Australian Charities and Not-for-profits Commission: Regulatory Approach Statement

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1 Australian Charities and Not-for-profits Commission: Regulatory Approach Statement This statement sets out the regulatory approach of the Australian Charities and Not-for-profits Commission (ACNC). It explains to charities and other stakeholders how we regulate charities and guides ACNC staff in making appropriate and consistent decisions. The first section of this statement outlines who we are, what we do and the values that guide us. The second section sets out how we exercise our functions and powers to encourage compliance and manage non-compliance by charities with their regulatory obligations. Our role Objects The ACNC is the specialist, independent national regulator of charities. It is established by, and administers, the Australian Charities and Not-for-profits Commission Act 2012 (Cth) ( ACNC Act ). The objects of the ACNC Act are to: Scope maintain, protect and enhance public trust and confidence in the Australian notfor-profit sector support and sustain a robust, vibrant, independent and innovative Australian not-for-profit sector promote the reduction of unnecessary regulatory obligations on the Australian not-for-profit sector. Although the objects of the ACNC Act refer to charities and not-for-profits, the ACNC currently only regulates charities. Charities can choose to register with the ACNC and registration is free. Only registered charities are able to access Commonwealth charity tax concessions and benefits. The Australian Taxation Office is responsible for administering Commonwealth tax law, including determining charities eligibility for different tax concessions. Some tax concessions and benefits are only available if the charity is registered as a particular subtype of charity, such as a public benevolent institution or health promotion charity. Functions Registering charities The ACNC registers organisations as charities through a transparent application process, applying the ACNC Act and the definition of charity and charitable purpose in the Charities Act We work closely with applicants to resolve any issues identified during the registration process and to assist them to understand eligibility requirements for charitable status.

2 Maintaining the free ACNC Charity Register The ACNC maintains a free and searchable online public register of charities. The ACNC Charity Register contains information about charities purpose, activities, financial information, responsible persons, and the people they work to benefit. This valuable information helps donors, funders and the wider community support charities with trust and confidence. The ACNC works to add value to this data through conducting analysis and research, which is made publicly available. Search the ACNC Charity Register at acnc.gov.au/findacharity Report once, use often: reducing red tape for charities The ACNC administers a report once, use often reporting framework and the Charity Passport, through which charity information is made available to authorised government agencies. We collect the minimum information required to assess compliance with the ACNC Act and Regulation, and work with other agencies to reduce unnecessary or duplicative administrative requirements imposed on the sector. This function includes working with states and territories to align regulatory and reporting obligations. Providing guidance, education and advice The ACNC provides guidance and education to assist registered charities in understanding and complying with their obligations under the ACNC Act. Charities can access guidance in a range of ways, such as through web-based and printed guidance, a telephone advice service, online educational tools, and face-to-face information sessions. The ACNC also provides information to assist the public in understanding the work of charities in order to improve the transparency and accountability of the sector. Monitoring compliance and managing non-compliance The ACNC monitors compliance by registered charities with their obligations under the ACNC Act and manages non-compliance. We work collaboratively with charities to address concerns, including through education and advice. When charities do not meet their obligations, we take appropriate and proportionate action to help protect charities, their beneficiaries and the public. 2

3 Understanding charities The foundation of the ACNC s regulatory approach is an understanding of charities. Charities exist to benefit the public and they contribute to our society in vital ways, including addressing disadvantage and strengthening the fabric of our communities and environment. The public provides significant support to charities through donations of time, skills and money. We recognise that the purposes, activities, needs and the sources of funding of charities will change over time as charities reflect and shape changes in society. We know that charities want to spend their resources on their mission, not on regulation. We also understand that charities pursue diverse goals in different ways. Their goals, activities, sizes, legal structures, and those they help are different, and result in varying needs and challenges. Charities and the people involved in them have diverse beliefs and values and reflect communities from different cultures, languages and places. Charities enjoy, and rely upon, the trust and confidence of the public. This trust is essential in attracting and maintaining funding, volunteers, and staff. We believe that transparency and accountability promotes that trust. We also recognise that the misconduct of a few can endanger confidence in others, and we will act swiftly and firmly where necessary to protect trust in the sector. Values The ACNC s regulatory approach reflects our five key values Fairness, Accountability, Independence, Integrity and Respect (FAIIR). Fairness Presumption of honesty The ACNC understands that most people involved in charities are honest, acting in good faith and trying to do the right thing. If mistakes are made, they are usually honest mistakes, or due to a lack of knowledge, expertise or capacity. The ACNC provides information and education to support the knowledge, expertise and capacity of those involved in charities. When the ACNC considers how to exercise its regulatory functions, one of the things we look at is whether there was an intention to do the wrong thing and whether any of those responsible for the charity (such as committee members, directors, or trustees) knew about or participated in improper conduct. We consider the extent to which the charity is cooperating with us, and the willingness of those responsible to take action to remedy the problem. However, we will take firm action as appropriate to address serious non-compliance. Providing support The ACNC provides information and education to help charities to understand and meet their obligations and to help organisations wishing to register as charities to understand the requirements for registration. This support is timely, accessible to different audiences and provided through a variety of methods. We recognise the diversity of charities and draw upon the existing work and resources of relevant bodies. Fair procedures The ACNC applies principles of procedural fairness. Before the ACNC makes a decision, we contact the charity to clarify matters or raise our concerns. We provide the charity with a reasonable opportunity to address our concerns, taking into consideration 3

