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Back to "Community & Associations Newsletter - October 2019"

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External Conduct Standards

Since 23 July 2019, charities operating outside Australia have been subject to the ACNC External Conduct Standards.

The standards apply to entities which:

a) operate outside Australia – in whole or in part; or

b) work with the parties that are operating outside Australia; or

c) are closely related to or have a significant impact on entities outside Australia.

Standard 1 requires charities to take reasonable steps to ensure that activities performed outside Australia are consistent with their not-for-profit purpose and character.

Standard 2 requires charities to keep records of activities and expenditures outside Australia on a country by country basis.

Standard 3 requires charities to take reasonable steps to minimise risks of corruption, fraud and bribery and to document perceived or actual material conflicts of interest.

Standard 4 requires charities to take reasonable steps to ensure the safety of vulnerable individuals overseas who are being provided with services or who are engaged to provide services on behalf of the charity.

Reasonable Steps

For Standards 1, 3 & 4 “reasonable steps” are not prescribed but rely on a situation-based approach. Each charity should conduct a risk assessment to decide if an action would be reasonable for a particular circumstance

Exemptions

Can interpretation of the phrases “operating outside Australia” or “third parties” provide exemption to charities from needing to comply?

Regulation 50.4 (2) states:

…..an entity is not operating outside Australia … only because … activities outside Australia (including providing funds…)….that are directly related to the pursuit of … purposes in Australia… are merely incidental to its operations in Australia.

So, although there is some overseas activity, provided the benefit is realised here in Australia, and provided the activity is merely incidental, the charity is exempt from the standards with respect to that activity.

Examples of exemption given by ACNC:

  • Small number of patients travelling to an overseas destination for part of a medical treatment the major part of which is provided in Australia.
  • Attendance at an overseas conference by staff.
  • Buying “small” quantities of equipment overseas to use for charitable purposes in Australia, eg socks for a one off distribution to local homeless.
  • Engaging an Internet provider who is overseas, provided that is “incidental only”, to service delivery here: but not if the internet is the main method of fund raising and fund raising is the core business of the local charity.

However,

a local church, whose purpose is “advancement of religion” locally, may raise a small sum of money and send it overseas, to an overseas mission where one of their members is working. No matter how small the sum (ie “incidental”) because the benefit is for the overseas mission, the exemption is not available.

The exemptions can also apply where a local charity uses a third party overseas to implement its activity and:

  • the third party is also registered with the ACNC and hence has to comply in its own right;
  • the local charity, for example, sends money to another third party charity (also registered locally), then the first charity is exempt from the standards once the money leaves its hands, and the third party is responsible for its distribution; and
  • where involvement with the overseas third party is not directly related to the local charity’s’ purpose (for example an IT company providing technical support to a charity which has main purpose of delivering education).

We recommend you visit the ACNC website https://www.acnc.gov.au/for-charities/manage-your-charity/charity-governance/acnc-external-conduct-standards.

Please contact Josephine Heesh if you require further clarification about how the External Conduct Standards apply to your charity.

Grace Brophy, Solicitor
Josephine Heesh, Partner

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