Compliance Reviews by the ACNC

The ACNC announced earlier this year that it plans to review 500 charities this year. In this Insight, we explore what the ACNC will be investigating, and what NFP organisations need to be aware of.

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In a statement earlier this year, the Australian Charities and Not-for-profits Commission (ACNC) indicated that it planned to review approximately 500 charities per year. Between July 2020 – June 2021, the ACNC will focus on the largest group of charities with DGR endorsement – formally known as Public Benevolent Institutions. It should come as no surprise that the ACNC will be reviewing how registered charities, particularly those registered before 3 December 2012 – continue to abide by their obligations.

In the midst of Covid-19, where operations may be slower than usual – we believe this is the perfect opportunity to review your charity’s governing documents, Board Charter, charitable purposes, policies and most importantly your compliance with the obligations, Governance Standards and External Conduct Standards (read our article on this issue) set out by the ACNC.

Birchgrove Legal’s Not-For-Profit team, can assist you in taking practical steps to ensure your charity does not come under the scrutiny of the ACNC.

When will the ACNC Act

The ACNC will be required to take action in the following three (3) circumstances:

1. When a charity does not meet its obligations under the ACNC Act;
2. When a charity does not meet the minimum standards as set out in the Governance Standards and External Conduct Standards;
3. When an organisation is no longer eligible to be registered as a charity.

What to expect

In conducting a compliance review/investigation, the ACNC will take a number of steps once it believes that a charity is not meeting their ongoing obligations. That is:

1. The ACNC will send you a written notice (typically by letter) – which outlines that your charity is subject to a compliance review, or that your charity is now under investigation (for more complex scenarios);
2. Over the subsequent months, the ACNC request further information and/or documentation – and will provide you with the opportunity to explain your actions. The charity is required to respond within a certain timeframe, and must provide honest reasoning and evidence to support their claims.
3. The ACNC will then make a decision to take administrative action, or exercise their formal enforcement powers, which could include the decision to revoke the charity’s registration under the Australian Charities and Not-for-profits Commission Act 2012 (Cth) (or “ACNC Act”).

Compliance/Enforcement Actions

The ACNC is equipped with the power to take one (or more) of the following actions once the review or investigation is finalised:

1. Provide regulatory advice to the charity;
2. Recommend steps the charity should take to address any issues;
3. Require the charity to have its accounts audited or lodge any additional reports;
4. Use enforcement powers or impose administrative penalties, including:
   • Issue an in/formal warning;
   • Direct a charity to take action, or stop acting in a certain way;
   • Reach an enforceable undertaking with the charity;
   • Issue an injunction (through a court order);
   • Enforce the suspension, removal and appointment of Responsible persons; or
   • Revoke a charity’s registration when other enforcement options are not available.

In most cases, the decision to revoke a charity’s registration will be published on the ACNC Register which is publically available.

Your right to review

Charities have a period of 60 days after they are notified of a compliance decision to apply for said decision to be internally reviewed by the ACNC. If you are unsatisfied with the internal review decision, you may be entitled to request the following review actions:

1. Apply to have the decision reviewed by the AAT; or
2. Appeal the decision directly to a court.

These actions are much more time-consuming and costly – therefore we recommend that you seek legal advice prior to undertaking these review actions.   

What you can do

There are a number of steps your charity can take before you are the subject of a compliance review/investigation:

1. Conduct a thorough review of your governing documents, policies, delegation protocols and Charters to determine whether they contain any issues, risks or flaws which could be remedied;

2. Undertake your own self-evaluation to assess whether your charity is meeting its obligations, and to identify areas in your charity which require a particular focus.

Common issues which tend to arise, include:

• Poor governance;
• Inability to manage conflicts of interest;
• Inadequate and outdated governing documents;
• An oversight on financial risks; and
• Issues with overseas operations and compliance with ACNC External Conduct Standards.

3. Appoint a legal representative who is skilled in the Not-For-Profit sector to assist you to undertake a comprehensive review of your charity’s operations and compliance with its obligations;

4. Appoint an independent auditor to assist with reviewing your financial documents.

To discuss further, get in touch with Birchgrove Legal today on (02) 9018 1067 before your charity is subject to a compliance review/investigation by the ACNC.