GOVERNANCE FOR GOOD The ACNC’s guide for charity board members Contact us phone 13 ACNC fax 1300 232 569 visit acnc.gov.au © Copyright 2013 email advice@acnc.gov.au You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any GPO Box 5108 way that suggests the ACNC or the Commonwealth Melbourne VIC 3001 endorses you or any of your services or products). Follow us G overnance for good Introduction from the Commissioner Charities are an essential Charities can do none of this without their board members. These members have part of the fabric of Australian the ultimate responsibility for running the society and reach into every charity, its property, finances and the employment of its staff and volunteers. community across Australia, Being a board member can be incredibly as well as beyond our shores. hard work and is normally unpaid, but it can also be immensely rewarding. They enrich our culture, protect our Remember that you are not on your own. environment, educate our children, We hope this guide will provide you with enable us to practice our faith, promote some helpful information, but if you need our health and wellbeing, strengthen more help our ACNC staff are committed our democracy, contribute to good to helping support you and your charity in public policy and advocate on behalf its important work. of individuals and communities. Good wishes Susan Pascoe, AM Contents 2 Who is this guide for? 12 Governing your charity 3 Governance 14 Overseeing your charity’s finances 4 Your board 15 Your obligations to the ACNC 5 People on your board 17 Your charity changes or if things go wrong 6 Common questions for board members 19 Top 10 tips for board members 8 Your governing documents 20 Resources for charities 10 Your duties and responsibilities visit acnc.gov.au phone 13 ACNC 1 G overnance for good Who is this guide for? This guide is for people who are, Why should I read this? or are thinking of becoming, board members of a charity registered with the Being a board member of a charity can be Australian Charities and Not-for-profits a very positive experience. It can give you Commission (ACNC). the opportunity to make a real difference in your community – but it also brings with We have used the term ‘board members’ it responsibilities. For you and your charity to mean members of the governing body to succeed you should be aware of your of a charity. In your organisation they may responsibilities and your role in helping be called the directors of the board of your charity achieve its goals. directors, members of the management committee, the governors or the trustees. The focus of the ACNC is to support It is the people with overall responsibility charities to meet the core minimum for governing the charity and overseeing governance requirements as required and controlling its management. by the governance standards under the ACNC Act. However, the ACNC is also interested in supporting good governance Whether you’re taking up the within charities beyond these standards. responsibilities of a board member for the As part of this, we will work with the sector first time or you’re an experienced board to produce guidance on good governance member looking for a refresher, there’s practices to support charities and their always something you can do to improve board members. Where appropriate, we will your knowledge and the governance of differentiate between this kind of guidance your charity. and information on the legal obligations of registered charities. This guide focuses on good governance and the role of This guide explains the responsibilities of governance in charities in the context of board members of charities. In particular, their obligations under the ACNC Act. it focuses on the new framework introduced by the Australian Charities The Australian Government intends to and Not‑for‑profits Commission Act 2012 introduce governance and external conduct (ACNC Act) and how the ACNC can standards that will apply to registered support you and your charity. The ACNC charities from 1 July 2013. This guide will be Act refers to those responsible for directing revised after these standards are released. a charity as ‘responsible entities’. Read more about the introduction of governance and external conduct standards. 2 visit acnc.gov.au phone 13 ACNC G overnance for good Governance What is governance? What are registered charities? Put at its simplest, governance is the Charities that are registered with the ACNC processes, activities and relationships that are called registered charities. There are a make sure your organisation is effectively number of different ‘types’ of charities such and properly run. as public benevolent institutions and health promotion charities. So, good governance is when charities have practices and procedures in place that In this guide, we use the term ‘charity’ to help them to deliver their work effectively refer to all types of registered charities. and transparently and when the roles and Charities may also be registered with other responsibilities of people in the charity are government agencies such as state and clearly understood. This includes the particular territory regulators or accreditation bodies, roles of board members and the roles of but here we are referring to charities staff, volunteers and members. Of course, registered with the ACNC. good governance is more than the rules of your charity and the individual behaviours of board members. Good governance involves strong relationships between the members of For more information, read your governing body and stakeholders and is much more about working as a collective than our fact sheet on who can individual responsibilities. register with the ACNC. Why is governance important? Good governance helps make sure that the Role of the ACNC day-to-day work of a charity aligns with its The ACNC is the independent national purpose. It is important that board members regulator of charities. The ACNC: ask why are we here, what are we doing and ■■ registers organisations as charities how will we do it? Asking these questions (and trying to answer them) helps charities ■■ helps charities understand and meet their to stay true to their vision and mission. obligations through information, guidance, advice and other support ■■ maintains a free and searchable public What