The Australian Charities and Not-for-profits Commission (ACNC) is the primary regulator of charities in Australia. It was established under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) and is likely to have a significant impact on not-for-profits in Australia.
This brief article identifies and seeks to answer some of the key questions that we at Rockwell Olivier get asked by those who are or may be affected by the new legal and regulatory regime.
The new laws are complicated. Non-compliance may expose your organisation and its officers to unnecessary risk and may negatively impact on funding and fundraising initiatives.
I want to start a charity. Do I need to register with the ACNC?
Registration with the ACNC is voluntary. However, registration is required in order for a charity to be able to access Commonwealth tax concessions.
I have a charitable not-for-profit organisation. How does the ACNC affect me?
If your organisation was registered as a charity with the ATO, it should have been automatically registered under the ACNC legislation. You can check this by visiting the ACNC website.
The purpose of the ACNC is to promote openness and accountability in the sector. In this regard, the ACNC maintains a public register (ACNC register) which includes details about all registered entities. Such information includes:
- contact details for the entity;
- the governing rules for the entity;
- annual information statements and financial reports; and
- names and positions of directors (however, contact details of directors will not be publicly accessible).
There are new reporting and governance obligations on charitable organisations. See below for more information on this and other matters you should be aware of.
I have a non-charitable not-for-profit organisation. How does the ACNC affect me?
At present the ACNC only has jurisdiction over charities. However, it is expected that this jurisdiction will be expanded to the wider sector to include non-charitable not for profits (such as some sporting associations).
What are my reporting requirements?
If your organisation is registered it will need to lodge annual information statements with the ACNC. The first financial report year commenced on 1 July 2013 and will end on 30 June 2014. If you are a registered charity and your organisation’s reporting period ends on 30 June you will be required to lodge your first annual information statement on or before 31 December 2013.
In addition to lodging an annual information statement, you may be required to lodge financial reports with the ACNC. If you are a medium or large registered charity you will need to lodge financial reports with the ACNC from the 2013-14 financial year onwards. These will need to be lodged within 6 months of each financial year end (i.e. the first financial report will be due by 31 December 2014).
A large registered entity is one with revenue of more than $1 million. A medium registered entity is one with revenue of more than $250,000 but less than $1 million. A small registered entity is one with less than $250,000 revenue per year.
Could the ACNC Register affect my fundraising or grants?
There should be no negative effects directly arising from the operation of the ACNC Register. However, there is scope for a third party to use the financial data recorded on the ACNC Register in order to create a league table for the purpose of ranking NFP’s (eg by sector, financial standing, revenue from fundraising/grants). Any such steps may impact on your fundraising and grant-seeking practices and abilities.
What are the governance standards?
It is a condition of registration that an organisation complies with the governance standards as set out in the regulations made under the ACNC Act. The governance standards are effective from 1 July 2013. There are 5 governance standards which are briefly described below. In order to comply with the governance standards, changes may need to be made to your governing documents.
Governance standard 1: Purposes and not-for-profit nature of a charity
To meet this standard a charity is required to:
- be able to demonstrate that it is established as a not-for-profit entity with a charitable purpose;
- be run as a charity (by following its purpose and its character as a not-for-profit);
- make information about its purposes available to the public, including members, donors, employees, volunteers and benefit recipients.
Governance standard 2: Accountability to members
This standard requires charities to take reasonable steps to ensure that:
- the registered entity is accountable to its members; and
- the registered entity’s members have an adequate opportunity to raise concerns about the governance of the registered entity.
Governance standard 3: Compliance with Australian laws
This standard imposes a new statutory obligation for charitable entities to not engage in conduct or omit to engage in conduct which may result in an indictable offence under Australian law.
Governance standard 4: Suitability of responsible entities
A charity must take reasonable steps to ensure that each of its responsible persons:
- is not disqualified from managing a corporation under the Corporations Act 2001 (Cth) (see the ASIC Disqualified Persons Register); and
- is not disqualified from being a responsible person of a registered entity by the ACNC Commissioner at any time during the preceding 12 months (see the ACNC Register of Disqualified Persons).
Governance standard 5: Duties of responsible persons
This standard requires a registered entity to take reasonable steps to ensure that its responsible persons:
- act with care and diligence in the discharge of his or her duties;
- act in good faith in the best interests of the registered entity;
- do not misuse their position;
- do not misuse information obtained in the performance of the responsible person’s duties;
- disclose conflicts of interest;
- ensure that the financial affairs of the entity are managed in a responsible manner; and
- do not allow the entity to operate while insolvent.