4 the capacity of the charity to respond. We give written reasons for our decisions and tell charities how they can challenge our decisions. We seek to limit the burden of our regulatory actions on charities to that which is proportionate and necessary. In exceptional cases, we may choose not to contact a charity before taking action where this would put at risk a person, assets or our investigation. For example, we may not be able to contact a responsible person first if we become aware that they are about to divert significant assets from the charity for personal benefit. In such cases, however, the ACNC contacts the charity or affected person after taking action and gives them an opportunity to explain and address our concerns. Proportionality and consistency The ACNC takes appropriate and proportionate action to address an issue. We consider a wide range of factors in evaluating the seriousness of an issue and the appropriate action to address it. For serious cases, the appropriate action is likely to be a strong one for example, the only way to protect public trust and confidence in the case of an organisation falsely pretending to be a charity is to revoke its registration. The ACNC makes decisions according to published policies and procedures to ensure consistency and so that charities and the public understand what to expect. Accountability and transparency The ACNC is accountable for its processes and work. We are transparent about our procedures, decisions and actions. The ACNC is accountable through regular consultation and feedback, and through periodic meetings with sector and professional representatives and the ACNC Advisory Board. We have a Complaints and Compliments policy so that people can give us feedback or advice on how we can perform better. Under the ACNC Act, most of our decisions can be appealed to the Administrative Appeals Tribunal and the courts. We are also accountable for our conduct to the Parliament, Commonwealth Ombudsman, Auditor-General and the Australian Information Commissioner. The ACNC Annual Report is tabled in Parliament and published online. We also publish our strategic plan, policies and (where appropriate) procedures. We communicate our policies, procedures, and decisions in a variety of ways, including in meetings, events, on our website and using social media. We publish our service standards so charities know what they can expect from our services, and we report performance against these standards. We use feedback to improve our services. We are also accountable through the Australian Government Regulator Performance Framework, which includes yearly assessment against performance indicators. ACNC Regulator Performance Framework measures: acnc.gov.au/rpfmeasures Independence The ACNC Commissioner is an independent statutory office holder. Staff are appointed by and report to the Commissioner. We have our own budget held in a statutory special account and we report annually to Parliament. We are governed by our own legislation, the ACNC Act and Regulation. ACNC staff have a mix of backgrounds from the not-forprofit, public and private sectors. Within the ACNC, decisions are based on evidence, including that given by charities themselves. We impartially apply the ACNC Act, other laws and ACNC policies. 4

5 We have a published conflict of interest policy to manage apparent and actual conflicts of interest with staff. We do not promote the services of particular charities to the public or in our work, although we may refer to freely available useful resources provided by charities and other sector bodies. Integrity The ACNC is committed to acting with integrity, adhering to Australian laws and the Australian Public Service s Code of Conduct and Values, as well as our organisational values. The ACNC Act sets out when and how we may act. Our values and principles guide us in doing so and are embedded through our policies and procedures. Our staff are critical to our integrity as an organisation. We support our staff to adhere to the highest ethical standards and to engage openly and genuinely with charities and the public. Respect The approach of the ACNC is grounded in respect for charities and those who work with and for them. We listen to and work with charities. We recognise the unique nature and diversity of charities, and respect their autonomy. Engaging with charities We seek to employ staff who understand the charity sector and we develop their understanding of the distinctive context of charities. We have a stakeholder engagement strategy, which includes holding regular consultative forums. We work closely with peak bodies, advisors and other key stakeholders. We run education sessions, often delivered in partnership with peak bodies, to help charities comply with the ACNC Act. We recognise the need to ensure diverse, innovative and accessible ways of reaching charities and those involved with them, in particular small and regional charities. We engage with charities using the web, social media, phone and face-to-face information sessions. Respecting autonomy We understand that charities are an important part of civil society, not a part of government or of the business ( for-profit ) sector. It is for charities to determine their own goals and strategies and to decide how they should best fulfil them. It is also the role of the charity to manage, administer and accept responsibility for governance. Respecting capacity and accountability In its work, the ACNC takes into account the available resources of charities and the level of administrative burden. We also consider the existing mechanisms that charities have to account to their diverse and multiple stakeholders (for example, those who benefit from their services, their members, staff, volunteers, funders and the public). We recognise and encourage the desire of many charities to improve their transparency and accountability (for example, by taking part in self-regulation or accreditation schemes). Many charities are also regulated by other government agencies or by funders, and we take into account this regulation when designing our processes or when deciding how we will address concerns about a charity. 5

