ACNC Update Not-for-Profit Boardroom Briefing Presented by David Locke| Assistant Commissioner | Charity Services 4 March 2015 We are not a complaint handling body, we use concerns raised with the ACNC to determine if there is issues we need to investigate. We are not here to resolve complaints made by the public. We call complaints raised by members of the public concerns – we cannot disclose to someone who raises a concern any information about the matter, including whether we decide to investigate, or the outcomes of any action we take. We also do not necessarily focus on the concern raised by a complainant. 1

02/06/13 ACNC has celebrated two years since its commencement under the ACNC Act 2012. How much has been achieved in 2 years and what does the future hold? PRESENTATION TITLE | DATE

What have we done? Where are we going? What do we want? 02/06/13 What have we done? Where are we going? What do we want? PRESENTATION TITLE | DATE

02/06/13 What have we done?

Objects 02/06/13 The NFP Sector pressed for objects to be set out up front in the ACNC Act: The objects of this Act are: (a) to maintain, protect and enhance public trust and confidence in the Australian not-for-profit sector; and (b) to support and sustain a robust, vibrant, independent and innovative Australian not-for-profit sector; and (c) to promote the reduction of unnecessary regulatory obligations on the Australian not-for-profit sector.

A Reliable Register 59,400 charities 6,000 removed or revoked 02/06/13 59,400 charities 6,000 removed or revoked 5,500 registered 6 charities revoked for non-compliance 8,400 double defaulters PRESENTATION TITLE | DATE

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02/06/13 2014 Reporting stats   22,000 submitted 2014 Annual Information Statements; and a further 2,000 are in progress The estimated compliance rate so far is 75-80% The 2014 AIS contains basic financial information questions: 9 elements for small 12 for medium 15 for large charities Medium and large charities are also required to provide financial reports Hunger Project – a collaborative relationship and concrete object of benevolence (meaning a genuine partnering between 2 or more organisations to deliver benevolent to a recognised group). Health Promotion Charities – exposure draft until February 2015, need to recognise a disease and activity to prevent that disease. Housing – Allows for provision of housing falling short of benevolence if part of a chain of delivery for benevolent housing (i.e. fundraising to maintain viability).

Sample Constitution Developed by ACNC with ASIC and ATO; 02/06/13 Developed by ACNC with ASIC and ATO; Complete Guidance material; Easily adapted to meet various governance arrangements;

Commissioner Interpretation Statements 02/06/13 Commissioner Interpretation Statements The Hunger Project Case Health Promotion Charities Housing Process: - identify issues - public consultation - publication of Interpretation Statements Hunger Project – a collaborative relationship and concrete object of benevolence (meaning a genuine partnering between 2 or more organisations to deliver benevolent to a recognised group). Health Promotion Charities – exposure draft until February 2015, need to recognise a disease and activity to prevent that disease. Housing – Allows for provision of housing falling short of benevolence if part of a chain of delivery for benevolent housing (i.e. fundraising to maintain viability).

02/06/13 Where are we going?

The policy context Administer the ACNC and Charities Act transition planning to the ATO and ASIC In some settings the continuing existence of ACNC requires some explanation. It is government policy to abolish the ACNC. Department of social services under the minister of Social services has responsibility for policy on this matter. A Report by DSS on options for the future of charity regulation is with the Minister and may make its way to the Senate next year. The voting intentions of the Senate on this matter are uncertain. So in the meantime, we continue to administer our Acts and participate in transition planning back to ATO and ASIC if and when required. DSS Consultation July 2014 – 250 stakeholders attend; 88 written submissions; summary of report to be published by end of September on DSS website; now amended to “following the consultation period” Number 1 repeal bill introduced March 2013 in House of Representatives; placed on government business last Wednesday 3rd December (2nd birthday); second reading debate for about 3 hours, adjourned to the new year. Still not resolved in the house of representatives. Number 2 repeal bill to be prepared and debated before number 1 repeal bill can become effective. Understood that it has not yet been drafted. Uncertainty as to whether there will be an exposure draft. Expectation that ACNC will still be operatign 30 June 2015. The reports of my death are greatly exaggerated. - Mark Twain

“if we get the chance, we shall repeal it.” 02/06/13 “if we get the chance, we shall repeal it.” House of Representatives September 2012 Hon. Kevin Andrews Minister for Social Services

Repeal Bill No.1 02/06/13 2013-2014 The Parliament of the Commonwealth of Australia HOUSE OF REPRESENTATIVES Presented and read a first time Australian Charities and Not-for-profits Commission (Repeal) (No. 1) Bill 2014 No. , 2014 (Social Services) A Bill for an Act to repeal the Australian Charities and Not-for-profits Commission Act 2012, and for related purposes Introduced 19 March 2014 Debated 3 December 2014 Adjourned to next sittings PRESENTATION TITLE | DATE

A new Social Services Minister 02/06/13 “I have advised key stakeholders in this area I have no immediate plans to be progressing that issue while I focus on higher order priorities.” Social Services Minister Scott Morrison

DSS Consultation 4 July 2014 Discussion Paper 02/06/13 4 July 2014 Discussion Paper 10-24 July 2014 Consultations in 7 cities with 240 attendees; Written submissions closed 20 August 2014 – 88 received; Report Published 19 December 2014 Will inform the No.2 Bill PRESENTATION TITLE | DATE

National Centre for Excellence 02/06/13 “The NCE will not be a replacement for the ACNC. It will not have regulatory functions. The Australian Government has committed to establish a NCE that will operate independently of government to enhance the institutions of civil society. This may occur through supporting collaboration, innovation, education, training and advocacy, and working to reduce reporting requirements and red tape.” DSS Report on Australia’s Charities and Not-for- profits December 2014

National Centre for Excellence 02/06/13

Final Report on NCE 02/06/13 “The final report and its attachments will be published on this page – we think some time in the next fortnight. We will email participants and interested parties who’ve registered when this occurs.” Andrew Young 7 November 2014

02/06/13 What do we want?

