Transcript

Moderator : Matt Crichton

Good afternoon and welcome to the ACNC’s webinar on the obligations of registered charities.

I’m Matt Crichton. I’m a Communications Officer at the ACNC and I’ll be presenting today’s webinar, along with Anne Duffy who is one of our Advice Services Officers.

Hi Anne.

ANNE

Hi everyone.

MATT

With us today behind the scenes we also have Caitlin Patterson from our Advice Services team, Regina Rutten from our legal team and Amanda Watkins from our Compliance team. They’ll be answering your questions live throughout the webinar.

MATT

This session aims to help you understand what your core obligations are now that your organisation is a registered charity. Although it’s aimed at new charities, the information in this presentation will be of interest to all charities registered with the ACNC.

You can ask a question at any time in the GoToWebinar panel on your screen. Unless you let us know that you want your question to be private, all attendees will be able to see the questions that Marla and Beth respond to.

If you have any difficulties with the sound on your computer, try calling the phone number listed in the GoToWebinar panel.

If there are any questions we can’t answer today we’ll provide answers later. A recording of this webinar will also be available on our YouTube channel.

Finally, we value any suggestions you have to improve our webinars in the future. So please pass on your suggestions in the survey at the end of this session.

MATT

Let’s look first at what the ACNC does.

The ACNC is Australia’s national independent regulator of charities. As a specialist regulator of charities, we have a number of functions:

We register charities, who are then able to say that they have met our requirements for registration and have agreed to be accountable and meet our governance standards. With registration, they are also able to apply for charity tax concessions and other benefits.

Wemaintain an online database of every registered charity in Australia. This is freely available, searchable and used by the public, potential donors, volunteers, grant-makers and government. There is an increasing awareness of the ACNC Register, and it is being used more as a checking tool when, for example, government funding is being considered.

We provide advice, guidance and education to charities on their obligations to the ACNC. Advice is available via our phone line, email and mail service. Our guidance and education is accessible in print, online and face-to-face.

We also regulate charities by reviewing their compliance with our reporting and notification requirements, our governance standards and other requirements. We look into concerns about charities raised by the public and other government agencies.

And finally, we have a responsibility in all of our work to try to reduce red tape for charities, by ensuring our processes are as streamlined as possible and by working with other agencies to try to harmonise reporting and other requirements.

Now I’ll hand over to Anne to begin.

ANNE

Thanks Matt. As Matt explained, in today’s webinar, we’re going to talk about the obligations that all charities have as part of being registered with the ACNC. This information is relevant to all charities, but let’s start with some of the first few questions you need to ask yourself as a newly registered charity.

The first thing to consider is who at your charity needs to be aware of your obligations to the ACNC.

Your obligations to the ACNC shouldn’t take you very long to meet - but they will usually involve several people in your charity. While not everyone at your charity needs to be an expert on these obligations, its important that you know who is involved and that they have access to the information they need to meet them.

It’s a good idea to have a discussion with your board or committee about who at your charity has responsibility for these obligations. It’s up to you who at your charity this is and will depend on your particular circumstances such as whether you have staff, how many volunteers you have and what your other obligations may be. Somebody will need to take responsibility for ensuring that you are meeting your obligations and, as a board, you need to be satisfied that your charity is meeting its obligations.

The most important people who need to understand your charity’s obligations to the ACNC are your responsible persons.

MATT

Let’s look first at what the ACNC does.

The ACNC is Australia’s national independent regulator of charities. As a specialist regulator of charities, we have a number of functions:

We register charities, who are then able to say that they have met our requirements for registration and have agreed to be accountable and meet our governance standards. With registration, they are also able to apply for charity tax concessions and other benefits.

We maintain an online database of every registered charity in Australia. This is freely available, searchable and used by the public, potential donors, volunteers, grant-makers and government. There is an increasing awareness of the ACNC Register, and it is being used more as a checking tool when, for example, government funding is being considered.

We provide advice, guidance and education to charities on their obligations to the ACNC. Advice is available via our phone line, email and mail service. Our guidance and education is accessible in print, online and face-to-face.

