Charity watchdog clocks up 200 investigations

Since its establishment on 3 December 2012, the Australian Charities and Not-for-profit Commission (ACNC) has been working to protect public trust and confidence in charities and assist charities in complying with their obligations under relevant laws.

The ACNC has become known for a less intrusive and more educational approach to dealing with non-compliance, particularly when compared to other regulatory bodies. However, this does not mean that the ACNC does not take its regulatory role seriously; in fact, the ACNC has conducted more than 200 charity related investigations since inception.

ACNC investigations to date have largely been initiated from complaints received by the ACNC from the community and the not-for-profit sector, and can be categorised into three main risk types: governance; fraudulent or criminal activity; and private benefit.

Governance

The main concerns in relation to governance have been in relation to:

• conflicts of interest of charity officers;
• operational decisions regarding charities; compliance with governing documents;
• financial mismanagement; and
• lack of or inadequate governance policies and procedures.

The ACNC considers that good governance is in place where a charity has adequate checks and balances and policies and procedures in place to ensure transparency and effectiveness in meeting its objects.

A further indicator of good governance is where the roles, responsibilities and obligations of those involved with the management of the charity are clearly understood.

All charities registered with the ACNC must abide by the ACNC governance standards and, further, must be prepared to act when governance standards and practices of good corporate governance are not being adhered to.

Fraudulent or criminal activity

The public was also vigilant in reporting fraudulent and criminal activity, especially sham charities soliciting funds, bank accounts being changed and fundraising scams.

While most charities do not engage in this type of behaviour, the investigations do serve as a reminder to charities to ensure they have the appropriate authority to fundraise within each jurisdiction of Australia in which they appeal for public support.

Additionally, all money that is donated should be kept in a separate fund and used solely for the purposes and activities set out in the charity’s constitution or other regulations surrounding the appeal.

Private benefit

The issue of private benefit was also high on the list of public concerns, based on the complaints to the ACNC.

A private benefit can occur in many ways including: conflict of interest situations; where a charity’s resources are being utilised for personal use; individuals incurring inappropriate personal expenses and corporate sponsorship being used for personal rather than charitable purposes.

In relation to conflicts of interest, there are strict rules that govern the use of company information and a person’s position in relation to a charity as well as disclosure procedures that must be followed where a situation of conflict does or is likely to arise.

Charities and not-for-profit organisations should ensure that appropriate methods of dealing with conflicts of interest are prescribed by their constitution and, where necessary, develop legal agreements to guarantee long term protection of the charity’s assets. The ACNC has indicated that they will encourage all charities to take these steps to ensure that a distinction is maintained between private assets and charity assets, and that the assets of the charity are used for the purposes and activities outlined in the constitution.

The ACNC is committed to working with charities that have been affected by inappropriate governance, financial mismanagement and fraud to help them correct their mistakes.

Future of the ACNC

While the ACNC’s days are numbered, charities and not-for-profits can still learn valuable lessons from the investigations of the ACNC to date.