Change to governance of charities coming

A proposed amendment by the Federal Government to Governance Standard 3 could significantly impact charities registered with the Australian Charities and Not-for-profits Commission (ACNC).

The Australian Charities and Not-for-profits Commission Amendment (2021 Measures No.2) Regulations 2021 dated 24 June 2021 was tabled in the Senate on 3 August 2021, and will pass as law if approved by both Houses of Parliament.

The current Governance Standard 3 in comparison to the proposed changes is tabled below:

The current approach of ACNC:

• ACNC will not investigate every alleged breach of law by a charity.
• ACNC will only investigate serious offences (for example, fraud, money laundering or terrorist financing) that are likely to affect public trust and confidence and where this is necessary to protect the assets of the charity and the people it serves.
• The ACNC will not investigate breaches of law or issues that other regulators or the police are better placed to handle. The ACNC will work with those agencies where appropriate.

Under section 35-10 of the Australian Charities and Not-for-profit Act 2012 (Act), the ACNC Commissioner is empowered to deregister a charity if they believe:

• a charity has not complied with a Governance Standard; or
• it is more likely than not that the charity will not comply with a Governance Standard.

A charity that has its registration revoked will also lose its tax concessions (federal and state based).

The ACNC is also empowered to exercise other enforcement powers under part 4-2 of the Act if a charity fails to comply with a Governance Standard.

As stated in the Senate’s Standing Committee for the Scrutiny of Delegated Legislation (Monitor 12 of 2021), the Committee is concerned that:

1. The amendments appear to enable the ACNC Commissioner to exercise a range of discretionary powers in determining whether a registered charity has failed to comply with the Governance Standards, however, the scope of offences that will be subject to the ACNC Commissioner’s discretion is unclear.
2. The ACNC Commissioner may consult with a law enforcement agency or other relevant entity in forming a reasonable belief about compliance with the Governance Standards but the scope of this discretion to investigate the offence is unclear.
3. The objective test to determine whether a registered charity has maintained reasonable internal control procedures to ensure that its employees, websites, social media, publications etc. breaches Governance Standard 3 is also unclear.
4. The amendment has the effect of preventing registered charities from engaging in or actively promoting certain kinds of summary offences (such as public nuisance or misdemeanour) as it will affect the entity’s tax exemption entitlement and registration under the Act. It is unclear whether the amendment may limit the charities’ implied freedom of political communication by preventing them from engaging in or supporting certain activities (e.g. being involved in, or the charities’ staff being involved in, protests because it could risk the charity being deemed as actively promoting or engaging in a potential summary offence).

How we can help

The proposed amendment to Governance Standard 3 is an important reminder for registered charities to check that they are compliant with all 6 Governance Standards.

ACNC has provided a helpful self-evaluation checklist of the standards, procedures and processes required to be implemented by all registered charities to comply with the Governance Standards.

Click here for the ACNC self-evaluation checklist

Thynne + Macartney’s lawyers can advise registered charities on the standards, procedures and processes required to be implemented to ensure they are compliant with the recent changes in fundraising, employment, work health and safety, tax and privacy laws, to meet all 6 Governance Standards.