6 How we exercise our functions and powers The ACNC uses its powers in accordance with the values outlined in this statement in a way that reflects both the risks and the evidence before us. In exercising our powers and functions, we have regard to the matters specified in Section of the ACNC Act, including the regulatory principles of regulatory necessity, reflecting risk, and proportionate regulation. Regulatory principles Regulatory necessity The ACNC minimises its own regulatory requirements to those necessary to enable assessment of compliance with the ACNC Act and Regulation. The ACNC also works with other government agencies to reduce unnecessary or duplicative regulatory requirements imposed on charities. In exercising our powers, we do not burden charities any more than is reasonably necessary in the circumstances. Reflecting risk The ACNC operates under a risk-based regulatory framework. We give consideration to the particular circumstances of different charities and support them to comply with their obligations. In determining whether compliance action is required, we employ a consistent process to assess risk. Proportionate regulation ACNC regulatory actions are proportionate to the problems we seek to address. Our preference is to conduct activities designed to guide, educate and support charities to better understand and comply with their obligations. However, we will act firmly and take enforcement action as appropriate to address non-compliance. Regulatory approach: support and compliance The ACNC s regulatory approach is summarised in the regulatory pyramid of support and compliance shown. Our approach is founded on providing education and advice to support charities to meet their regulatory obligations. We take action that is necessary and proportionate to address non-compliance. In most cases, this will mean beginning at lower levels of the pyramid and moving upwards only when circumstances require it. However, in serious cases the appropriate action to address an issue may be near the top of the pyramid. 6

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8 Monitoring compliance The ACNC monitors compliance and identifies non-compliance with the ACNC Act through regular reporting by charities to us, from complaints (from the public and others), and from referrals from other agencies (including agencies of states and territories). We also actively seek to identify risks, including through dialogue with the sector. Managing non-compliance The Commissioner s Policy Statement: Compliance and Enforcement sets out the compliance and enforcement aspects of our regulatory approach in more detail. When we will act There are three main situations where the ACNC may take compliance and enforcement action: when a charity does not meet its obligations under the ACNC Act to report to us or keep proper records when a charity does not meet minimum standards of governance when an organisation is not, or is no longer eligible to be registered as, a charity The ACNC does not take compliance action in response to all complaints relating to charities. It is not our role to run charities. We do not assess the effectiveness of a charity in meeting its objectives. We will not become involved in internal differences of opinion or employment disputes in charities. For example, we do not intervene where board members have a difference of opinion about a decision which does not raise any issues of governance. The ACNC does not regulate the service quality of charities such as aged care providers, although there may be times when service quality is relevant to our consideration of whether a charity meets requirements for registration or is relevant to our investigations. If a complaint is made about these matters, we will assist the person complaining to contact the relevant regulator. We will work with these regulators if they have broader concerns about the governance of a registered charity, for example about any excessive private benefits going to those running the charity. In some cases, limits to the ACNC s legal powers mean that we are not able to use the full suite of regulatory options. In these cases, the ACNC may seek to refer to other regulators under agreements with them with the aim of achieving a consistent approach to all registered charities. There are also times where another regulator is already acting to address the problem. For example, another agency may be investigating a breach of fundraising laws. In these cases, we will, if asked, assist the other regulator (including sharing information, where permitted by law). Prioritisation and response The ACNC uses a risk-based approach to allocate its compliance resources to address concerns about charities. All concerns raised are evaluated to determine whether the concern is within our jurisdiction, whether it is credible and the potential consequences of the concern.