are charities? register so that anyone can look up The word ‘charity’ means different things information about registered charities to different people. People commonly ■■ is working with state and territory understand charities to be organisations governments (as well as individual that exist to help others. Whether it’s federal, state and territory government providing accommodation to those in departments and agencies) to develop need or teaching English to newly arrived a ‘report-once, use-often’ reporting migrants, charities are at the heart of the framework for charities. effort to make our communities safer, fairer and more vibrant places to live. The ACNC will also be responsible for ensuring that charities comply with their There is, however, a particular legal obligations under the ACNC Act and definition of charity. This has been regulations made under it, including developed through common law (which enforcing governance and external is judge-made law) – they must be a conduct standards for charities when not‑for‑profit, have a charitable purpose they commence. and, be for the public benefit. Charities have to meet this particular legal test and the requirements of the ACNC Act before they can be registered with the ACNC. visit acnc.gov.au phone 13 ACNC 3 G overnance for good Your board The governing body of a charity is Every charity is different and so are the group of individuals who share their boards. However, there are some responsibility for the governance of a responsibilities that are common to charity. For the purpose of this guide we most boards: refer to the governing body as the ‘board’ ■■ accountability – making sure your and those on it as ‘board members.’ charity meets its obligations, manages its finances and operates transparently ■■ strategy – setting the charity’s long-term The board members should goals and making sure it pursues its help your charity to stay charitable purposes ■■ resourcing – securing funding and focussed on its objectives, other resources to support the work manage its finances effectively of the charity and comply with the legal, ■■ advocacy – representing the charity to the community and to its members operational and ethical and stakeholders (with a chief executive requirements of your charity. officer and staff, if any) ■■ monitoring – making sure the charity is run as required under its governing Charities come in many different shapes documents and the law. and sizes and so do their boards. Although boards are made up of a group of individuals, they only have the power Committees of boards to bind the charity as a group, not as Because a board’s time is often very individual members – so it is the board limited, your board may decide to create as a group that can make decisions, not committees of the board to look more individuals on their own. It’s a team sport! deeply into some issues (sometimes called Boards share ultimate responsibility for sub-committees, standing committees or overseeing the work of charities and must ad hoc committees). For example, you may make sure that a charity remains true to its appoint a finance committee to look closely charitable purpose. at your charity’s finances and to ensure that adequate information is provided to the board for their decision-making. Role of the board Committees can be either ongoing or The board is responsible for providing project-specific. For example, a committee leadership and strategy to a charity. It might be established to recruit and also bears ultimate legal responsibility. induct new board members or to oversee Generally, boards delegate some of their a particular project (such as building responsibilities to staff or volunteers. works) and will only operate for a limited However, there are some things that are period of time. Committees may make usually reserved for the board such as recommendations to the board, but they appointing a chief executive officer (if the generally do not make decisions on behalf charity has one), adopting a strategic of the board. plan, overseeing the management of Your charity may have governing rules (see organisational risks and calling meetings the section in this guide on ‘your governing of the members. rules’) around how to establish committees, what they can be used for and who can be a member. Make sure you check your rules before establishing a committee. 4 visit acnc.gov.au phone 13 ACNC G overnance for good People on your board Role of board members People assisting the board Board members are the people who Not everyone who attends a board are either elected or appointed to be a meeting is a member of the board. member of a charity’s board. These people If your charity has a CEO, it is likely they are sometimes also called committee will attend board meetings. Your CEO members, trustees, governors or directors may or may not be a member of the and can be elected or appointed by board, although generally they will not nomination (for example, under legislation be and therefore will not have a vote. or under a trust deed). Board members do not generally have any authority as Some charities will have a secretary who individuals, but must act as part of a is responsible for making sure that a charity group to fulfil the role of a board. meets its governance obligations and works to support the board. Your secretary may or may not be a member of the board. If you are on the board of a Other staff, volunteers, consultants or your registered charity, you will be charity’s auditor (if any) may attend board meetings if they are invited – perhaps to considered to be a ‘responsible discuss a particular issue that involves them. entity’ under the ACNC Act. Your charity has an obligation to notify the ACNC Eligibility requirements for if there are any changes (appointment, removal or resignation) to your charity’s responsible entities. being a board member The eligibility requirements for being board members are different for every charity. To find out who is eligible to be Officers of the board a board member of your charity, check Although boards act as a group, your charity’s governing rules and any some board members take on extra board legislation that applies to your charity. responsibilities. For example, most boards For example, you cannot be a board will appoint a chair, who will be