Australian registered charities must abide by five governance standards, set out by the Australian Charities and Not-For-Profits Commission (ACNC). These standards ensure that charities remain accountable and continue to operate in a charitable manner. This article explains what these five charity governance standards are and gives practical tips on meeting them.

Be Not-for-Profit and Exist for Charitable Purposes

The first standard is that the charity must be not-for-profit and exist for a charitable purpose. This must remain the case for as long as it is registered as a charity. Importantly, the charity’s activities must be dedicated to achieving its charitable purposes.

The charity can meet this standard in several ways:

  • only undertaking activities in line with its charitable purposes;
  • ensuring there are processes in place to allow funds to be distributed in a not-for-profit manner and towards its charitable purposes;
  • publicising the activities it undertakes; and
  • having governance documents that set out the charitable purposes and how it will manage and distribute funds.

Have Accountability

The second charity governance standard is that the charity must be accountable to its members (who are effectively the “owners” of the charity). This means providing its members with:

  1. the results of its activities; and
  2. an opportunity to discuss and question the operation of the charity.

The charity can meet this standard by holding annual meetings for members and providing members with information about the charity’s activities and finances.

Comply with Laws

The third standard is that the charity must comply with all applicable laws. Therefore, the charity must first determine which laws will apply to their activities. Some of these laws will include:

  • the charitable fundraising legislation of the states and territories in which it operates;
  • financial reporting and auditing requirements set by the ACNC; and
  • industry-specific laws, such as food safety laws for a charity that gives food.

Appoint Responsible Persons

The fourth charity governance standard is that it must only appoint ‘responsible persons’ to its board and committee. Responsible persons play an important role in directing the activities of the charity and ensuring compliance with the governance standards.

The charity’s governing documents should set out how it appoints a responsible person. The ACNC also requires that a responsible person is:

  • not disqualified from managing a corporation; and
  • not disqualified from being a responsible person within the previous 12 months.

The charity can comply with this governance standard by thoroughly investigating the suitability of a nominated responsible person before appointing them.

Uphold Duties of Responsible Persons

The final charity governance standard is that the responsible persons must comply with duties, including:

  • acting with reasonable care and diligence;
  • acting honestly and fairly for the charitable purpose and in the best interests of the charity;
  • disclosing conflicts of interest;
  • not misusing their position or information obtained as a responsible person;
  • ensuring responsible management of finances; and
  • not allowing the charity to operate while it is insolvent.

The charity should write these duties into their governing documents. This will give procedures for the responsible persons to follow.

Key Takeaways

A registered charity must comply with five governance standards. These standards are to:

  1. operate as a not-for-profit and exist for charitable purposes;
  2. be accountable to its members;
  3. comply with laws;
  4. appoint responsible persons to its board and committee; and
  5. ensure responsible persons uphold their duties.

If you would like assistance in complying with charity governance standards, including drafting the charity constitution or other governing documents, you can find templates on the ACNC website.

COVID-19 Business Survey
LegalVision is conducting a survey on the impact of COVID-19 for businesses across Australia. The survey takes 2 minutes to complete and all responses are anonymous. We would appreciate your input. Take the survey now.

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. For just $199 per month, membership unlocks unlimited lawyer consultations, faster turnaround times, free legal templates and members-only discounts.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

Our Awards
  • 2019 Top 25 Startups - LinkedIn 2019 Top 25 Startups - LinkedIn
  • 2019 NewLaw Firm of the Year - Australian Law Awards 2019 NewLaw Firm of the Year - Australian Law Awards
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer