Australia: Governing charities and not for profits could get harder: Treasury releases consultation on not-for-profit governance arrangements

On 8 December 2011, the Treasury released a consultation paper on current governance arrangements for the not-for-profit (NFP) sector. The Government is consulting on what the core organisational governance principles applying to a registered NFP should be. The consultation will form an important component of the Australian Charities and Not-for-profits Commission (ACNC) legislation commencing on 1 July 2012. Charities and NFPs should consider their governance arrangements in the context of the five governance principles identified in the consultation paper and take the opportunity to make a submission to Treasury.

The consultation paper can be accessed here.

The Consultation paper identifies five governance principles which are grouped in to the following areas:

1. Duties and minimum standards of responsible individuals, including rules for proper organisational arrangements

   This includes appropriate standards to be complied with by the persons responsible for the governance of NFPs including in respect to their:

   • roles
   • legal duties
   • ability to ensure that the NFP entity is operating to the highest standards of accountability.
2. Disclosure requirements and managing conflicts of interest

   The government is considering what information charities and NFPs should be required to disclose including in respect to:

   • remuneration of responsible persons
   • types of conflict of interest that responsible individuals in NFPs should disclose and manage - this attaches to both commercial and legal conflicts.
3. Risk management procedures, including internal and external reviews and auditing requirements

   Treasury is considering the appropriate mechanisms for the ACNC to implement mandatory internal and external reviews and audits of charities and NFPs.

4. The coverage of the minimum requirements of governing rules

   Treasury is considering:

   • the appropriate minimum content of the constitutions or other governing documents of charities and NFPs
   • the ACNC's role in enforcing these requirements.
5. Relationships with members

   A significant factor being considered is the appropriate governance rules governing the relationship between a charity or NFP and its members; and whether the requirements should apply to non membership entities. That is, looking at the relationship with the charity or NFP.

   The Treasury is also examining whether the ACNC should impose compulsory meeting requirements.

Considering the impact on your organisation

The issue of governance is central to any organisation including charities and NFPs. The Consultation paper can have the effect of changing how charities and NFPs operate today and may affect how people engage with and involve themselves in such organisations in the future.

In assessing the appropriate governance principles in their own contexts, charities and NFPs will need to consider the following factors:

• size, in terms of human capital
• finances
• existing reporting requirements
• direction, growth and future strategy
• stakeholder diversity.

The closing date for submissions is Friday, 20 January 2012.

Gadens Lawyers is able to advise charities and NFPs seeking to understand the principles set out in the consultation paper, review their governance arrangements and assist in making a submission to the Treasury.

For more information, please contact:

This report does not comprise legal advice and neither Gadens Lawyers nor the authors accept any responsibility for it.