Riches

No probs, and we will wander off. So until next time, we bid you farewell. See you later.