Jul 28, 2023 / News

ACNC Activities / NFP / NFP Newsletter

NFP Newsletter Edition 17 - ACNC Activities

Toolkit on cyber security released

The Australian Charities and Not-for-profits Commission has released new guidance that defines cyber security, outlines a charity’s legal obligations, and explains how to manage the risk of cyber attack.

It includes a cyber-security assessment and checklist, as well as templates.

See the details at https://www.acnc.gov.au/for-charities/manage-your-charity/governance-hub/governance-toolkit/governance-toolkit-cyber-security.
 

Know the charity sector

The latest official data shows Australia’s charity sector generated $190 billion in revenue and employed 10.5 per cent of the workforce, highlighting its significance to the Australian economy and community.

The ACNC’s ninth edition of its Australian Charities Report shows that charity revenue, assets, and donations grew in 2021.

For the latest edition, the ACNC analysed annual information statements of 49,402 charities. Among them were 8280 basic religious charities – 17 per cent of the total. A total of 7743 of them declined to provide financial information in 2021. 

‘The Australian Charities Report ninth edition provides a comprehensive insight into the sector, including state by state comparisons’, said commissioner Sue Woodward.

‘We can see the sector is a major employer. There were 1.42 million employees in the 2021 reporting period, and revenue growth was strong, up by nearly $14 billion on the previous period.’

Donations increased by $676 million to $13.4 billion, and charities reported more than $422 billion in assets, an increase of nearly $31 billion.

Expenses also went up – by $7.1 billion to almost $175 billion. Liabilities rose by $4.1 billion to $141.7 billion, a 40 per cent increase over three years. 

The report confirms a widely-observed decline in volunteering, from 3.4 to 3.2 million. 

‘The picture is more sobering when we look at the decline over a longer time frame’, said Ms Woodward.

‘There was a loss of around 596,000 volunteers between the 2018 and 2021 reporting periods. This decline is of concern as we know volunteers are vital across the sector, and overall, 50 per cent of charities operate with no paid staff.

‘Behind the top-line figures are thousands of small charities operating with mostly volunteers. In fact, 65 per cent of charities are small, with annual revenue under $250,000, and a third of all charities have less than $50,000 annual revenue.’

Listed below is state and territory data.
 

State or territory	Number of charities	Revenue from government ($ million)	Revenue from donations and bequests ($ million)	Revenue from goods or services ($ million)	Total revenue ($ million)	Volunteers	Employees
ACT	1106	1697	154	1043	3531	48,711	26,943
NSW	15,727	24,499	5149	13,560	49,996	1,487,020	337,237
NT	436	1284	27	571	2026	11,053	12,547
QLD	6898	11,424	1639	7782	22,510	369,673	174,778
SA	3370	5436	391	3395	10,238	140,989	94,936
TAS	1053	2074	107	783	3215	48,815	29,882
VIC	11,491	24,664	2979	12,738	44,633	521,317	300,280
WA	4247	8551	657	7190	17,656	200,967	143,528

The data shows $13.4 billion (7 per cent) of charity revenue is made up of donations and bequests. That compares with $97 billion (51 per cent) of revenue from government, including grants.

Charities distributed $9.7 billion in grants and donations.

 

Adhering to ACNC’s governance standards

The ACNC’s governance standards is a set of core principles dealing with how a charity should be run. It’s timely to review your compliance with them.

Charities must meet the standards to be, and remain, registered with the commission. The principles do not apply to basic religious charities.

They require charities to remain charitable, operate lawfully, and be run in an accountable and responsible way. They help to maintain public trust.

The principles are high-level and charities must determine what they need to do to comply with them.
 

Standard	Explanation
1- Purposes and not-for-profit nature	A charity must be not-for-profit and work towards its charitable purpose. It must be able to demonstrate this and provide information about its purposes to the public.
2- Accountability to members	A charity that has members must take reasonable steps to be accountable to its members and provide them with adequate opportunity to raise concerns about how the charity is governed.
3- Compliance with Australian laws	A charity 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 or more.  The current value of a Commonwealth penalty unit is $222.
4- Suitability of responsible people	A charity must take reasonable steps to: Be satisfied that its responsible people (such as the board or committee members or trustees) are not disqualified from managing a corporation under the Corporations Act 2001 or disqualified from being a responsible person of a registered charity by the ACNC Commissioner, and Remove any responsible person who does not meet these requirements.
5- Duties of responsible people	A charity must take reasonable steps to make sure that its responsible people are subject to, understand, and carry out the duties set out in standard 5.
6- Maintaining and enhancing public trust and confidence in the Australian not-for-profit sector	A charity must take reasonable steps to become a participating non-government institution if the charity is, or is likely to be, identified as being involved in the abuse of a person either: In an application for redress made under section 19 of the National Redress Scheme for Institutional Child Sexual Abuse Act 2018, or In information given in response to a request from the National Redress Scheme Operator (secretary of the Department of Social Services) under section 24 or 25 of the Redress Act.