We also regulate charities by reviewing their compliance with our reporting and notification requirements, our governance standards and other requirements. We look into concerns about charities raised by the public and other government agencies.

And finally, we have a responsibility in all of our work to try to reduce red tape for charities, by ensuring our processes are as streamlined as possible and by working with other agencies to try to harmonise reporting and other requirements.

Now I’ll hand over to Anne to begin.

ANNE

Thanks Matt. As Matt explained, in today’s webinar, we’re going to talk about the obligations that all charities have as part of being registered with the ACNC. This information is relevant to all charities, but let’s start with some of the first few questions you need to ask yourself as a newly registered charity.

The first thing to consider is who at your charity needs to be aware of your obligations to the ACNC.

Your obligations to the ACNC shouldn’t take you very long to meet - but they will usually involve several people in your charity. While not everyone at your charity needs to be an expert on these obligations, its important that you know who is involved and that they have access to the information they need to meet them.

It’s a good idea to have a discussion with your board or committee about who at your charity has responsibility for these obligations. It’s up to you who at your charity this is and will depend on your particular circumstances such as whether you have staff, how many volunteers you have and what your other obligations may be. Somebody will need to take responsibility for ensuring that you are meeting your obligations and, as a board, you need to be satisfied that your charity is meeting its obligations.

The most important people who need to understand your charity’s obligations to the ACNC are your responsible persons.

ANNE

The role of a ‘responsible person’ at your charity is an important one. One of the most frequent questions my colleagues and I are asked in our work is who is a responsible person and what do they do.

In your charity, you probably won’t call them ‘responsible persons’ – this is a term from the ACNC. Your responsible persons are the people who are involved in governing your charity. They are the members of the governing body and have ultimate responsibility for the way your charity is run or are otherwise involved in this capacity.

They are known by different names based on the structure of your organisation.

For incorporated associations, they are called the members of the management committee (such as your President, Treasurer and Secretary). For companies limited by guarantee, indigenous corporations and cooperatives, it’s your directors. For trusts, they are your trustees. You may also know them as other names, such as board members, governors or councillors.

It is a good idea to check your charity’s governing documents to find out who your responsible persons are and how they are appointed.

Whatever you call your responsible persons, it’s important that you know who they are. Newly registered charities will have notified the ACNC of who these people are at the point of registration.

Many charities ask us whether their chief executive officer, company secretary or public officer is a ‘responsible person’. Generally, they are not, but this will depend on the circumstances of your charity. The questions you need to ask yourself are: “Is this person a member of the governing body of my charity? And do they have voting rights?” Even though certain senior staff members or trusted volunteers may attend your board meetings, this does not necessarily mean that they meet the definition of ‘responsible persons’.

Even chief executive officer, company secretary or public officer is not considered a responsible person you can still nominate them to be your address-for-service person, who we will use as the main contact for your organisation. The address for service person does not have to be a responsible person at your charity.

We will refer to the term ‘responsible persons’ several times throughout this webinar, so try to keep in mind who these people are.

Now I’ll hand back to Matt to take you through the next steps.

MATT

Thanks for that, Anne. That was a great introduction.

Once you’ve established who at your charity needs to know about your charity’s obligations to the ACNC, you should find out exactly what they are. Most charities have the same obligations to the ACNC – but they can vary slightly depending on the size of your charity – we’ll talk about that later.

In this presentation, we will talk through each of your obligations, but the ACNC also provides detailed guidance on the obligations of registered charities online. At the end of today’s webinar, we will include a slide that has the link to any resource we mention – such as this one.

Once you’ve worked out what the obligations your charity has are, you need to learn when they apply to you. Some obligations apply during the entire time of your being registered as a charity – but there are others that only come up once a year or which arise any time you make certain changes to your charity. Being aware of when your obligations apply will help you to respond to them within the timeframes.

Knowing when your need to meet a certain obligation will help you plan for how you meet them. For obligations that apply on an ongoing basis, you will need to think about how your charity can demonstrate that it is meeting these obligations, even though you may not be required to provide this information to the ACNC. For others that are more active, you may need to consider what systems you have in place that will help you meet these obligations when they arise.

