INDEX

ACNC Governance Standards update ....... 1

Annual information statement .................... 2

The ACT gets on board .............................. 2

Charities under the microscope.................. 3

NFPs encouraged to speak freely .............. 3

Human rights and anti-discrimination bill dropped ...................................................... 4

Editorial

It has certainly been an eventful week in federal politics! Parliament has passed the historic National Disability Insurance Scheme legislation. The government has now termed the initiative „DisabilityCare Australia‟.

The Not-for-profit Sector Freedom to Advocate Bill was recently introduced into the Senate but the government has pressed the pause button on the divisive Anti-Discrimination Bill.

Meanwhile, the ACT government has announced it intends to align its regulatory requirements for ACT incorporated associations and fundraising, with the ACNC.

There are some developments on the ACNC front that you need to be alert to:

the ACNC has commented on its

approach to compliance and investigations.

a sample of the report all charities will

need to submit annually to the ACNC has been released. Be ready for increased disclosure.

the ACNC governance standards have

been amended.

Suhanya Mendes Editor

ACNC Governance Standards update

The ACNC Governance Standards have been tabled in Parliament.

Background

See our 24 January 2013 Not for Profit Briefing for background, details and our recommendations in relation to the standards.

Changes to the draft standards

Draft standards were released for consultation earlier this year. Changes following the consultation include:

Until 1 July 2017, incorporated associations that comply with their

state or territory obligations will be taken to have met the standard dealing with duties and responsibilities of the governing body members.

The standard requiring accountability to members now includes a

definition of “member”. “Member” includes shareholder. “Member” also includes the objects/purposes of a trust – this appears to be an unintended consequence given that the explanatory material says trusts are not included.

The standard dealing with financial management of charities has

been rolled into the standard dealing with duties and responsibilities of the governing body members.

Concerns We are concerned that:

The standards require more of charities than the Corporations Act

2001 (Cth) requires of directors in that charities will be required to avoid “perceived” conflicts of interest – not just “actual” conflicts of interest.

One example given of a charity demonstrating its NFP “character” is if

the remuneration of its staff is benchmarked against other NFP entities. We hope this example will be treated only as an example, and not be interpreted as a requirement. In our view, it would not always be necessary or appropriate for a charity to adopt this as a measure of its "NFP character".

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26 MARCH 2013

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25 MARCH 2013

The ACT gets on board the ACNC reform train

On Labour Day, the federal and Australian Capital Territory governments announced that the ACT government intends to streamline regulation for charities that are ACT incorporated associations.

Once the changes take effect, ACT incorporated associations that are ACNC registered charities will only report to the ACNC, and not to both the ACNC and the ACT Office of Regulatory Services. Amendments are also to be made to ACT fundraising legislation.

In October last year, it was announced that South Australia intended to make changes to its associations and fundraising legislation.

Incorporated associations in all other jurisdictions are required to report both to the State or Territory regulator and the ACNC.

Two jurisdictions are on board, six to go!

Suhanya Mendes Senior Lawyer

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An example is provided of a step a charity may take to demonstrate

that it is accountable to members. The measure is for the charity to call for members to propose agenda items, prior to sending out a notice of a general meeting. This goes beyond existing requirements under the Corporations Act 2001 and State legislation such as the Associations Incorporation Reform Act 2012.

Because the standards require Parliamentary approval there may be changes to the standards before they become law. In fact, the Liberals have given notice that a motion will be moved to disallow them. Whether the governance standards become law remains to be seen.

Elizabeth Turnour Lawyer

Annual information statement for charities

Annual information statement

Under the Australian Charities and Not-for-profits Commission (ACNC), all registered charities will be required to lodge a yearly information statement – known as an Annual Information Statement (“AIS”) – with the ACNC. For charities that operate on a 30 June financial year end date, the first AIS will be due on 31 December 2013.

Generally, the information obtained through a charity‟s AIS will be made publically available on the ACNC‟s online register.

Sample 2013 AIS

A sample 2013 AIS (and a step-by-step guide) is now available on the ACNC website, and asks questions regarding a charity‟s:

contact details;

size (small, medium or large);

purposes;

type (i.e. whether or not a basic religious charity);

activities;

paid employees and unpaid volunteers; and

place of operation.

The final version of the AIS is due for release in May/June 2013.

Public consultation paper

The 2013 AIS only requests non-financial information about a charity‟s operations. As of 2014, however, a charity may also need to provide information about its financials.

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25 MARCH 2013

NFPs encouraged to speak freely

The Federal Government has acted on its announcement last year to ban “gag clauses” in contracts between government agencies and NFPs.