responsible member of a charity that is a company for running meetings and providing registered with the Australian Securities leadership to the board. and Investments Commission (ASIC) if you have been disqualified from directing Some boards appoint a treasurer who is companies by ASIC. responsible for overseeing a charity’s finances in more detail to make sure that the board has If your board is looking to appoint new the information it needs to make decisions members, you might find our quick tips about its charity’s finances. But don’t forget on choosing a new board member useful. – all board members share responsibility for a charity’s finances, not just the treasurer. Some boards will have a secretary who is responsible for managing the affairs of the board. The secretary usually takes and distributes minutes of board meetings and assists in organising the business of the board. For example, putting together agendas and notifying any regulator of changes to board membership. visit acnc.gov.au phone 13 ACNC 5 G overnance for good Common questions for board members Can board members resign? Can board members be Yes. Board members can resign at any personally liable as a time. Check your governing rules to find board member? out whether there are any steps you need to take – you may need to notify If you are complying with your duties your chair or secretary in writing and the as a board member, in many cases you charity should notify the ACNC and any will not be personally liable as a board other relevant government agencies. member. However, this depends on the particular action and the type of charity Consider what impact your resignation you are. For example, board members will have on the charity before choosing may be personally liable for legal action to resign. Ideally, look at giving a period taken against an unincorporated charity of notice. If you are also an employee of or for criminal or serious misconduct. the charity you will need to check your employment contract to see whether Under the ACNC Act, board members there is anything about how to resign of registered charities that are as a board member. Sometimes if you incorporated may be personally liable resign as a staff member you will also for deliberate actions or omissions that cease to be a board member. breach the ACNC Act if they have acted dishonestly, with gross negligence or are reckless. Can board members be paid? The ACNC Act treats the board Generally, board members can be paid members of registered charities that if the payment advances the charity’s are unincorporated associations and charitable purpose and the payments trusts differently. are clearly authorised (such as by a For unincorporated associations, meeting of the members). Check your the obligations and liabilities under rules to confirm whether there are the ACNC Act are imposed on each any rules around paying your board individual who is a director at the time. members. If your charity is a trust, your trustees (directors) cannot be paid For trusts, the obligations and liabilities unless the trust deed specifically sets under the ACNC Act are imposed on out that they are to be paid. Charities the trustees. If the trustee is a body that are companies registered with corporate (an incorporated organisation) ASIC that omit the word ‘limited’ from then the obligation and liabilities are their company name must not pay their imposed on the individuals who were board members fees. the directors of the company at the time. Payment of reasonable expenses is different to payment for services. Board Can board members be members can be reimbursed (paid employees of their charity? back) for reasonable expenses they paid while carrying out their duties. Your charity may have rules that set Check the fundraising regulation in your out whether members of the board can state or territory of operation as there also be employees of the charity. If your may be rules about the payment of charity’s rules do not prohibit this, your board members if you are fundraising. board members can also be employees of the charity. However, be aware that this can give rise to conflicts of interest that must be managed correctly. Consider reading our quick tips on conflicts of interest. 6 visit acnc.gov.au phone 13 ACNC G overnance for good How long does an legal responsibility for any decisions made. In charities with paid staff, most appointment last? boards will delegate responsibilities The terms of appointment for board to a chief executive officer (CEO). In members vary between charities others, the delegation can be to a but will generally be set out in your particular volunteer or sub-committee charity’s rules. For example, some of volunteers. Whatever the case, it charities will have three year terms is important to set out in writing what with one third of your board retiring the delegation is, especially if it is and being appointed every year. There’s delegating the powers of the board. no one size fits all solutions, so look for a model that works for your charity. Can a member tell a board member what to do? Can a board member tell a In most cases, no. Board members staff or volunteer member are independent and generally cannot what to do? be directed by any general member No. If your charity has staff or of a charity. volunteers, individual board members cannot direct their work unless the Can a board member board member has been given authority to do so (such as by a decision of be removed? the board or if they are a more senior Your charity may have rules that employee of the charity and are set out if a board member can be directing them as part of their role removed before the end of their as a senior employee). Generally, the term of appointment and how. Some board can only direct the CEO as a rules allow for a board member to collective, but individual members can be removed by a majority vote at be authorised by the board to do so. a meeting of the members. It is important to be clear about Rules will often set out certain the roles of staff members, volunteers situations where a board member and board members. Everyone should automatically stops being a board understand what their role is and how member, for example, if the board it fits with others within a charity. This member fails to attend a certain can help