Throughout this webinar, we encourage you to consider these four steps for each obligation and ask yourself:

  • Do I know who this obligation applies to?
  • Do I know what this obligation is?
  • Do I know how we will meet this obligation?
  • Do I know when we will need to take action?

Your obligations to the ACNC are written in the law and as a charity you must continue to meet these obligations in order to be registered. The ACNC’s regulatory approach is based on the assumption that the great majority of charities are operating honestly and want to do the right thing. Where charities do fail to meet their obligations, it is usually a simple mistake and the ACNC works with these charities to help get them back on track.

But let’s take a look at why these obligations exist.

At the heart of it, we understand that people who set up charities do so because they want to make a difference to their community. Charities are established for lots of reasons – but whether it’s educating the young, healing the sick or practicing faith, all charities exist because they want to be of benefit to the community in some way.

The Australian community recognises the value of this work and the important role that charities play in our society. As a result, charities are provided with certain benefits – such as tax concessions – which make it easier for them to undertake their work and allows them to devote more of their resources towards their charitable purpose. Because charities don’t pay tax, they can spend more of their resources on achieving their charitable purpose.

In return for this assistance, the community expects that charities will use these benefits to advance their charitable purpose. The community also expects that they will do so in a way that means their resources are not going to waste or are vulnerable to being exploited.

The obligations your charity has under the law help to demonstrate that you are doing the good work that the community expects in return for the benefits that come with being registered. As you’ll learn in this webinar, your obligations relate to demonstrating that you are involved in charitable work and doing it in a way that is responsible.

Now I’ll hand over to Anne to talk about the first obligation we are going to cover.

ANNE

Thanks, Matt. When registering, all organisations are required to meet a set of criteria in order to be registered.

As a registered charity, you must ensure that you continue to meet these criteria to stay registered. There are two parts to this.

First – your organisation must be not-for-profit. A not-for-profit is an organisation that does not operate for the profit, personal gain or other benefit of particular people (for example, its members, the people who run it, or their friends or relatives). This does not mean that your organisation cannot make a profit. It means that any profit made must go towards pursuing the purpose of your organisation.

Second – your charity must have a charitable purpose. This is the reason your organisation was set up – or what your activities work towards. You might ordinarily call this your organisation’s ‘mission’ or ‘object’.

As a newly-registered charity, you will have indicated what your charitable purposes are to the ACNC when you applied to register. You can generally find your charitable purposes in your charity’s governing documents – usually called your rules or constitution.

Your charitable purpose must also be for the public benefit. There are many ways it can benefit the public – it can provide goods, services, education, counselling or spiritual guidance, or improve the environment.

In addition to this, your charity must also meet the governance standards – which we will cover in more detail later in this webinar – and finally, not be involved in any terrorist or other criminal activity.

If you’d like to know more about these requirements, you can read more on the ACNC’s website– or, if you like webinars, you can view a recording of an earlier webinar delivered by the ACNC on this topic. You can view all the ACNC’s previous webinars online.

Over to you, Matt.

MATT

Thanks, Anne.

As registered charities you need to keep records. Keeping records is one of your core obligations, but it’s also good practice and will help your charity to do its work efficiently. Records provide an account of your organisation’s activity and they are a useful basis for sharing information with your stakeholders or helping the people involved in your charity remember what may have happened in the past in case they forget or if there is disagreement.

To meet your obligations to the ACNC, you need to keep two kinds of records.

Operational records are documents that provide information about how your charity has been working towards its charitable purpose. Your records need to show that your charity is entitled to be registered as a charity and meeting its obligations under the ACNC Act and any relevant tax laws.

We don’t set out what kind of records charities have to keep – but it’s a good idea to keep records such as annual reports, agendas, minutes, operational plans, reports from events and client records. Essentially, you should ask yourself whether you have records which accurately record how your charity is working towards achieving its charitable purposes. The kind of records you keep will vary depending on the type of work your charity does and also its size.

