New charities: good governance a concern

In examining its 15 most significant current compliance cases, the Australian Charities and Not-for-profits Commission (ACNC) found that every case involved governance issues. One-third of these cases involved charities less than five years old of varying size from across Australia.

ACNC Assistant Commissioner Murray Baird said governance issues usually arose through a charity board’s inexperience or understanding of good governance. At times, it had been clear a board has ‘fallen asleep at the wheel’ or engaged in wilful and deliberate wrong doing.

“As the regulator, what has been pleasing is charities under investigation, for most part, have worked cooperatively with the ACNC to comply with requests for information and changes to governance practices, says Baird.”
The ACNC is responsible for regulating some 60,000 charities that operate locally, nationally and overseas. Since commencing as the national charity regulator 15 months ago, the ACNC has received 500 complaints, of which more than 240 have warranted an investigation or review by the ACNC’s compliance team.

ACNC Director of Compliance Stewart Donaldson said the Commission’s most common source of reliable information was from the public, followed by former charity employees or board members, and referrals from other agencies.
“So far, we have already encountered a wide range of governance issues. The most common problem is when charities use funds inappropriately, in ways which do not comply with the charity’s purposes, says Donaldson.
“We have also seen a number of cases where there is a lack of accountability to members. In some cases charities have failed to convene meetings as required in their constitution or have failed to follow the appropriate process to amend constitutions.

“The third most common theme is where responsible persons fail in their duties. This includes failing to declare conflicts of interest, not maintaining accurate records or operating while insolvent.

“Finally, at the extreme end, we have investigated charities where allegations have been made of criminal activity.”

Mr Donaldson said the ACNC works closely with the relevant state, territories or other Commonwealth agencies to determine who the best regulator to act is.

The ACNC has produced Governance for good – a guide for charity board members, and Protect your charity from fraud to support the sector in remaining compliant.

Sarah Harding

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