to avoid misunderstandings number of meetings throughout that can lead to disputes. Read our the year or becomes bankrupt. quick tips on internal disputes to find out more. The ACNC Act also gives the ACNC power in certain serious and specific situations to suspend or remove Can boards delegate their board members of a registered responsibilities? charity and also to appoint an ‘acting responsible entity’ to act in the place Some responsibilities of boards may of the removed board members. We be delegated (formally handed over) will generally only take this step in to others, although this depends on very exceptional circumstances in your charity’s rules and any legislation line with our regulatory approach. that applies to your charity. Remember, even if some responsibilities can be delegated, the board still bears ultimate visit acnc.gov.au phone 13 ACNC 7 G overnance for good Your governing documents Your governing documents (or ‘rules’) ■■ how meetings of members and meetings set out many of the powers, objects and of the board are called and held processes by which your charity is run. ■■ how authority is delegated to the board, They help you make sure your charity is staff or volunteers run well and on track. ■■ what will happen if the charity needs to All organisations have rules. Whether they be ‘wound up’ (closed down). are written in a formal document such as a constitution or are simply verbal It is important that your rules accurately agreements between members, rules reflect how your charity operates. If your should be part of every organisation’s life. rules are not followed, you will not be able When written, these rules are sometimes to rely on them if there is uncertainty, which called a constitution, charter, articles, is when you need them most. rules or rulebooks. In this guide, we call them ‘rules’. Your rules might be kept in more than one If you become a board document. For example, your charity might member, make sure you: have a constitution that sets out how your charity will be run and a mission statement 1. Ask for a copy of your charity’s current rules. that sets out its purpose. Religious 2. Read them, and ask questions organisations may also have a religious if you do not understand them. doctrine or canon law that sets out how they are to be run. 3. Refer to them and make sure you follow them or, if appropriate, follow the correct process to change them. Why are rules important? Rules are important because they help give some certainty about how your charity is Showing that your charity run and set out procedures that everyone is a not-for-profit involved with your charity can rely on. Rules bind you (as a board member), the charity In order for your organisation to be and its members. considered a charity, it must be a not‑for‑profit. The ACNC will look at your charity’s rules as part of the evidence of your charitable Generally, your organisation is a not-for- purposes to ensure that it is entitled to profit if it does not operate for the profit, registration with the ACNC. The rules of personal gain or other benefit of particular registered charities will be available on people, such as its members, the people the≈ACNC Register in the future. who run it or their friends or relatives – this gain or benefit is sometimes called Your charity’s rules will generally set out: ‘private benefit’. This applies both while the ■■ that your charity is a not-for-profit organisation is operating and if it winds up. ■■ its charitable purpose Your rules are a good place to show that ■■ the powers the board has to run your organisation is a not-for-profit. They the charity will contain clauses that prevent it from ■■ how to become a member and the providing private benefit to its members. rights and obligations of members Find out more about the meaning of not‑for‑profit and how to show that ■■ how members of the board (and any your organisation is a not-for-profit. office bearers such as a president or treasurer) are elected or appointed 8 visit acnc.gov.au phone 13 ACNC G overnance for good What is public benefit? Adopting or changing your rules Charities must be for the ‘public benefit’. If you are drafting your first set of rules, This means that they must benefit the or introducing new rules, your charity will general community or a sufficient section need to formally adopt them. You may have of the community. existing rules that set out how this must be done, or, if your charity is incorporated, the For example, an organisation will not be a legislation that applies to your charity may charity if it exists only to make money for set out requirements for how to adopt new the members of its board – this is a private rules. If your charity is a company limited benefit. Private benefit does not just have by guarantee then the Corporations Act to be money – it could be a service or applies. If it is an incorporated association goods or anything else the charity provides. then the legislation of the state or territory it The people who are involved with a charity, is registered in will apply. Make sure you are such as its staff or volunteers, can benefit familiar with these requirements before you from the work of the charity (for example, start making any changes. the board members of a self-help group can still benefit from involvement with the When you apply for registration, you must charity) but the purpose of the charity provide a copy of your charity’s rules to must be to benefit the public or a sufficient the ACNC. section of the public, not any specific Charities that were automatically registered individual. Specific individuals may only with the ACNC will be asked to submit a benefit from the charity where this benefit is copy of their current rules so these can be in line with the charity’s charitable purpose. published on the ACNC Register. While it is important that you always follow Showing that your charity has your charity’s rules, these must be suited a charitable purpose to your charity – sometimes you may need to make changes to your rules. All charities must have a charitable purpose. Your purpose is the reason You need to notify the ACNC if you make your organisation has been set up, any changes to your rules. Read more or what your activities work towards about notifying the ACNC of changes achieving. Some