Your charity must also keep financial records. These are documents that correctly record and explain three key aspects of the financial activities at your charity.

Your records need to explain:

  • How your charity spends or receives its money or other assets – its transactions. You should be able to clearly show where your charity
  • received its funding and how it used them to achieve its purpose
  • It’s financial position – how much money and other assets it has and where they are being stored, and
  • Its performance – such as its budget and how it has performed against it.

You can keep your records in any format that suits you – but they have to be readily accessible. This means they have to be easy to find and stored in a way that allows them to be understood. You do not need to provide your records to the ACNC unless you are asked to do so. These records must be kept for seven years.

You can keep records on a computer if you choose to do so, but it’s a good idea to make back-ups of any important data or even consider printing out a paper record of some documents. Your financial records must also allow for true and fair financial statements to be audited if required.

You can also keep paper records if you prefer. If you’re keeping paper records, it’s a good idea to organise them into files, boxes, folders or envelopes that will allow any particular record to be found easily. We recommend separating your records into different categories such as bank statements, communications, bills and receipts, and then organising them based on the reporting period to which they apply.

Keeping records will also help you to meet your other obligations to the ACNC by having the information you need to meet them easily on hand.

MATT

Some of the most common issues that we notice with charities are around your obligation to keep records.

Many of the charities that are brought to the attention of our Compliance team have problems with record keeping. In the worst case scenario, some charities did not keep any records of their activities or finances at all. Other charities had incomplete or inaccurate records and were unable to substantiate their activities or explain their income and expenditure. Some charities destroyed records or did not know where they were kept.

A common theme in these cases is that charities with poor record keeping practice do not have agreed processes among their memberships on how records are to be created and stored. The people involved with these charities typically didn’t appreciate the importance of keeping accurate and up-to-date records.

I’ve recently come into contact with some charities that have had difficulty in record keeping, and I wanted to share a story with you as a case study. This case study, and the others in this webinar, is not about a real charity – but an example story drawn from real cases.

So – what was the issue? A member of the public made a complaint about a charity alleging that it was not being managed in accordance with the purpose

for which it had been established. The complainant felt that the charity was acting in a way that was contrary to their charitable purpose and not providing public benefit.

We met with this charity to discuss the concerns that were raised and, as part of this discussion, asked to see copies of the charity’s records to try to establish whether it was operating in a way that was consistent with its charitable purpose. The charity was unable to provide these records, which made it difficult for them to demonstrate that they were working towards their charitable purpose. In response, we provided them with guidance on their obligations and some resources which helped them to create appropriate records. As a first step, the charity submitted its Annual Information Statement and agreed to implement appropriate record-keeping procedures. We continue to monitor this charity, but by taking a few simple steps to keep appropriate records, they will be able to meet this obligation.

Now I’ll just hand over to Anne to talk about the Charity Portal.

ANNE

Before we start talking about the next obligations, it’s important that you are aware of the ACNC Charity Portal.

The Charity Portal is an online service that charities can use to meet any of their core obligations to the ACNC. It’s free, easy to use and the best way to monitor your obligations to the ACNC. You can access the Charity Portal at charity.acnc.gov.au, or navigate to it from our homepage by clicking the purple Portal tab at the top of the screen.

You can use the Charity Portal to:

    • Review and update your charity details (which will update the information displayed on the ACNC Charity Register)
    • Submit any reports you have to provide to the ACNC, and
    • Print a copy of your charity’s registration certificate.
    The Charity Portal also provides information on approaching due dates and any overdue obligations. Throughout this presentation, we’ll refer to the Charity Portal whenever you can use it to meet your obligations. We have also recently delivered a webinar on managing your charity in the charity portal – you can access a recording and transcript of this at acnc.gov.au/webinars.
  • ANNE

    All registered charities must submit a report to the ACNC every year – this report is called the Annual Information Statement or the AIS. You can submit your charity’s AIS online through the ACNC Charity Portal. For most charities, it shouldn’t take more than half an hour and it contains the sort of information that you should know or find out quickly such as:

    • What activities it undertook throughout the year
    • Who the charity works to help – its beneficiaries, and
    • Where in Australia – or overseas – your charity operates.

