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.
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:
- the results of its activities; and
- 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.
A registered charity must comply with five governance standards. These standards are to:
- operate as a not-for-profit and exist for charitable purposes;
- be accountable to its members;
- comply with laws;
- appoint responsible persons to its board and committee; and
- 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.
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