External Conduct Standards
The proposed external conduct standards were tabled in Parliament in the first week of December 2018 and will become effective on 1 July 2019. There has been opportunity for the sector to engage with Treasury to put submissions on the final version of the standards. The standard are set out as Division 50 of the Australian Charities and Not for Profits Commission Act 2012 and were anticipated when the Act commenced but have been delayed until now.
The standards apply to all charities so basic religious charities do not have an exemption as they presently have from the governance standards.
- Standard 1: Activities and control of resources – including funds
This standard requires an entity to take reasonable steps, and have internal controls and procedures in place, to manage any risks that may arise due to its operation and activities. An entity must ensure its resources are controlled and used to reflect its purpose and character, and managed in a way that safeguards against insolvency and potential risks to its assets. This aims to prevent money laundering, the financing of terrorism, sexual offences against children, slavery and trafficking in individuals and debt bondage, people smuggling, international sanctions, taxation and bribery, by requiring a registered Australian entity to comply with the Australian laws relating to those scenarios. This standard applies even for activities conducted outside Australia.
- Standard 2: Annual review of overseas activities and record-keeping
Entities are now subject to new reporting requirements that will provide a brief and comprehensive summary of its overseas activities, monitoring procedures and expenditure per country. This requires an annual review of overseas activities and record-keeping and requires the entity which operates outside of Australia to be transparent and accountable. One means of evidencing this is to keep records and to prepare summaries on a country by country basis which will be filed with Australian Charities and Not- for- profits Commission (ACNC) as part of the annual information statement.
- Standard 3: Anti-fraud and anti-corruption
This standard requires the entity be managed in a way that furthers its not-for-profit purpose and not be misused for any illicit or improper purpose. An entity must show it has taken reasonable steps to identify and minimise the risk of fraud and corruption by its responsible entities, employees, volunteers and third parties outside Australia. The entity must identify and document any perceived or actual material conflicts of interest for employees, volunteers, third parties and responsible entities outside Australia.
- Standard 4: Protection of vulnerable individuals
Entities are required to minimise the risk of exploitation or abuse to persons, especially children, who are unable to care for or protect themselves and are therefore considered vulnerable. The standard aims to protect vulnerable individuals provided with services or benefits and also requires an Australian entity to take reasonable steps to ensure the safety of vulnerable individuals outside Australia to the extent that they are engaged by a local entity, or a third party in collaboration with a local entity, to provide services or benefits on behalf of that local entity or the third party. One aim is not to exploit or abuse, for example, disabled persons who are volunteers or employed by a charity overseas.
There are various examples set out in the explanatory memoranda of what it means to ‘operate overseas’. Any charity which has a partnership with an overseas branch or, in the case of a religious organisation, that works with its own members who live and work overseas, must observe these standards.