    ANNE

    Your AIS is due within six months of the end of your reporting period – but we encourage you to submit it as soon as you can so that you don’t forget.

    Most charities use the default reporting period which is the financial year – 1 July to 30 June. So, if your reporting period ends on 30 June, you have until 31 December to submit your AIS. If you want to report on a reporting period that is not 1 July to 30 June, this is called a 'substituted accounting period'. You can apply for a substituted accounting period online using ‘Form 4A: Request a substituted accounting period.”

    It’s a good idea to think about doing your AIS after your Annual General Meeting, if you have one. At this meeting, most charities will present a report to their members which outlines the work you’ve done throughout the year and a financial statement which explains how your charity used it’s finances. This is exactly the sort of information you will need to complete your annual information statement.

    Submitting your annual information statement after your Annual General Meeting may help you to remember when it’s due.

    If your charity fits into the ‘medium size’ category, you must also provide a reviewed or audited annual financial report with your AIS. Large size charities must provide an audited financial report. We will talk more about charity size in a moment.

    Small charities are not required to provide a financial report, however you can voluntarily submit one if you want the public to see the financial results of your charity. This can be a good way to increase your charity’s transparency.

    Now I’ll hand over to Matt to introduce you to the concept of charity size.

    MATT

    Before we go any further, let’s talk about ‘charity size’ and how to work out what size your charity is.

    You charity size is determined by your revenue for the year. The categories which are small, medium and large are set out in the ACNC’s legislation, but they are the same or similar to the sizes referred to in other pieces of legislation, such as some incorporated association legislation and the Corporations Act.

    Your charity’s size has an impact on certain obligations, so it’s important to be aware of which size category your charity fits into. The categories are:

    • Small: charities that have an annual revenue of less than $250 000
    • Medium: charities that have an annual revenue of $250 000 or more but less than $1 million, and
    • Large: charities that have an annual revenue over $1 million

    For some charities, your size may change unexpectedly due to a revenue anomaly. For example, if you are typically a small charity with an annual revenue of $200 000 but you receive a one off donation of $100 000, you would be considered a medium sized charity for that year. However, if this is a one off event and you are likely to be a small charity again in future years you can apply to keep your charity’s usual size by submitting a form. You might want to do this because medium charities have more extensive reporting requirements than small charities. The form is called ‘Form 4D: Apply to keep charity size’ and it’s available on the website under the publications TAB.

    Try to keep in mind what size your charity is as we go through the rest of your presentation.

    I’d just like to remind you at this point that if you have any questions, please feel free to ask them through the GoToWebinar panel on your screen. Now it’s back to Anne.

    ANNE

    Another obligation that charities have to the ACNC is to keep your information with us up to date – we call this your ‘notification obligation’. You need to notify the ACNC if certain things change at your charity.

    In particular, you must notify the ACNC if your charity changes:

    • It’s legal name – this is your charity’s formal name that appears on your governing documents or, if you are incorporated, in any documentation it may have with the government agency that incorporated your charity.
    • Your charity may also have other names by which it is known such as a trading name or a nickname given to it by its volunteers. You don’t need to notify us of changes to those names – only your official legal name. If you do have other names by which your charity is known that aren’t its legal
    • name – you can provide this information voluntarily on the ACNC register. This may help your members, supporters, volunteers or donors to identify your charity and you can provide this information through the Charity Portal.
    • It’s address for service – this is the address to which the ACNC will send any documents (such as reminder notices to submit your AIS or login/password reset request letters). If you are using an email address, make sure it’s one that is easily accessible and checked regularly especially when key contact people resign.
    • Your charity might also have a business street address or email that members of the public can use to communicate with your charity. You can change your charity’s contact details on the charity portal and these do not need to be the same as your address for service.
    • It’s governing documents – these are the formal documents that set out how the charity will operate and are legally binding upon the charity. In your charity, they might be known as your rules, constitution, memoranda or articles of association, rule book or trust deed. If you make any changes to your governing documents, you must notify the ACNC.
    • And finally, your responsible persons. We talked about who your responsible persons are earlier in this webinar, but they are the people who have responsibility for governing your charity.