What does a charity need to do? 02/06/13 Keep records; Report annually; Notify changes Meet Governance Standards.

Annual Information Statement 02/06/13 All Registered Charities 6 months after year end No financials last year – some financial data this year Basic Religious charities need not provide financial data On line pre filled form PRESENTATION TITLE | DATE

Annual financial reports 02/06/13 Only medium and large – over $250K revenue; Medium reviewed - $250K- 1M Large audited – over $1M revenue Basic Religious charities exempt Other regime requirements accepted this year; Heavily regulated sectors special exemptions; PRESENTATION TITLE | DATE

Reporting requirements for medium and large charities Financial Reporting Regulations released on 17June 2013 and apply from 1 July 2013. Financial statements must give a true and fair view and must comply with accounting standards. Special and general purpose financial statements allowed Transitional arrangements for those not applying accounting standards before – can provide the financial information contained in the 2014 AIS which must be audited/reviewed. 25

Reporting requirements contd.. The reports must comprise at a minimum: - a statement of profit and loss and other comprehensive income - a statement of financial position - a statement of changes in equity - a statement of cash flows - notes to the financial statements - an auditors report (large) or a reviewer’s report (medium) - a declaration from the responsible persons. Joint and Collective reporting options available – once approved: Joint reporting: charities will be able to submit a one AIS and one financial report for the approved group Collective reporting: charities will be able to submit one or more AIS and one or more financial report on a basis other than an entity basis (e.g. affiliation) 26

The Governance Standards 02/06/13 A minimal level of assurance that they meet community expectations: Not for Profit Accountable to members Comply with laws Suitable directors Directors duties Standard 1: Purposes and not-for-profit nature of a registered entity   Charities must be not-for-profit and work towards their charitable purpose. They must be able to demonstrate this and provide information about their purpose to the public. Standard 2: Accountability to members Charities that have members must take reasonable steps to be accountable to their members and provide their members adequate opportunity to raise concerns about how the charity is governed. Standard 3: Compliance with Australian laws Charities must not commit a serious offence (such as fraud) under any Australian law or breach a law that may result in a penalty of 60 penalty units (currently $10 200) or more. Standard 4: Suitability of responsible persons Charities must check that their responsible persons (such as board or committee members or trustees – called ‘responsible entities’ under the ACNC Act) are not disqualified from managing a corporation under the Corporations Act 2001 (Cth) (Corporations Act) or disqualified from being a responsible person of a registered charity by the ACNC Commissioner. Charities must take reasonable steps to remove any responsible person who does not meet these requirements. Standard 5: Duties of responsible persons Charities must take reasonable steps to make sure that responsible persons understand and carry out the duties set out in this standard. Charities must take reasonable steps to make sure that the following duties apply to responsible persons and that they follow them.

Duties reasonable care and diligence 02/06/13 reasonable care and diligence honestly in the best interests of the charity and for its charitable purposes not to misuse their position as a responsible person not to misuse information they gain in their role as a responsible person to disclose conflicts of interest to ensure that the financial affairs of the charity are managed responsibly not to allow the charity to operate while it is insolvent. These duties are:   •to act with reasonable care and diligence •to act honestly in the best interests of the charity and for its charitable purposes •not to misuse their position as a responsible person •not to misuse information they gain in their role as a responsible person •to disclose conflicts of interest •to ensure that the financial affairs of the charity are managed responsibly •not to allow the charity to operate while it is insolvent. The language of this 5th standard is almost identical to the duties set out in the Corporations Act and reflect the long held governance standards applicable to directors. Keep in mind that in relation to a company that is a charity, generally speaking the Corporations Act regulatory regime switches off and the ACNC Act scheme switches on. The distinction is that in the corporations act regime, it is the director who is responsible to meet the duties. In the charities regime it is the charity that must ensure compliance by its directors. It is the view of ACNC that the practical effect of the primary responsibility falling on the charity is much the same as the responsibility falling on the director. ACNC presumes, in the absence of evidence to the contrary that registered charities comply with the governance standards. A report of a breach of these standards becomes a trigger for inquiry and intervention. PRESENTATION TITLE | DATE

Our Regulatory approach 02/06/13 “The ACNC begins from a presumption that charities act honestly and prudently. However, we will take decisive action when a charity acts dishonestly and puts public trust and confidence at risk,”

A Compliant Register 02/06/13

02/06/13 NFP Governance is not a billabong cut off from the mainstream of governance. Governance codes can readily be adapted for NFP considerations. It is estimated that 70% of for profit governors are also involved in NFP governance and given that 6 million Australians volunteer in NFPs it would be interesting to consider whether there are more NFP governors in Australia than for profit. Surveys also show no evidence that NFP boards are any more or less effective than for-profit boards. In short, public trust and confidence in charities requires good governance. Good governance tailored to the unique needs of the NFP sector can be encouraged and mandated by a dedicated, focussed NFP regulator setting the boundaries and patrolling the area. In the words of an iconic Australian registered charity, the safest place to be is to swimming between the flags. It avoids the risk of drowning.

Keep in contact with the ACNC 02/06/13 Commissioners Column and email updates Web guidance, podcasts, video content 13 ACNC (13 22 62) 9.00 am – 6.00 pm AEDST advice@acnc.gov.au facebook.com/acnc.gov.au @acnc_gov_au youtube.com/ACNCvideos There are of course many ways to get in touch with the ACNC.