people also refer to to your charity. this as your organisation’s mission. ‘Charitable purpose’ has a special legal meaning, developed over years by courts and parliament. Your rules should show that your organisation has a charitable purpose. This is important when applying to the ACNC to register as a charity to show that your organisation is eligible to be a registered charity and is therefore entitled to certain Commonwealth charity tax concessions, exemptions and other benefits. Find out more about the meaning of ‘charitable purpose’. visit acnc.gov.au phone 13 ACNC 9 G overnance for good Your duties and responsibilities As a member of a board, you have duties 2. To act with reasonable and responsibilities to your charity. Even though most board members of charities care and diligence are volunteers, you still have legal duties As a board member, show a standard of that you must meet to ensure that your care and diligence that a reasonable person charity is well-governed. would use if they were in your place. In As a board member, you have an important practice, do your best to participate. Before responsibility to your charity that requires the meeting, read and try to understand you to put the interests of the charity ahead any materials you have been given about of your own personal interests. The specific topics the board will be considering. Try duties vary depending on your charity’s to turn up to meetings on time. If you are legal structure. Generally, you need to be unable to attend a meeting, give reasonable careful and conscientious in your role and notice and try to catch up afterwards. act with common sense and integrity. If you have any questions about any of There are generally considered to be four your board’s business, always ask the main duties of board members: other board members or staff and make sure to leave time for thinking about your 1. To act in the best interest decision. If you do not feel comfortable making a decision on something, it may be of your charity and for worth asking for more time. You should feel a proper purpose confident to independently make decisions When acting as a board member you and not just follow the crowd. Sometimes, must make decisions that are in the best you should request that your separate view interest of your charity and to further its be recorded in the minutes. charitable purpose. One part of your duty of care is to make If you are on the board as a representative sure that your charity can pay its debts or nominee of another organisation, you when they are due. This is called being will generally have to make decisions that solvent. If your charity is unable to do this are in the best interest of the charity (rather then it will be insolvent. This responsibility than, for example, the organisation that to keep your charity solvent is often clearly nominated you). set out in relevant legislation (depending on its legal structure and your state or territory) and most lawyers agree that this requirement is also implied as part of this Ask yourself - is this decision in the best interest of my charity and does it further duty to act with care and diligence, for its charitable purpose? all charities. Ask yourself - would someone who was observing me think that I was being careful and conscientious in my duties? Can my charity pay its bills? 10 visit acnc.gov.au phone 13 ACNC G overnance for good 3. Not to improperly use 4. To disclose and manage information or position conflicts of interest Sometimes as a board member you will Conflicts of interest occur when your duty come across information that could be to act in the best interests of your charity used for your personal or other interests. is in conflict with (or may conflict) with the Any special knowledge that you gain as a opportunity or potential to get a personal board member must only be used for the benefit (or a benefit for a person or benefit of the charity and never to further organisation you have a relationship with). personal or other interests. If you have a conflict of interest (or For example, you might learn about perceived conflict), inform your board the details of a tendering process or the as soon as possible. Generally, it is best private details of staff or clients. Keeping (and often required by your rules or any this information private is one of your legislation that applies to your charity) responsibilities as a board member and not to take part in any discussion or this information must not be used except decision‑making where you have a in the interests of your charity. conflict of interest. Conflicts of interest are common and do not have to be a serious problem. Ask yourself - am I using my position However, if a conflict of interest is not as a board member, or information I have managed properly, it may damage your received in this position, for the benefit charity’s reputation and, in serious cases, of my charity? Or am I using it for my own even break the law. Perception is critical – interests or the interests of my family or even if there is no actual conflict of interest. others I have a relationship with? For more information, consider reading our quick tips on managing conflicts of interest. Ask yourself - would an independent observer be sure that I was acting in the best interests of my charity? Or might they think I was acting in my own interest? visit acnc.gov.au phone 13 ACNC 11 G overnance for good Governing your charity The most important part of your work in Records a charity is actually doing what your charity was established to do. However, as a Keeping records allows you to have board member you must make sure that an accurate account of your charity’s not only is your charity doing good work important information. You should consider but it is also properly governed. what kind of information it is important for your organisation to keep and also whether there are any privacy or any other legal Meetings considerations for the sorts of records you keep. For example, you might keep Often, to get the work of your charity records on: done, your board will need to hold meetings. Some can be informal (such ■■ your financial statements such as bank as over the phone or around your kitchen statements, and receipts to show any table), while others must follow certain money coming in or