    You must notify the ACNC any time a responsible person:

    • starts in their role, or
    • finishes in their role.

    Charities must also notify us if they think they have seriously breached the ACNC Act or the governance standards, but we will come back to that later.

    ANNE

    If any of these things change at your charity, you must notify the ACNC. The time that you have to notify the ACNC differs depending on the size of your charity.

    For small charities, you have 60 days from the date that you become aware of the change. For medium and large charities, you have 28 days from the date that you become aware of the change.

    We encourage you to notify us as soon as possible as this will help you not to forget, but also ensure that your charity’s entry on the Register will be up-to-date. This information is often also used by other government agencies and may be accessed by people looking to donate or volunteer with your charity, so it is important to make sure it is accurate.

    It’s a good idea to pick some time points throughout the year when you think changes are likely to happen at your charity. For example, if your charity

    ANNE

    If any of these things change at your charity, you must notify the ACNC. The time that you have to notify the ACNC differs depending on the size of your charity.

    For small charities, you have 60 days from the date that you become aware of the change. For medium and large charities, you have 28 days from the date that you become aware of the change.

    We encourage you to notify us as soon as possible as this will help you not to forget, but also ensure that your charity’s entry on the Register will be up-to-date. This information is often also used by other government agencies and may be accessed by people looking to donate or volunteer with your charity, so it is important to make sure it is accurate.

    It’s a good idea to pick some time points throughout the year when you think changes are likely to happen at your charity. For example, if your charity holds an election for its responsible persons at your annual general meeting, you should make a note to remind yourself that you will need to notify the ACNC at around this time.

    MATT

    One of your ongoing obligations as a registered charity is to meet the governance standards. These are a set of core, minimum standards that deal with how charities are run. To provide you with a quick summary of each:

    • Charities must be able to demonstrate that their purposes and character are not-for-profit, that they work towards their charitable purposes, and provide information about their purposes to the public.
    • They must take reasonable steps to be accountable to their members and provide them with adequate opportunities to raise concerns about how the charity is governed.
    • Charities must not commit a serious offence (such as fraud) under Australian law or breach a law that may result in a penalty of 60 penalty units or more.
    • Charities must take reasonable steps to ensure that their responsible persons (such as board or committee members or trustees) are not disqualified from managing a corporation or disqualified from being a responsible person of a registered charity.
    • And finally, charities must take reasonable steps to make sure that their responsible persons meet seven duties, for example, ensuring the charity’s financial affairs are managed responsibly and that conflicts of interest are declared.

    As you can see, these really are minimum standards. Most charities are doing a lot more than just meeting these minimum standards and the ACNC assumes that charities are meeting them unless there is a good reason to believe that they are not.

    Earlier on I mentioned that if you think your charity has seriously breached the governance standards – or any other part of the ACNC act – you must notify the ACNC.

    If you think you may have seriously breached the ACNC Act or the Governance Standards, all charities must notify the ACNC within 28 days – regardless of their size.

    There is further information available on our website and we have also recently delivered a webinar on the governance standards, a recording and transcript of which are available online.

    MATT

    Under the governance standards, charities must take steps to ensure that their responsible persons know and are meeting their duties. The duties set out as part of governance standard 5 are regarded as common practice for board members and they align very closely to the duties in other legislation and they have well-established meanings.

    We’ve listed the duties that your responsible persons have here, but as there are seven of them, we won’t talk about them in great detail today. But, in general, they require you to act responsibly, ethically, always with the best interests of your charity at heart and in a way that furthers your charity’s charitable purpose.

    You can find more information about your responsible person’s duties on the pages on our website about governance standards that I mentioned earlier. You may also like to read the ACNC’s guide for charity board members – Governance for Good, also available on the website.

