ACNC External Conduct Standards - Public Consultation
August 2018 | Article | Seak-King Huang and Alex Milner
On Monday 13 August 2018, the Treasury released for consultation the proposed external conduct standards which will be implemented through new regulations under the Australian Charities and Not-for-profits Commission Act 2012. The standards will apply to any charity registered with the Australian Charities and Not-for-profits Commission (ACNC) which operates outside Australia or works with third parties who operate outside Australia.
For those registered charities who are accredited by the Department of Foreign Affairs and Trade (DFAT) or members of the Australian Council for International Development (ACFID), standards and principles for how they conduct their activities overseas will not be new. They will need to consider how these proposed new standards will apply alongside - or perhaps in place of – principles and standards they currently have in place.
For other registered charities, including public benevolent institutions, education and research organisations, religious organisations (including churches and mission organisations), volunteer organisations as well as philanthropic organisations, standards of this type may be a new concept. They will need to consider what changes they will need to make – policies and operational – in order to be able to comply with the proposed standards.
All registered charities to whom the standards will apply will also need to understand the ramifications of the standards being legislated, as distinct from being a contractual or voluntary obligation.
The exposure draft regulations propose four standards:
Two are directed at public accountability and financial matters:
- Standard 1 focusses on activities and control of resources. This includes requirement that the registered charity maintains reasonable internal controls around its resources and takes reasonable steps to ensure that resources given to third parties are used in a way that is consistent with its purpose and character as a not-for-profit entity, and with reasonable controls and risk management processes in place. This standard also requires compliance with Australian laws relating to money laundering, resourcing terrorism, sexual offences against children, and slavery and trafficking of people.
- Standard 2 focusses on annual review and record-keeping of operations and activities on a country by country basis by the registered charity.
The other two are directed at conduct outside Australia:
- Standard 3 requires the registered charity to take reasonable steps to minimise risks of corruption, fraud, bribery or other financial impropriety by those governing them, including board members and trustees,, and by employees, volunteers and third parties outside Australia, and to document any perceived or actual material conflicts of interest.
- Standard 4 requires the registered charity to take reasonable steps to ensure the safety of vulnerable individuals outside Australia who are provided with services or benefits by the registered charity itself or with/through a third party or who are engaged to provide services or benefits on behalf of the registered charity or third party.
The standards are worded in very general terms. In our view, it would be prudent to test current practices and arrangements against this new general wording. Areas to test would include:
- Policies and procedures
- Agreements with third parties,
- Financial controls
- Record keeping
- Risk management
- Safeguarding of vulnerable people
Unlike some of the ACNC governance standards, no protections are proposed for these external conduct standards. In our view, this is another issue that registered charities who work overseas directly or through third parties, should consider carefully. For example, should compliance with similar requirements under a grant agreement with government or with the ACFID Code of Conduct be protections against breaches of these standards?
Further, the proposed standards do not distinguish between the types and circumstances of overseas activities carried out by a registered charity. The question needs to be asked if this “one size fits all” approach is appropriate for all circumstances. For example, those registered charities who provide time critical emergency relief and engage in disaster recovery activities should review the standards and consider if they can be applied appropriately in contexts where their activities are invariably carried out swiftly and risk management cannot be shaped in the same way as for activities in a long term development project.
The exposure drafts regulations, accompanying explanatory memorandum and a Consultation Paper including FAQs can be found here.
The closing date for written submissions to the Treasury is Friday 21 September 2018. The Treasury is also working with the ACNC to hold public meetings in Canberra (27 August), Melbourne (30 August) and Sydney (3 September). Expressions of interest to attend these sessions must be submitted by 24 August 2018.
If you have any queries about the proposed new standards, please contact Seak-King Huang (Partner) or Alex Milner (Senior Associate).