'NFP Governance and Performance Study' released
More than 30 per cent of Australia's Not-For-Profit organisations (NFPs) have discussed mergers in the past year as the NFP sector seeks to improve its efficiency and expand its services. This is one of the key findings of the latest 'NFP Governance and Performance Study' released by the Australian Institute of Company Directors.
More than 2700 NFP directors with a combined income of $15 billion in 2013/14 participated in the study, making it the largest survey of NFP governance in Australia. The respondents included directors from a wide range of organisations, including educational institutions, aged-care facilities, charities, recreational organisations and social-service providers.
The push for consolidation is greatest among NFPs with incomes above $10 million or those operating in social services. Around a quarter of boards that have discussed a merger believe the process would be complete within two years, setting the scene for a new round of consolidation in the sector.
The results of the study show that NFP boards have extremely high standards of governance that allow directors to pursue the strategies that will achieve the best outcomes for their organisations and stakeholders. Around 80 per cent of non-executive directors who took part in the study believe the quality of governance in the sector is better than it was three years ago.
Other key findings of the survey include:
- Many NFPs are struggling to determine the impact of reforms, or proposed reforms, to government policy and legislation. Seventy eight per cent of respondents called on the government to clarify its direction and create stability in operating environments as a matter of priority in the next three years;
- Only 50 per cent of non-executive directors believe their organisations measure overall performance effectively. Many would like more non-financial information to determine if an organisation is achieving its mission or purpose;
- Sixty two per cent of respondents identify maintaining or building income as a high priority in the next 12 months as they seek to diversify their organisations' income streams and reduce their reliance on government funding;
- Uncertainty about government funding is ranked as the second most important challenge for school boards in the next three years, behind only the need to maintain or enhance a school's reputation;
- Directors of aged-care facilities nominate financial sustainability as their biggest challenge over the next three years, followed by compliance with government requirements.
Australian charities operating in more than 100 countries
The Curtin Australian Charities 2013 Report has revealed that 17 per cent of registered charities are involved overseas – they either operate in more than 100 countries or help people outside Australia.
In 2013, Australian charities were most involved in India, the Philippines, New Zealand, Papua New Guinea and Indonesia. Charities were also operating in areas of conflict such as Syria and Iraq.
The Australian Charities and Not-for-profits Commission (ACNC) said that it and other charity regulators needed to reduce the risk of misuse of funds sent overseas, including through charities. The ACNC works with the Australian Federal Police and other intelligence and enforcement agencies to share intelligence and referrals on these issues.
The Australian Transaction Reports and Analysis Centre (AUSTRAC) has stated that charities working overseas are especially vulnerable to exploitation by terrorist supporters. AUSTRAC says that money raised legitimately to help people suffering in conflict zones can get mixed up with funds raised specifically to finance terrorism.
The ACNC's advice is to send money only to trusted family and friends or to reputable humanitarian organisations. Always research humanitarian organisations and other potential recipients before sending money, it advises. If the humanitarian organisation is a charity, the ACNC recommends that you check its register and find out where the funds will go and how they will be used.
The ACNC's work in building a register improves the visibility of charities operating overseas. Prospective donors and volunteers can search it to find charities that operate in particular countries. They can also uncover detailed information about a charity and ensure that it is meeting its obligations. The ACNC has published information on its website to support overseas giving and explain how charities can lower the risk of financing terrorism.
In addition to the register, charities can ensure that their overseas donations are not being misused through the commission's surveillance of charities' compliance with good-governance standards. The standards play a role in improving the governance of all registered charities.
The commission has joined with the Australian Council for International Development (ACFID), the peak body for Australian not-for-profit and development organisations, to make compliance with ACNC governance standards easier for organisations. (Ninety-seven per cent of ACFID members are also registered with the ACNC). The ACNC website outlines principles and obligations charities must comply with in order to meet both the ACNC and ACFID requirements.
Is your charity complying?
A guide to the ACNC regulatory approach and self-assessment compliance test are the latest tools available from the regulator. Its aim is to help charities stay on track.
'Your charity and ACNC Compliance' helps to demystify the role of the ACNC's compliance team, which investigates concerns it receives about charities. 'Take the ACNC compliance test: is your charity complying?' enables charities to do a quick 'health' check to see how well they are meeting their obligations.
'Your charity and ACNC Compliance' explains the defined process concerning how and when investigations and reviews are conducted, when charities may be notified, and what information can be shared and disclosed. It also provides advice on actions charities should take if they find that they are not meeting their obligations.
The compliance test is quick and easy to do, allowing charities to make periodic checks. It has five simple questions, and 'no' and 'not sure' answers to any of them should alert an organisation to investigate further or take remedial action.
Use the questions to assess how well your charity is meeting its obligations, and whether it is taking the right steps to comply with the ACNC Act.
||Is your charity working towards its charitable purpose?
||A purpose is the reason your charity was set up – its mission.
Charities and their responsible persons (such as boards, committee members and trustees) must work toward this charitable purpose, make information about this purpose available to the public, and be able to show how it is trying to achieve this purpose.
||Is your charity using its profits and assets only for its charitable purpose?
||A charity must use its profits and assets only to try to achieve its charitable purpose and cannot use them for any other purpose.
Consider how you can demonstrate this clearly, for example, through keeping appropriate written records that log correctly your operations
||Is your charity meeting its reporting obligations?
Every charity must lodge an Annual Information Statement (AIS). For the 2014 AIS, most medium and large charities must also lodge annual financial reports. If your charity has made a material error in its AIS or financial report, you must correct it as soon as possible.