    What is most important about these duties is that your responsible persons know and understand them and that they are meeting them in their work.

    ANNE

    All charities must meet the governance standards at the point that they become registered with the ACNC and then on an ongoing basis after that.

    You don’t need to provide the ACNC with evidence that your charity is meeting the governance standards unless we request it from you, but it’s a good idea to consider how your charity could demonstrate that it is meeting the standards. Even though you may not have to provide information to the ACNC every year, there are still steps you will need to take to ensure that you are meeting the standards.

    It’s a good idea to regularly review whether your charity is meeting these standards. For example, you should consider having a discussion at your charity’s board meeting about whether you are meeting the standards every time you appoint a new responsible person.

    ANNE

    Perhaps the most common breach of governance standards relates to governance standard 5 – where charities have not taken reasonable steps to ensure that their responsible persons are subject to and comply with their duties. This is also the area in which charities are most often the subject of complaints from the public.

    Some of the most common scenarios involve board members who are not

    1. keeping themselves informed about a charity’s finances and activities
    2. making independent assessment of information, or they are relying too heavily on others in their decision making
    3. acting in the best interest of the charity or acting for their own private benefit or that of a friend or relative, or
    4. aware of or disclosing perceived or actual conflict of interest.

    We also see issues arise where a charity does not have processes in place to responsibly manage their finances. One of the common challenges associated with this is not having a formalised process that allows responsible persons to seek clarification about point about which they are uncertain.

    Some of the things a charity can do to make sure its responsible persons meet the duties in governance standard 5 are:

    1. Raise awareness of these duties by providing a letter of appointment or other information to responsible persons
    2. Provide regular information or training to responsible persons about their duties and obligations, and
    3. Take action if responsible persons are not carrying our their duties.

    Governance standard 5 is the most significant governance standards, both in terms of what it requires charities to do and also the number of issues we see in charities. As a case study example we recently undertook an investigation in regards to a charity that operated nationally via an online presence.

    The responsible persons of this charity were all family or close friends and a complaint was made that it was using its funds to provide interest-free loans to its responsible persons. In our investigation, we found that this complaint was true and, as a result, found that the responsible persons concerned were not acting in the best interest of the charity and were misusing their position as responsible persons.

    This case study illustrates that it is so important that the charity take appropriate steps to ensure that its responsible persons know about and meet their duties.

    MATT

    Governance standard 2 requires charities to be accountable and transparent to members. This standard is intended to enable members to be in a position to understand their charity’s operations and raise questions about its

    governance.

    This standard only applies to charities that have members.

    Concerns that are raised with the ACNC about this standard usually come from individuals who feel they do not have the opportunity to raise the concern with the charity directly or they feel that they do not have access to the information they need to deal with their concern.

    In our experience we have found that may concerns could be resolved, or may not even arise, if basic information is available to members and members feel that they are being heard and have an opportunity to raise concerns.

    Some things you could do to meet governance standard 2 are:

    1. Hold annual general meetings which provide detailed information about a charity’s activities and an opportunity for members to ask questions and raise concern
    2. Provide adequate notice of members meetings so that members can prepare any questions they might have and arrange to attend
    3. Have clear processes for electing or appointing responsible persons (this may include setting out this process in your governing document), and
    4. Distribute reports to your membership on your charity’s activities through the year, including about its finances.

    To give you a sense of this, I have prepared another case study. This one is about a charity that was operating a centre that provided temporary accommodation for people experiencing homelessness.

    We became alerted to the situation after some of the charity’s members raised a concern about the governance of the charity. The charity’s website had been taken down after a former responsible person - who had responsibility for managing their web presence – resigned. Without access to the website, no information about the charity was available to members.

    Through our investigation, we found that the board members were attempting to fix some governance failures that had been identifies by the board and the membership of the charity. Despite this, they were not holding regulate meetings with their members or communicating openly and frequently with them.

    In this situation, the charity was not being accountable to their members. We worked with this charity to identify strategies they could use to better communicate their work to their members and to enhance their accountability while continuing to address the governance problems at their charities.

