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Not for Profit News | Governance
19 February 2019 | Minutes to read: 5

Not for Profit News | Governance

By Corrine Siddles

Within the NFP sector, there have been several new governance regulations introduced. The below articles provide a snapshot into the recent changes and key issues to be aware of within the NFP sector that may impact on the governance of your organisation.

Gifts and honorariums guidance

The Australian Charities and Not-for-profits Commission has released new guidance aimed at helping charities that wish to provide gifts or honorariums to people in their organisation.  The principles can also be applied to other NFP entities.

The new Gifts and Honorariums guide urges charities to approach the issue with care and diligence, and to consider their own unique circumstances when deciding to provide a gift or honorarium.

A gift is typically given in appreciation of an individual’s charitable service.  An honorarium is typically a payment made to honour charitable service.

Some charities refer to payments of this nature as ‘allowances’ or ‘ex-gratia payments’.  Although the names may sometimes be different, the considerations for a charity in the guidance still apply.

Charities’ ‘responsible persons’ need to consider the issues and concerns about providing gifts or honorariums and encourage their organisations to have formal policies on the matter.

The guidance details the ACNC’s expectations on the issue – including that gifts or honorariums should generally be token in nature – as well as outlining legal considerations.  It also contains a useful series of questions charities should ask themselves before providing a gift or honorarium.

The ACNC generally expects that gifts or honorariums will be of a token nature. They should not provide anyone with a sizeable or significant personal benefit.

Charities breaching this provision risk failing to comply with their purpose and character as a not-for-profit entity.

It is up to a charity’s responsible persons to determine an acceptable value of gifts and honorariums, taking into account the charity’s financial position and its ability to carry out its charitable purposes.

Charities need to consider the legal implications of providing gifts and honorariums.  To remain registered as a charity with the ACNC, an organisation must:

  • Be an NFP entity
  • Comply with its purposes and character, and
  • Be accountable to its members.

A charity should take reasonable steps to ensure that its responsible persons are subject to, and comply with, obligations to:

  • Act in good faith in the charity’s best interests and to further its purposes
  • Disclose perceived or actual conflicts of interest
  • Ensure that the organisation’s financial affairs are responsibly managed, and
  • Ensure that decisions to provide a gift or honorarium does not risk breaching these requirements.

Charities that prepare financial statements may also need to disclose gifts or honorariums to certain individuals (such as responsible persons) in accordance with AASB 124 Related Party Disclosures.  Related parties include a charity’s key management personnel (defined in AASB 124).  This may include a responsible person or a close member of a responsible person’s family.

The ACNC annual information statement asks medium and large-sized charities whether they have related-party transactions and if they have documented policies concerning them.

AICD’s governance study released

Now in its ninth year, the Australian Institute of Company Directors’ governance survey is Australia’s biggest.

Not-for-Profit Governance and Performance Study canvassed2022 respondents and focus groups across the country.

This year’s study explored emerging issues facing NFPs, including cybersecurity, innovation, financial viability and culture.

They may be seen as governance issues that push boards to focus their energies beyond traditional performance measures.  Uncommon five or 10 years ago, in 2019 they are crucial governance considerations.

Key findings of the study included:

  • 82 per cent of respondents undertake their NFP governance for no financial reward
  • 58 per cent said they were working more than two days a month on their NFP, compared with 41 per cent in 2013
  • Half of respondents believe innovation is the responsibility of management and half view it as a board role
  • 75 per cent of 2018 respondents monitored, measured and led culture, a significant increase on 2017
  • Boards are using a combination of methods to measure culture. Staff surveys, staff turnover and dismissals, client surveys, OH&S reports and client complaints are common techniques
  • 25 per cent of respondents believe that their boards need to perform better
  • 38 per cent reported that their board had a ‘very good’ understanding of the impact of a cyberattack and 25 per cent of the probability of a cyberattack on their organisations, and
  • The laws surrounding volunteering can be complex, yet volunteers are an important resource to many, if not most, community organisations.

Volunteer guidance released

Not-for-profit Law has released National Volunteer Guide, an overview of the key legal obligations of organisations towards their volunteers.

It contains practical examples, template documents and tips to assist in their understanding.

The guide is divided into six parts and covers:

  • Glossary of common terms and overview
  • Understanding the legal differences between a volunteer, employee and independent contractor
  • Understanding your organisation’s legal obligations on volunteer safety
  • Protecting volunteers and those with whom they interact from unlawful workplace behaviour
  • Recruiting, inducting, managing performance and ending a volunteer relationship, and
  • Organisational issues applicable to volunteers.

New guidance on inducting chairpersons

The Governance Institute has included a new section in its governance guide on inducting a board chairperson.

Good Governance Guide on issues to consider when developing director induction processes says that company secretaries have an important role in a new chair’s induction, ensuring that several matters are attended to.

Items to be considered when a new chair is appointed include:

  • If the chair is to be a company-bank-account signatory, ensuring that the board passes appropriate resolutions and notifies banks of changes
  • Meetings with the new chair to discuss proposed changes to board processes
  • Discussing the chair’s expectations for director development and education and incorporating these into the company’s annual calendar
  • Drawing the chair’s attention to those clauses in the company’s constitution (or other key documents) that relate to the chair’s powers, and
  • Identifying appropriate opportunities to introduce the new chair to important company stakeholders.

The guide has also been updated to include new examples of information and documentation that may be included in an induction pack for directors.

It concludes with a handy list of matters that are usually the responsibility of company secretaries.

Look out for changes in 2019

Keep a sharp watch on the federal government’s legislative agenda with only a few parliamentary sitting days left before the election.

ACNC Amendment Regulations (No. 2) 2018 prescribe external-conduct standards for the purposes of Division 50 of the Act.  We await the expiry of the disallowance period.  The commencement date of the instrument is the later of the commencement day referred to in section 50-20 of the Australian Charities and Not-for-profits Commission Act 2012 and 1 July.

External-conduct standards provide a minimum level of assurance that registered entities meet appropriate levels of governance and behaviour when operating outside Australia.  They apply to a registered entity that operates outside Australia or works with third parties that do.

The federal government is proposing amendments to the Corporations (Aboriginal and Torres Strait islander) Act that are planned to take effect from 1 July.

Treasury has released a consultation paper on the government’s proposed deductible-gift recipient reforms.  We await to see what happens.

A review panel has made 30 recommendations to strengthen the ACNC’s legislative framework in Strengthening for Purpose: Australian Charities and Not-for-profits Commission Legislative Review 2018.  We await the federal government’s response.

The Senate Select Committee on Charity Fundraising in the 21st Century is scheduled to report in February.

Not for Profit News | Governance

Corrine Siddles

Corrine is a Director in our Audit and Assurance division. Corrine's expertise includes the audit of large and small corporations, not for profit entities, the financial services industry, community health centres, self managed superannuation funds and special purpose audits.

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