9 If an evaluation determines a concern is credible and serious, the next step will usually be a risk assessment. The purpose of the risk assessment is to provide a more detailed analysis to support a final decision about the prioritisation of the risk and the appropriate ACNC response. We employ a consistent process to assess risks by examining a range of factors as a whole: the nature of the concern: this includes considering whether it may involve fraud and/or criminal activity and whether there may be harm to beneficiaries persistence: this includes considering whether the concern relates to an isolated incident or conduct that has persisted over a long period; we also consider whether the charity has a history of non-compliance harm to the sector as a whole: this includes considering whether public funds (such as government grants and public donations) are involved other factors specific to the concern: for example, whether the matter is time-bound and whether it represents a new or emerging issue other factors specific to the charity: for example, whether the charity is closely controlled and the extent of oversight by other regulators. The ACNC acts swiftly and firmly where vulnerable people or significant charity assets are at risk, where there is evidence of serious mismanagement or misappropriation, or where there is a serious or deliberate breach of the ACNC Act. Proportionate action Compliance and enforcement action taken by the ACNC is proportionate to the non-compliance we seek to address. We consider several factors to determine the appropriate action, including severity and persistence of the breach, risk of harm to the sector and community, and the willingness of the charity to comply. We also consider whether it is appropriate to refer the matter to another regulator or agency that is better placed to act. Our approach begins with an emphasis on providing education and advice to support charities to meet their regulatory obligations. Some charities may need more assistance. For a smaller number, we will need to use our formal powers under the ACNC Act. We will usually give those involved a chance to explain and consider any explanation before we use our formal powers. Assistance to address non-compliance: We may assist charities by providing regulatory advice or information on how to comply with their obligations. We may refer the charity to appropriate educational activities. We may agree with a charity on a course of action to resolve the non-compliance within a reasonable timeframe. Administrative actions: Overdue statement: We will publish a notice on the ACNC Charity Register where a statement or report required under the ACNC Act is more than 6 months overdue. Administrative penalties: Under the ACNC Act, registered charities are liable to an administrative penalty for making false or misleading statements, or for 9

10 failing to lodge documents on time. However, the ACNC may remit (reduce or remove) all or part of an administrative penalty that arises. The ACNC takes a risk based approach to issuing penalty notices and remitting penalties. ACNC decisions to not remit a penalty (or to remit only part of a penalty) can be reviewed or appealed where the penalty is greater than a specified amount. Revocation We may revoke the registration of a charity on certain grounds (mainly that a charity is not entitled to registration, has not complied with the ACNC Act or Regulation, or is insolvent or in administration). For example, it would be appropriate to revoke the registration of an organisation that has been established as a charity merely to launder money or as a front for conducting serious criminal activity. Revocation may also be appropriate where the charity has significantly and persistently failed to comply with governance standards or reporting obligations under the ACNC Act, particularly where other enforcement options are not available (that is, the charity is not a federally regulated entity). If a charity s registration is revoked, it would lose its charitable status under Commonwealth law, including its access to Commonwealth tax concessions (including, where relevant, deductible gift recipient status) and the revocation would be published on our Register. All ACNC decisions to revoke the registration of a charity can be reviewed or appealed. Enforcement powers The ACNC s enforcement powers are specified in Part 4-2 of the ACNC Act: Warning: We may formally warn a charity that it is not complying with its obligations if it doesn t respond to informal advice or education and support. Direction: We can direct a charity to act, or stop acting, in a certain way to make sure it complies with the law. For example, we could direct a charity to amend a serious error in a financial report if it doesn t respond to our advice to do so. Enforceable undertaking: We can make agreements with charities for them to take or stop actions that would breach our Act or Regulations. If the charity breaches that agreement, a court can enforce the agreement. For example, if those responsible, on taking office, discover that a charity has diverted funds for private benefit, we can agree with them that they will take specific action to address these concerns. Injunction: We can ask a court to order a person to do, or not do, something to make sure they comply with the law. A court can also make these orders by the consent of the ACNC and the person or charity. For example, we might ask a court to stop illegal activity or prevent a transaction that will jeopardise the interests of clients. Suspension or removal of responsible persons: In exceptional cases, we can (except in the case of basic religious charities ) suspend or remove a member of a charity s governing body who has breached our Act or Regulations. For example, we could suspend or remove a person who has, in a serious and persistent way, misdirected funds. As our preference would be to provide evidence of misconduct to enable the charity itself to suspend or 10

11 remove that person, this would only be used where the other members of the governing body refused (or were unable) to take action. In such cases, we may also appoint one or more persons to act in the place of the responsible person during the period of the suspension or until the role has been filled. All ACNC decisions to use our formal enforcement powers can be reviewed or appealed. Publication of enforcement actions ACNC reviews and investigations will be confidential and no information about a case will be published (or comment made in the media) unless and until we have decided to use a formal power under the Act. Under the ACNC Act, the use of our formal powers must usually be noted on our Register. Enforcement actions published on the register will include the charity's response. The ACNC may remove these enforcement actions from the register after five years. Revocation of a charity s registration is shown on the register, but it does not include a response from the charity. The Compliance and Enforcement policy sets out in more detail our policy on publishing our enforcement actions. Conclusion The ACNC s regulatory approach reflects the objects in the ACNC Act, our understanding of the charity sector in Australia, a consideration of good regulatory practice, and feedback from the sector. We will review this statement every three years to ensure that it demonstrates best regulatory practice. We invite ongoing feedback on our regulatory approach. 11