Every charity must notify the ACNC of changes to its name, address for service, responsible persons and governing documents, as well as if it has significantly contravened the ACNC Act and may no longer be entitled to registration.
You should also notify the ACNC if you believe your charity has made a false or misleading statement to the commission.
||Is your charity meeting its record-keeping obligations?
||Every charity must keep written records that correctly record and explain its operations, transactions and financial position and performance. In most cases, charities must retain these records for seven years.
||Is your charity meeting all five governance standards, showing it has met minimum requirements for governance
||Apart from 'basic religious charities', all charities must meet governance standards under the ACNC Act and ACNC regulations before applying to register and to maintain registration.
These standards set out a principles-based, minimum standard of governance and are designed to help promote public trust and confidence in charities.
Governing documents templates released
The ACNC has developed a 'constitution' template to help small charitable companies limited by guarantee. It's supported by a detailed clause-by-clause guide, a quick checklist for completing it, and a table that sets out which sections of the Corporations Act 2001 (Cth) may be relevant to clauses in the template.
Specifically, the template is designed to help:
- An NFP that wants to incorporate as a company limited by guarantee and register as a charity with the ACNC;
- A company limited by guarantee that wishes to become a charity registered with the ACNC;
- A company limited by guarantee that is a registered charity and wants to update its constitution.
The NFP sector has supported the template and its supporting materials, which are available at acnc.gov.au/clgconstitution.
Charities will also find the following templates helpful in revising their governance requirements:
- Template-governing documents: Information about template-governing documents available for charities, such as model rules from states and territory incorporating regulators;
- Examples of charitable purposes: Contains examples of charitable-purpose clauses that a charity can use as a guide.
AGM considerations and new resources
The ACNC has developed a dedicated resource page to help charities to understand their obligations in relation to AGMs. An AGM is a meeting held once a year that a charity's members are invited to attend. Its purpose is to give members a report on the charity's activities and finances for the previous year, to allow time for them to ask questions, and to elect a board and committee members.
AGMs are among the most important events in a charity's annual calendar. They provide an opportunity for members to gather and participate in governance. Holding an AGM is one of the key ways a charity can demonstrate accountability, celebrate achievements and focus on the year ahead. The ACNC encourages charities to use their AGMs to review activities and finances from the previous year.
At AGMs, charities should also remind themselves of the ACNC governance standards and consider how they can demonstrate that they are meeting them. For example, holding an AGM is one of the ways that a charity can demonstrate that it is accountable to its members, required under governance standard two. The standards also require charities to take reasonable steps to ensure that their board and committee members (responsible persons) are suitable for their roles (governance standard four) and that these people understand and are carrying out their duties (governance standard five).
Although the ACNC does not usually require charities to hold an AGM, they should check rules and legislation applying to them to find out whether they are required to do so. If charities make certain changes at their AGM (such as to their names, responsible persons or governing documents), they must notify the ACNC.
The ACNC will be developing further resources such as template minutes, agendas and notices for AGMs over the next months to support charities wanting to hold annual meetings.
2000 charities might lose their status
The ACNC is revoking the charity status of hundreds of organisations it believes are no longer operating. They have failed to contact the ACNC since its inception on 3 December 2012 and failed to respond to letters and calls. They have also failed to complete their 2013 Annual Information Statement (AIS). The ACNC was also unable to uncover evidence that the charities were still operating.
There may be many reasons for these charities to have gone 'missing'. In many cases, they decide to operate under a different name or ABN, or might have merged with another charity and failed to advise the ACNC.
The project to clean up the ACNC's register began earlier this year, when around 6000 charities were found to be 'missing'.
The commission has subsequently been able to account for around 4000 charities that have updated their contact details, confirmed that they were no longer operating, sought voluntary revocation, or were identified by the ACNC as not requiring registration.
So far, more than 1500 of the 2000 'missing charities' have been revoked after an extensive ACNC search that failed to find 'proof of life'. Of these, 19 are based in the ACT, 114 in NSW, seven in the Northern Territory, 66 in Queensland, 31 in South Australia, six in Tasmania, 82 in Victoria, and 79 in Western Australia.
The full list of charities marked for revocation and information on how charities can contact the ACNC is available at www.acnc.gov.au/whereareyou. Each quarter, the commission will publish an intention-to-revoke registration of listed charities not in contact with the ACNC. A spreadsheet of them will be searchable.
The ACNC's official register lists the names of Australia's registered charities and includes details of their activities, areas of operation and size. It allows potential donors to check charities' credentials. The register has been viewed more than 500,000 times online and is increasingly seen as a valuable community resource.
Lodge your 2013 Annual Information Statement
An estimated 7000 charities face penalties and having a 'red mark' against their name for not filing their 2013 AIS, which was due by 31 October. The ACNC will publish the names of 'overdue' charities and issue penalties to charities that are found to be deliberately avoiding their obligations.
If the ACNC finds evidence that charities are intentionally not submitting, it will apply penalties. Maximum penalties for non-compliance are up to $4260 for big charities. Charities that also fail to submit their 2014 AIS will have their status revoked, and lose their entitlements to Commonwealth tax concessions.
Deadline for 2014 AIS extended
The ACNC will for the first time make financial information from Australia's registered charities available to the public free of charge. An estimated 35,000 charities report on a standard financial year (1 July to 30 June) and are required to submit their 2014 AIS by 31 January 2015, an extension of a month from the date has been recently announced.
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