The ACNC has a self-evaluation tool that aims to help charities assess if they are meeting their obligations. It also helps to identify issues that might prevent them from doing so.

It poses questions and prompts charities to describe both the practical steps that they are taking to meet their obligations and to list relevant policies and procedures.

A charity that conducts activities overseas – including sending funds overseas from Australia – must also comply with external-conduct and governance standards. 

Four external-conduct standards cover certain aspects of a charity’s overseas operations.
 

Standard	Explanation
1 Activities and control of resources (including funds)	The way a charity manages its activities overseas and how it is required to control the finances and other resources it uses overseas.
2 Annual review of overseas activities and record-keeping	The requirements for a charity to obtain and keep sufficient records for its overseas activities.
3 Anti-fraud and anti-corruption	The requirements for a charity to have processes and procedures that work to combat fraud and corruption in its overseas operations.
4 Protection of vulnerable individuals	The requirement for a charity to protect the vulnerable people that it works with when conducting its overseas operations.

An ACNC self-evaluation tool for charities operating overseas aims to help charities assess if they are meeting their obligations and identify issues that might prevent them from doing so.

The tool poses questions and prompts charities to describe the practical steps they take to meet their obligations.

 

Disclose referendum donations

A referendum disclosure scheme has been introduced through changes to the commonwealth’s Referendum (Machinery Provisions) Act 1984.

The act’s changes will affect a charity only if it is campaigning, receiving or making donations on referendum matters, and the amount is $15,200 or more. They will apply for the upcoming referendum on an Indigenous Voice to Parliament. Referendum matters are defined as matters communicated to influence the way people vote in a referendum.

The Australian Electoral Commission oversees the change and has published guidance on its website about the scheme.

Charities’ governing bodies and their responsible people should take care to comply with Australian electoral laws and should refer to the AEC’s guidance if they expect to spend $15,200 or more on referendum matters.

The ACNC will provide links on the charity register to the AEC’s transparency-disclosures register. 

The changes will have no effect on what registered charities are required to submit to the ACNC.

 

Defining health-promotion charities 

The ACNC has published an updated commissioner’s interpretation statement (CIS) on health-promotion charities (HPC). 

To be entitled to registration as a HPC, an organisation must demonstrate that it is ‘an institution whose principal activity is to promote the prevention or the control of diseases in human beings’.

An organisation must demonstrate that it meets all the elements of the description.

The updated CIS contains a section explaining that the ACNC will group similar activities to determine ‘principal activity’. It also contains a section explaining how the ACNC will treat an organisation’s administrative functions when determining principal activity.

The CIS does not narrow the commission’s interpretation of a health-promotion charity. Charities currently registered under this subtype will continue to meet the description under the updated statement.

 

Registrations revoked 

Following several warnings, the ACNC has revoked the registration of more than 700 charities.

Assistant commissioner general counsel Anna Longley said all charities were required to submit annual information statements and those that repeatedly failed to do so risked losing registration.

‘Most charities meet their obligations. However, we notified more than one thousand charities last month that they were at risk of having their registrations revoked because they had failed to submit two or more annual information statements despite several reminders […]’, Ms Longley said.

‘The ACNC seeks to support charities to remain registered. Some of them submitted their outstanding statements so they have retained their registration. However, around 700 did not. Many of these organisations may have ceased operating.

‘Accountability and transparency are critical to maintain public trust and confidence in the sector. People check the charity register to verify key details about organisations, for example, before they make a donation. It is therefore important we review charities to make sure they are complying with their obligations and ensure the information on the [register] is up to date.’

Once charity registration is revoked, the ACNC notifies the Australian Taxation Office, which removes tax concessions. 

 

ACNC secrecy to go

The federal government has announced that it will amend secrecy provisions in ACNC legislation to allow greater disclosure of regulatory activities. 

The changes will enable the ACNC to publish registration and compliance decisions to improve transparency and accountability.

At the moment, secrecy provisions prevent the ACNC from disclosing whether it is investigating alleged misconduct, the outcomes of investigations, and reasons for revoking a charity’s registration. 

The government proposes to introduce legislation to support the reforms.
 

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The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.