    This case study highlights how important it is to keep members updated on the operation and governance of the charity. It also highlights that especially when a charity is undergoing change, it is important to consider how this change needs to be communicated to the membership.

    ANNE

    Your obligations to the ACNC exist to assist your charity in achieving its charitable purpose and maintain, protect and enhance public trust and confidence in the charity sector. Failing to meet your obligations can have a number of impacts on your charity that can make it difficult for your charity to achieve its purpose.

    By knowing what obligations your charity needs to meet, understanding who is responsible for meeting those obligations and having a clear plan on how the charity will meet its obligations is a good way to ensure your charity complies with its requirements for maintaining registration.

    The points on this slide demonstrate some of the risks a charity may face where it fails to meet its obligations.

    If your charity is not meeting its obligations, this can have an impact on its reputation, which may affect your relationship with your donors and volunteers. Damage to your charity’s reputation can also affect your ability to attract and retain skilled staff and may impact the willingness of government agencies or others to provide funding to your charity.

    Your beneficiaries are at the heart of your charity’s purpose, and failing to meet your obligations can place them in a position of potential harm.

    Your obligations also help you to protect your charity’s resources from being exploited through fraud or by being misdirected to non-charitable purposes.

    In cases of serious misconduct or mismanagement, your charity may also be at risk of having its status as a charity revoked or being involved in criminal proceedings.

    As I mentioned before, we have a lot of guidance on our website that support charities in better understanding obligations and for meeting minimum standards of governance. Included in this guidance is an ACNC compliance self-assessment checklist and practical examples of good governance practices.

    It is also good to remember that where non-compliance has been identified, we aim to work with charities to try to get them back on track.

    MATT

    Where you think your charity has or is going to fail to meet its obligations, it is best to notify us. We will try to work with your charity to get back on track. There are some situations were a charity must notify the ACNC, including if:

    • they are not meeting their obligations in a significant way, and as a result their organisation is no longer entitled to registration (for example, if the charity is not complying with the governance standards); or
    • they have made a material error in their annual Information Statement or financial reports.
    Charities should also notify the ACNC if they discover they have made a false or misleading statement to the ACNC. A voluntary disclosure of a false and misleading statement, in the approved form (available on the website), reduces the penalty that could otherwise apply.

    The ACNC has published its regulatory approach that explains the way we approach issues of non-compliance. We understand that most people involved in charities are honest and trying to do the right thing. We will consider whether a charity has breached the ACNC Act and how that breach can be resolved. Where appropriate, we will work with charities to allow them to resolve any issues.

    However, we will act quickly and firmly where there is evidence of serious mismanagement or misappropriation, a serious or deliberate breach of the ACNC Act, or if vulnerable people or significant charitable assets are at risk.

    MATT

    And as we’ve mentioned, there is more information on our website.

    You can read our guidance on meeting your ongoing obligations, or use the compliance self-assessment checklist on our governance tools page.

    You can also read more about responsible persons, governance standards, record keeping and reporting through the Annual Information Statement and notifying the ACNC of changes to your charity.

    ANNE

    You can also stay in contact with the ACNC for more information.

    You can subscribe to our regular updates

    Read our web guidance

    Or call or email us at advice@acnc.gov.au

    You can also like us on Facebook, follow us on Twitter or subscribe to our YouTube channel.

    ANNE

    We’ll finish there.

    Thank you for joining us today and for your questions.

    The ACNC runs webinars for charities monthly on a broad range of topics.

    Our next webinar is on 3 May 2016.

    You can sign up to attend any of our webinars at acnc.gov.au/webinars.

    If you’re interested in being kept up to date on webinars, please let us know in the survey at the end of this webinar. We’d also appreciate any feedback you have, so that we can make any improvements to future webinars.

    You can also get in touch with the ACNC Education team directly at education@acnc.gov.au.

    Thanks to Amanda, Regina and Caitlin for your help today and thanks to everyone for attending.

    As we mentioned, the slides, transcript and video of today’s webinar will all be available on the webinars page of our website.

    Goodbye and see you next time.