going out (including requirements. Your rules or the legislation any payments or donations, funding that applies to your charity may set out: contracts or receipts) ■■ how many meetings must be held ■■ meetings held by the charity (particularly and when (such as your annual meetings of your board and annual general meeting) general meetings) ■■ who needs to be at the meetings ■■ your charity’s activities (such as annual (there may be a quorum requirement, reports or other documents that allow where a certain number of people must you to show what kind of activity your be present for the meeting to be valid) charity has been undertaking). ■■ whether minutes need to be taken, Registered charities are required to keep how they are to be kept and who records under the ACNC Act, usually for can read them seven years. In particular they must keep ■■ who can vote on matters and how records that correctly record: voting is to happen. ■■ (and explain) its transactions, financial position and performance and enable Be familiar with any requirements your true and fair financial statements to be charity may have for holding meetings, prepared and audited (if needed), and and be clear about what kind of meeting you may hold. For example, how you run ■■ its operations. the meeting and the responsibilities of the people attending will be different if it is a board meeting, compared with a meeting of your members (even if the board and the members are the same people). You may like to read our quick tips on holding annual general meetings. 12 visit acnc.gov.au phone 13 ACNC G overnance for good People involved Some charities will choose to use ‘contractors’ who are paid by the charity The people involved with your charity are but who are not ongoing employees. Be at the heart of what it does – whether they familiar with the specific tax conditions are paid or volunteer members of staff, it for having contractors, before your charity is important to consider how you manage uses one. The ATO provides guidance on their involvement. contractors and tax that may be useful Having staff is an important responsibility. to your charity. Make sure that they have a safe workplace Volunteers are a precious resource to and that their conditions are lawful, fair, and charities and it is important that you make clear to both the staff and the board. There sure that your volunteers are supported, are resources available that can help you. safe and valued. Volunteers require For more guidance that may be useful for training and support, so consider forming your charity, visit agencies such as: a strategy on how your charity will recruit, ■■ Safe Work Australia – health and safety train and supervise its volunteers. The ATO laws and staff provides guidance on volunteers and tax ■■ The Fair Work Ombudsman and the that may be useful to your charity. Australian Human Rights Commission PilchConnect provides a useful guide that – employment and equal opportunity explains the difference between employees, ■■ the Australian Taxation Office (ATO) contractors and volunteers (167kb). – employees and taxation. Make sure your charity is clear about who is a board member, a staff member, a volunteer or a contractor to your charity – your responsibilities to each person will depend on what their status is in the organisation. In smaller charities, sometimes these roles will be less clear and often the roles of volunteers, board members and staff will overlap. While the people may be the same, the roles are different and so are their responsibilities. Remember, everyone on your governing body shares the responsibility to make sure your organisation’s finances are well-managed. Even if you have a treasurer on the board it is important that all the other board members also take their financial obligations seriously. All board members should feel comfortable to ask questions on financial matters and to be able to understand the charity’s financial statements. visit acnc.gov.au phone 13 ACNC 13 G overnance for good Overseeing your charity’s finances A key responsibility for your board is to Consider whether your charity make sure your charity has the resources needs to (by law) appoint an auditor. it needs to carry out its work, meet its For more information, read our debts and achieve its purpose. quick tips on basic financial controls. Raising money When things go wrong There are a number of ways your charity When facing financial trouble, there are can raise money. Charities commonly raise steps you can take to manage it and to money through membership fees, seeking reduce the risk of it happening again. donations from the public, government funding and/or holding events. If you are familiar with your charity’s finances (how much money you have, However your charity raises money, where it comes from and what it is being it is important that you understand the spent on) this will allow you to respond to obligations that come with receiving money. any trouble quickly and effectively. Acting You may have to comply with fundraising early gives you more options and could help regulation in your state or territory, meet you prevent your charity from closing down. certain obligations under a government funding contract or comply with your obligations as a trader. The ACNC does not regulate fundraising. It is important to Your charity may have other consider these obligations before you start raising money. obligations to manage its finances or make financial Financial controls reports to other government Keeping an eye on your charity’s finances is agencies. crucial to ensuring your charity has access to the resources it needs. Regularly review your financial position and your charity’s More resources ability to pay for its upcoming expenses. Ensure that your processes for money- Make sure you are familiar with your handling are safe and secure to protect ongoing obligations (including financial against fraud and financial crime. It can reporting) to the ACNC, and also to other be hard to believe, but theft does happen government agencies or under grant in charities – it is uncommon, but simple agreements. You can take a look at our: steps can help prevent problems. ■■ list of other regulators, and the Some boards will appoint a finance obligations your charity may have to them committee to look into