The Not-for-profit Sector Freedom to Advocate Bill was introduced to the Senate in mid-March. If passed, any clause in a contract that restricts or prevents an NFP (including its staff) from “commenting on, advocating support for or opposing a change to any matter established by law, policy or practice of the Commonwealth” will have no effect. There is an exception for confidential or personal information.

According to the explanatory materials, “[t]he Bill is intended to encompass and build on the Commonwealth Grant Guidelines, which include a specific clause that prevents agency staff from including suppression clauses in grant application and selection processes or clauses in grant agreements.”

The Aid/Watch case determined that charities can engage in advocacy. This initiative seeks to remove contractual impediments.

We look forward to the valuable insights NFPs are able to bring to the policy whiteboard.

Suhanya Mendes Senior Lawyer

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The ACNC has released a Public Consultation Paper regarding the financial information it proposes to collect in the 2014 AIS, and later years.

The paper poses several key questions for public consultation including whether the ACNC should collect information regarding a registered charity‟s:

related party transactions;

business activities;

financial reserves;

financial information (for small charities); and

compliance obligations with state, territory or commonwealth

agencies.

If you would like to contribute to this consultation, be sure to read the paper and complete the online survey or lodge a response by 5pm on 26 April 2013.

Chelsea Pietsch Lawyer

Charities under the microscope

The Australian newspaper has reported that the ACNC is actively investigating numerous charities. Reportedly, of the 62 referrals from the public and other regulators, 25 files are still open.

Andrew Sealey, director of strategic intelligence and compliance, stated that up to 30% of the complaints related to allegations that charity workers had received private benefits from donated funds. At law, charities are required to be for the public benefit and if the regulator takes the view that a charity is in fact being used as a vehicle for private benefit, its charity status could be on the line.

Other concerns are:

charities engaged in suspected fraudulent activity;

undertaking activities not aligned to the purpose.

"The most complex and serious cases being investigated by the ACNC have some common characteristics, including complex structures such as linked organisations controlled by family members or close associates and significant state and commonwealth government funding," according to Mr Sealey. Again such allegations if founded could breach the public benefit requirement for charities.

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The Moores Legal Not for Profit team

We have a range of practitioners who are able to assist with any minor queries or major issues you may have. If you require further information, please contact a member of our team.

Moores Legal is a law firm servicing companies and businesses, Not for

Profit organisations and individuals in the areas of Commercial Law,

Workplace Relations, Property Law, Not for Profit Law, Aged Care, Wills

& Probate, Estate Planning, Dispute Resolution, Family Law and Personal

Injury Law.

Libby Klein Principal Not for Profits

Fiona Thomas

Senior Lawyer

Not for Profits

Suhanya Mendes

Senior Lawyer

Not for Profits

Elizabeth Turnour

Lawyer

Not for Profits

Chelsea Pietsch Lawyer Not for Profits

Andrew Boer Principal Property Transactions

Andrew Sudholz

Principal

Property Transactions

Catherine Brooks

Senior Lawyer

Workplace Relations

Andrew Simpson

Principal

Bequests & Estates

Nils Versemann

Senior Lawyer

Intellectual Property

Steven Sapountsis

Special Counsel

Dispute Resolution

Stephen Winspear

Principal

Family Law for NFPs

DISCLAIMER: This Not for Profit Briefing is of a general nature only. Specific legal advice should be sought rather than relying on this Briefing.

25 MARCH 2013

Human rights and anti-discrimination bill dropped

In 2012, the Government released the Human Rights and Anti-Discrimination Bill Exposure Draft for public consideration (see our NFP briefing from 24/01/13).

This controversial draft legislation sparked much public debate, with critics claiming it would lead to “duplication”, “over-reach” and unjustifiable limits on free speech.

No doubt as a response to this criticism, the Government has announced its intention to postpone the bill.

While some have received this announcement with relief, others have described the Government‟s decision as a “setback for equality in Australia.”

In a press conference last week, Attorney-General Mark Dreyfus said he was “not satisfied that the bill in its current form passes the test of striking the right balance.”

Chelsea Pietsch Lawyer

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Mr Sealey anticipates more complaints once charities are required to submit reports (including the Annual Information Statement) to the ACNC, given that some of the disclosed information will be publicly available.

Mr Sealey stressed to us that the ACNC intends to take a graduated approach to compliance especially where charities have been inadvertently non-compliant. An example being when charities have posted misleading information on their website and a call pointing out the error or inconsistency has resulted in this being fixed and the website updated.

He sees “education and support as a legitimate compliance outcome.” This is to be contrasted with “deliberate and wilful noncompliance such as fraud, misuse of donated funds and terrorist financing”.

If your charity is being investigated, it is important that you know what your rights are and that the ACNC has extensive investigative and compliance powers under the ACNC Act.

Suhanya Mendes Senior Lawyer