your charity’s ■■ state and territory factsheets finances more deeply. This committee ■■ guidance on financial and other reporting usually reviews financial reports to the to the ACNC board in greater detail and provides advice ■■ quick tips on basic financial controls to the board on the organisation’s financial position. Your financial information should be presented in a clear way that can be understood by the members of your board and anyone else who has to deal with it. 14 visit acnc.gov.au phone 13 ACNC G overnance for good Your obligations to the ACNC If your charity is registered with the ACNC, Notify it has obligations it must meet to maintain its registration. If your charity changes its legal name, address for service, board members or The obligations of registered charities can governing rules you must notify the ACNC. be grouped into obligations to notify us This is important to keep your entry on the of certain changes, keep records and to ACNC Register up-to-date – otherwise report to us each year. Your charity does people who are searching for your charity not have to pay a fee to the ACNC for may think it has closed down. meeting any of its ACNC obligations as long as it meets these within the required You must also let us know if you think time period. your charity isn’t meeting its obligations and isn’t entitled to be registered with Your charity may have to pay a penalty if it the ACNC. For example, if your charity’s doesn’t meet its obligations on time. Your purposes are no longer charitable, you charity must also ensure that it continues must notify the ACNC. to meet the requirements for registration, including complying with the governance Find out more about notifying the ACNC and external conduct standards and of changes to your charity. pursuing its charitable purpose. Keep records Unless we tell you otherwise, your Registered charities need to keep both obligations to the ACNC are in addition financial and operational records. There is no to any obligations your registered charity requirement that you use a particular system, may have to any other government process or format for keeping records. agencies. The ACNC is working to reduce They must be readily accessible and made the duplication of obligations, such as available to the ACNC upon request. Records reporting to other government agencies. must usually be kept for seven years. Financial records are documents that allow you to explain your charity’s financial transactions, position and performance and Role of other regulators allow financial reports to be prepared and Charities must meet a range of legal audited (if required). requirements imposed by government Operational records are any other agencies at local, state and territory, documents about your charity’s activities and Commonwealth levels. Sometimes (operations). These may include meeting this regulation is specific to charities, minutes, reports, and written details of your sometimes it will apply to charities and charity’s activities, programs or services. other not-for-profits (such as fundraising Most charities have this information and legal structure) and sometimes it will and summarise it in an annual report to apply to charities and business (such members. You need to keep records that as work health and safety regulation). allow the ACNC to assess whether your Often there will be different requirements charity remains entitled to its registration depending on the type of activities the and that it is complying with its obligations charity does (such as working with children to the ACNC. Records must also allow the or providing aged care services). Australian Taxation Office (ATO) to decide Read our list of other regulators that may whether your charity is complying with affect charities, or our factsheets on the any relevant taxation laws. state and territory regulation of charities. Find out more about record-keeping obligations to the ACNC. visit acnc.gov.au phone 13 ACNC 15 G overnance for good Report Governance and external Registered charities must report each year conduct standards to the ACNC. The government intends to introduce The reporting requirements vary depending governance and external conduct on the size of the charity. Small charities do standards that are expected to apply not need to provide as much information as from 1 July 2013. Find out more about medium or large charities, which will usually governance and external conduct need to provide financial reports. standards. Once those standards come in your registered charity will need to comply Reporting obligations will be introduced with these too. This guide will be updated in two phases, from 1 July 2013 and, to include information about the standards generally, reporting to the ACNC is once they commence. additional to other reporting requirements your charity may have. Find out more about providing reports to the ACNC. Basic religious charities are exempt from providing annual financial reports and complying with the ACNC governance standards (expected to apply from 1 July 2013). Find out more about basic religious charities. 16 visit acnc.gov.au phone 13 ACNC G overnance for good Your charity changes or if things go wrong Sometimes things change – what you Conflicts of interest thought when you started out might not be what works best for your charity Conflicts of interest can happen often. If and sometimes things don’t go exactly these are if properly managed they do not as planned. Be aware of potential risks have to cause serious problems. A conflict to your charity and have a plan in place of interest occurs when a person who has to handle them. a duty to act in the best interests of another has the opportunity or potential to ‘use’ that information or their position in some Internal disputes way for their own personal benefit (or for the benefit of a person or organisation they Internal disputes need to be taken have a relationship with). Read our quick seriously, but there are steps you can tips on conflicts of interest to find out more. take to resolve them. Internal disputes involve disagreements between groups Disclose any conflicts of interest to the or individuals within a charity. For example, board as soon as you are aware of them. if a member of staff disputes a decision Unless the board members consent, you taken by the charity’s board about how should not participate in any discussion the charity is run. The ACNC does not have or decision-making on issues where you the power to deal with internal disputes in have a conflict of interest. Sometimes, it charities unless there is a serious risk to may be best if you leave the room until public trust and confidence. For example, the discussion is over. if the dispute has the potential to result in a breach of the ACNC Act. It is not the role of the ACNC to mediate disputes, but there are other organisations that can help. It is often a good idea to have a provision in your charity’s rules that sets out how a dispute will be resolved. It is always better to have the process in place before you need it! Read our quick tips on internal disputes to find out more. To help avoid disputes caused by misunderstandings, be sure that everyone involved with your charity understands their role and responsibilities and acts quickly to resolve any disputes. Remember, disputes can destabilise a charity and can distract you from carrying out your charitable purpose. visit acnc.gov.au phone 13 ACNC 17 G overnance for good Winding up Remember, if your charity ceases to be registered with the ACNC it will lose ‘Winding up’ means closing down its eligibility to receive tax concessions your charity. There are many reasons from the Australian Taxation Office and that charities choose to wind up. Some access to certain other Commonwealth charities might wind up because they have concessions, benefits or exemptions. achieved their mission or if they merge their operations with another charity. In other The ACNC Act gives the ACNC powers cases, they wind up because they can to ensure that the community continues no longer pay their debts. Whatever the to have high levels of trust and confidence reason for winding up, your charity may in the sector. These powers aim to protect have procedures that it must follow set out the reputation of charities doing the right in its rules or in any legislation that applies thing. In cases where charities are guilty to it. Contact your incorporating regulator of serious misconduct, the ACNC has the to check if there are any procedures your power to revoke a charity’s registration. charity may need to follow and it is in your best interest to notify the ACNC so that your charity is no longer has to meet its Insolvency obligations to the ACNC. Being insolvent means that your charity cannot pay its debts when they are due. If you think your charity may be insolvent Revocation or at risk of becoming insolvent you should The time may come when your charity seek professional advice immediately. You decides that it no longer wants to be a may need to notify your state or territory registered with the ACNC. Charities might regulator if your charity is incorporated. choose to request that their registration be revoked because they are winding up or if they decide to change their purposes to ones that are not charitable. Whatever the reason, if your charity decides that it no longer wishes to be a registered charity, you can complete the Application to revoke registration as a charity form (378kb) to cancel your registration. 18 visit acnc.gov.au phone 13 ACNC G ov er n a n c e f o r g o o d Top 10 tips for board members Know what your charity’s Although board members act 01 charitable purpose is and make 06 as a collective, do not just follow sure you and your charity are the crowd. You should always working towards it – when in do what you think is best for doubt, ask yourself whether your your charity, even if sometimes it actions are furthering your charity’s means asking questions, getting charitable purpose. extra information or independent advice, or taking a different view to other board members. Be clear about your role and Know your charity’s obligations 02 make sure that the roles and 07 to government agencies (such as responsibilities of everyone at the ACNC and other regulators) your charity are well understood, and make sure your charity is whether they are a volunteer, meeting them. member, board member, client or employee. Understand your charity’s financial Listen to the other board 03 position and be familiar with its 08 members and work as part of financial statements – everyone on a team. Your board shares a your board shares a responsibility collective responsibility for the to make sure your charity’s organisation and you should see finances are well-managed. board members as colleagues. Keep your responsibilities Be confident to declare and 04 as a board member in mind 09 manage conflicts of interest when making decisions as a responsibly. For more information board member, particularly the read the ACNC quick tips on difficult ones. managing conflicts of interest on acnc.gov.au Have a copy of your rules: read Always act in the best interests of 05 them, understand them, follow 10 your charity – as a board member them and if ever you are uncertain, you have a responsibility to put ask your other board members or the interests of your charity above get professional advice. your own personal interests. visit acnc.gov.au phone 13 ACNC 19 G overnance for good Resources for charities These are just some of the resources available to charities on governance. The ACNC is developing a list of resources and will provide further information in the future. Australian Institute of Company Directors www.companydirectors.com.au Chartered Secretaries Australia www.csaust.com Community Door (Queensland site but with general information) communitydoor.org.au Connecting Up www.connectingup.org CPA Australia www.cpaaustralia.com.au Inc. – A guide for incorporated associations in Western Australia (Western Australian site but with general information) www.commerce.wa.gov.au/associationsguide Institute of Chartered Accountants Australia www.charteredaccountants.com.au Not-for-profit Compliance Support Centre (Victorian Government site but with general information) www.nfpcompliance.vic.gov.au Our Community www.ourcommunity.com.au Philanthropy Australia www.philanthropy.org.au PilchConnect (Victorian site but with general information) www.pilch.org.au Queensland University of Technology - Developing Your Board Wiki https://wiki.qut.edu.au/display/CPNS/DYB+Home 20 visit acnc.gov.au phone 13 ACNC